Centre allows additional borrowing of Rs 9,913 crore by five states

The Centre on September 24 permitted five states to go for additional borrowing of Rs 9,913 crore through Open Market Borrowings (OMBs) to meet their expenditure requirements amid falling revenues due to the COVID-19 crisis.  These states are Andhra Pradesh, Telangana, Goa, Karnataka and Tripura.

The permission has been accorded after these states successfully met the reform condition of implementation of ‘One Nation One Ration Card’ system, an official statement said.

The Department of Expenditure, under the Finance Ministry, has accorded approval to Karnataka for additional borrowing of Rs 4,509 crore, followed by Telangana (Rs 2,508 crore) and Andhra Pradesh (Rs 2,525 crore).Goa intends to raise Rs 223 crore while Tripura Rs 148 crore, it said.

In view of the unprecedented COVID-19 pandemic, the Centre had in May allowed additional borrowing limit of up to 2 per cent of Gross State Domestic Product (GSDP) to states for the year 2020-21 with certain conditions. This made an amount up to Rs 4,27,302 crore available to the states.

Of the extra 2 percent, only 0.5 percent is unconditional. After that, states will be allowed four increments of 0.25 percent subject to implementation of four specific state-level reforms, where weightage of each reform is 0.25 percent of GSDP. The four reforms are — implementation of ‘One Nation One Ration Card’ system; ease of doing business reforms; urban local body/utility reforms; and power sector reforms by privatising power distribution.

“The remaining additional borrowing limit of 1 per cent was to be released in two instalments of 0.50 percent each – first immediately to all the States as untied, and the second on undertaking at least 3 out of the above mentioned reforms,” it said.

The Government of India has already granted permission to states to raise the first 0.50 percent as OMB in June 2020. This made an additional amount of Rs 1,06,830 crore available to the states.  State net borrowing ceiling for 2020-21 is Rs 6.41 lakh core (3 percent of GSDP).

Written by Rakesh Sashmal