New Delhi: The Centre Tuesday allowed twenty states to borrow an additional amount of Rs 68,825 crore to meet their urgent funding requirement as they battled Covid-19 global pandemic that crippled their revenue collection.
The decision to permit 20 states to borrow an additional amount equal to 0.5% of their respective GDP comes in the wake of the second part of 42nd GST Council meeting on Monday that failed to break the deadlock between the Centre, NDA ruled states on one hand, and some opposition ruled states on the other hand.
Since the outbreak of Covid-19 global pandemic, States have been demanding relaxation in their borrowing limit set at 3% of their GDP (GSDP) under the Fiscal Responsibility and Management Act, 2003.
“The Department of Expenditure, Ministry of Finance, has today granted permission to 20 States to raise an additional amount of Rs.68,825 crore through open market borrowings,” the ministry said in a statement.
In May this year, the department of expenditure under the ministry of finance allowed the States to borrow an additional amount, equal to 2% of their GDP, to meet the revenue shortfall caused by the outbreak of Covid-19 pandemic. However, one fourth of it, an additional borrowing of 0.5% of a state’s GSDP was linked to implementation of some reform suggested by the Centre. It included implementation of one nation one ration card, power sector and local body reforms.
In August this year, the Centre expressed its inability to pay GST Compensation Dues to states in the current fiscal as its own finances have been ravaged by the outbreak of the virus, which has killed more than one lakh people in the country.