The Centre on October 13 granted permission to 20 states to raise an additional Rs 68,825 crore through open market borrowings.

“Additional borrowing permission has been granted at 0.5 percent 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 of Finance to meet the shortfall arising out of the Goods & Services Tax (GST) implementation,” the government said in a press release.

In the GST Council meeting held in August, two options were put forward. The 20 states that opted for option 1 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 statement said.

Out of the total Rs 68,825 crore, Andhra Pradesh has been allowed to borrow Rs 5,051 crore, Arunachal Pradesh Rs 143 crore, Assam Rs 1,869 crore, Bihar Rs 3,231 crore, Goa Rs 446 crore, Gujarat Rs 8,704 crore, Haryana Rs 4,293 crore, Himachal Pradesh Rs 877 crore, Karnataka Rs 9,018 crore, Madhya Pradesh Rs 4,746 crore, Maharashtra Rs 15,394 crore, Manipur Rs 151 crore, Meghalaya Rs 194 crore, Mizoram Rs 132 crore, Nagaland Rs 157 crore, Odisha Rs 2,858 crore, Sikkim Rs 156 crore, Tripura Rs 297 crore, Uttar Pradesh Rs 9,703 crore, and Uttarakhand Rs 1,405 crore.

The facilities made available to the states, who have submitted their choice, include a special borrowing window, coordinated by the Ministry of Finance, to borrow the shortfall in revenue through 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.

The government has also included permission to borrow the final instalment of 0.5 percent of GSDP out of the 2 percent additional borrowings permitted by the government in view of the COVID pandemic, waiving the reforms condition.
The government had provided additional borrowing limit of up to 2 percent of GSDP to states. The final instalment of 0.5 percent out of this 2 percent limit was linked to carrying out at least three out of four reforms stipulated by the Centre.

“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 percent of GSDP has been waived,” the government statement said.

The 20 states, who have exercised Option-1, are eligible to raise an amount of Rs 68,825 crore through open market borrowings. Action on the special borrowing window is being taken separately, the statement said.

On October 12, the GST Council could not reach a consensus on borrowing options in lieu of compensation cess shortfall and Finance Minister Nirmala Sitharaman had said that some states questioned whether the Council has any authority to disallow those states that have already opted for one of the borrowing options from going ahead with their borrowing plans.

Source: Money-Control.

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