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Saturday, June 19, 2021

GST revenue shortfall: Kerala CM urges PM to raise borrowing limit

Kerala Chief Minister Pinarayi Vijayan, in his letter dated November 11, said states are justified in this request.

By: ENS Economic Bureau | New Delhi |
November 19, 2020 2:16:56 am
As Pinarayi Vijayan campaigns online, Opposition says he ‘ran away due to scandals’Kerala Chief Minister Pinarayi Vijayan. (File)

Kerala Chief Minister Pinarayi Vijayan has written to Prime Minister Narendra Modi asking for enhancement of borrowing amount under the special window facility provided by the Centre for meeting the Goods and Services Tax (GST) compensation shortfall. Vijayan, in his letter, expressed the state’s willingness to join the modified Option 1, but urged for raising the borrowing limit to Rs 1.83 lakh crore from the suggested Rs 1.1 lakh crore.

“… the states are fully justified in requesting that the limit of the amount through the special window facility needs to be enhanced to Rs 1.83 lakh crore instead of the suggested Rs 1.1 lakh crore. It may be noted that the states will have to wait for another two years to get the balance compensation of Rs 73,000 crore as per the Option 1 suggested by the Union Finance Ministry. The additional 0.5 per cent borrowing without conditionalities though welcome, cannot be treated as a facility in lieu of the unpaid part of the compensation as the principal and the interest of such borrowing has to be repaid by the states,” the letter dated November 11 stated.

The Finance Ministry had last month said the Centre would borrow from the market and then act as an intermediary to arrange back-to-back loans to pay the GST compensation shortfall of Rs 1.1 lakh crore to state governments.

In August, the Centre gave two options to states and Union Territories — either borrow Rs 97,000 crore from a special window facilitated by the RBI or borrow Rs 2.35 lakh crore from the market.

The options were revised to Rs 1.10 lakh crore and Rs 1.8 lakh crore, respectively. The Rs 1.10 lakh crore is based on 7 per cent revenue growth assumption as against 10 per cent earlier, while Rs 1.8 lakh crore is the revenue shortfall for the 10-month period as against Rs 2.35 lakh crore for the full year.

On Tuesday, Telangana became the latest state to accept Option 1, joining 22 other states and 3 Union Territories (Delhi, Jammu & Kashmir and Puducherry).

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