Revenues of the Gujarat government have taken a major hit during the ongoing Covid-19 lockdown. Earnings from various taxes imposed by the state are down by more than 50 percent, prompting the state to borrow Rs 5,000 crore in the first two months of the financial year 2020-’21.
“Our revenues are down by 50 percent due to the lockdown. This includes revenues from Value Added Tax (VAT), stamp duty, Motor Vehicle Tax (MVT), electricity duty, among others,” a senior state government official told The Indian Express.
“For the month of April which saw a total lockdown, the revenues from VAT from sales of gas, petrol and diesel were down to Rs 800 crore… We used to get Rs 2,400 crore every month. Similarly, the stamp duty collection, that usually falls between Rs 500 and Rs Rs 600 crore every month, dipped to just Rs 15 crore in April. In the month of May, due to low transactions, the revenues have crossed only Rs 25 crore and will not be more than five percent,” the official said.
The shortfall in revenue from other sources such as MVT and electricity duty has also been impacted. Due to almost zero sale of new vehicles, the MVT collection for April 2020 was just 10 percent of the monthly target of Rs 350 crore. The collected money is from the annual payments of the tax made online. Although there has been no impact on the electricity duty collected from residential customers, the duty collected from industrial and commercial customers have fallen. Compared to the average monthly target of Rs 800 crore, the state government received only Rs 650 crore as electricity duty in April.
The dip in revenues have also impacted the expenditure of the state government. “We do not have much expenditure (currently) as most of the activities are not going on due the lockdown. However, the state government has a mandatory expenditure of Rs 8,000 crore which includes Rs 4,500 crore as salaries and an additional Rs 3,500 crore as repayment of debt and interest. In order to meet this expenditure, we have to borrow Rs 2,500 crore,” the official said.
In the month of April, the Gujarat government already borrowed Rs 2,500 crore and for the month of May, a similar amount will be borrowed. “In total, Rs 5,000 crore will be the total borrowing in the first two months of this fiscal year. These borrowings are through open auctions through the Reserve Bank of India, where financial institutions like Life Insurance Corporation and banks with surplus funds participate. These are state development loans offered in form of bonds with fixed terms of five or nine years, where the rate of interest varies from 6.5-7.5 percent,” the official said.
Gujarat can borrow more than usual this year as the fiscal deficit of the Gross State Domestic Product (GSDP) has been raised to five percent. “For the state as a whole, the Centre has agreed upon some structural issues. For instance, the fiscal deficit is allowed to be now five percent from the earlier three percent of GSDP. So, the borrowing limit has been enhanced. This will give some relief to the state government to address some immediate liquidity issues,” the official remarked.
The Gujarat government has already borrowed Rs 5000 crore in the first two months of the current financial year, despite getting an additional Rs 1,500 crore as central taxes and an additional Rs 1,800 crore as central-scheme-grants.
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