Finance Ministry allows 20 States to raise over Rs 68,000 crore through open market borrowings

The Department of Expenditure in the Ministry of Finance yesterday granted permission to 20 States to raise an additional amount of Rs 68,825 crore through open market borrowings.

The Ministry of Finance said, additional borrowing permission has been granted at 0.50 per cent of the Gross State Domestic Product (GSDP) to those States who have opted for Option-1 out of the two options suggested by the Ministry to meet the shortfall arising out of GST implementation.

In the meeting of GST Council held on August 27, 2020, these two options were put forward and were subsequently communicated to the States on August 29, 2020. Twenty States have given their preferences for Option-1. These states are - Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Sikkim, Tripura, Uttar Pradesh and Uttarakhand.

Eight States are yet to exercise an option.

The facilities available to the States who choose Option-1 include a special borrowing window, coordinated by the Ministry of Finance to borrow the amount of shortfall in revenue through the issue of debt. The total shortfall in the revenue of the States on this account has been estimated at around Rs 1.1 lakh crore. Permission to borrow the final instalment of 0.5 per cent of GSDP out of the 2 per cent additional borrowings permitted by the Government of India given the COVID pandemic, waiving the reforms condition.

The Department of Expenditure, on May 17, 2020, had provided an additional borrowing limit of up to 2 per cent of GSDP to the States. The final instalment of 0.5 per cent out of this 2 per cent limit was linked to carrying out at least three out of four reforms stipulated by the Government of India.

However, in case of States who have exercised Option-1, to meet the shortfall arising out of GST implementation, the condition of carrying out the reforms to avail the final instalment of 0.5 per cent of GSDP has been waived. The 20 States, who have exercised Option-1, have become eligible to raise an amount of Rs 68,825 crore through open market borrowings. The Ministry of Finance said, action on the special borrowing window is being taken separately.