Finance Minister P Chidambaram on Tuesday said the government was considering a suggestion to levy a 1 per cent cess on income tax to fund relief work in the southern states where Sunday's tidal wave has claimed 11,500 lives so far.

The tsunami death toll across South Asia has climbed to 39,000.

A cess of 1 per cent on corporation tax and income tax will garner around Rs 1,400 crore (Rs 14 billion) for the Centre. Chidambaram, who visited the tsunami-affected villages in Tamil Nadu's Cuddalore district, told reporters that the Centre was considering DMK chief M Karunanidhi's suggestion for levying the cess.

• Tsunami: Waves of destruction

The government has budgeted for Rs 88,436 crore (Rs 884.36 billion) in corporation tax collection during the current fiscal year and is targeting nearly Rs 51,000 crore (Rs 510 billion) through income tax.

The Centre would extend all assistance to the state governments for implementing short- and long-term relief work in the affected areas and funding would not be a problem, Chidambaram said.

The National Democratic Alliance under Atal Bihari Vajpayee had levied a 2 per cent cess on all central taxes for Gujarat earthquake relief.

Briefing reporters after a meeting of the group of ministers on the disaster in the Capital this evening, Defence Minister Pranab Mukherjee said the Reserve Bank of India had asked banks to extend loans on liberal terms to people affected by tsunami.

For fishermen and poor people who have not repaid earlier loans, banks have been asked to reschedule and extend debts. The government has also directed insurance companies to quickly settle the claims of those affected.

In addition to the Rs 500 crore (Rs 5 billion) relief package cleared by the Cabinet on Monday, the government also decided to release Rs 200 crore (Rs 2 billion) under the Indira Aawas Yojana, Mukherjee said.

Housing and Urban Development Corporation Ltd (Hudco) has set up a Rs 2,000 crore (Rs 20 billion) fund for subsidised rehabilitation loans. It will offer the loans at 6.5 per cent against its current lowest rate of 7.5 per cent.

The agriculture ministry is sending experts to assess the damage to crops and plantations in the affected states. The government proposes to prepare targeted relief schemes in consultation with the states.

Mukherjee said India had also decided to extend an assistance of Rs 100 crore (Rs 1 billion) to Sri Lanka and Rs 5 crore (Rs 50 million) to Maldives. He added that so far contributions of Rs 17 crore (Rs 170 million) had been received in the Prime Minister's Relief Fund.

The Centre and state governments have stepped up relief work, distributing food and putting in place medical assistance to avoid outbreak of epidemics even as more aftershocks were felt in some parts of the affected states.

Picking up the pieces Govt clears Rs 200 crore assistance under Indira Awas Yojana Banks asked to be liberal with loans in affected areas Centre cleared a Rs 500 crore relief package on Monday PM's Relief Fund has received contributions of Rs 17 crore India Inc contributes liberally with funds, material and services