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.
On 27 August, the Centre offered two loan options to the States to meet the shortfall in their revenue collection due to implementation of GST in July 2017.
States were asked either to borrow an aggregate amount of Rs 97,000 crore to cover the loss in their revenue collection due to implementation of GST. Or to borrow an aggregate amount of Rs 2.35 lakh crore, to cover the shortfall caused by both, due to implementation of GST and also due to adverse economic impact of Covid-19 virus.
In order to encourage States to choose one of the two loan options offered by the Centre, finance minister Nirmala Sitharaman promised to waive the condition of implementing three of the four reforms to be implemented by the states to avail the additional borrowing under the FRBM Act.
On Tuesday, the Centre allowed those 20 states to borrow an amount equal to half a per cent of their GDP that agreed to Centre’s loan offer to meet shortfall in their revenue collection due to implementation of GST.
As a result, Maharashtra now gets an additional borrowing window of Rs 15,394 crore, followed by Uttar Pradesh Rs 9,703 crore, Karnataka Rs 9,018 crore, Gujarat Rs 8,704.00 crore and Andhra Pradesh Rs 5,051 crore.
Haryana gets permission to borrow Rs 4,293 crore, Madhya Pradesh Rs 4,746 crore, Bihar Rs 3,231 crore and Odisha Rs 2,858 crore.
Finance ministry said eight states are yet to give their choices.
