Finance Ministry allows five states to borrow additional Rs 9,900 crore through open market borrowings

The finance ministry has permitted five states to borrow an additional Rs 9,913 crore on aggregate through open market borrowings (OMBs) based on their implementation of reforms relating to the ‘One Nation One Ration Card’ system.

The five states were Andhra Pradesh (Rs 2,525 crore), Telangana (Rs 2,508 crore), Karnataka (Rs 4,509 crore), Goa (Rs 223 crore) and Tripura (Rs 148 crore), according to an official statement released on Thursday.

In May, the Centre had allowed the states an additional borrowing of 2 per cent of gross state domestic product over the 3 per cent limit mandated by the Fiscal Responsibility and Budget Management Act in light of the added expenditure burden on account of the pandemic.

While the move provided states with much needed fiscal headroom of up to Rs 4.28 lakh crore to meet the added costs in containing the virus, the additional amount came with certain caveats.

From the 2 per cent, the central government allowed states to borrow the first 0.5 per cent or Rs 1.07 lakh crore unconditionally via OMBs in June.

The next 1 per cent was divided into four parts of 0.25 per cent each that were tied to four areas of reforms which, if successfully implemented, would be granted to the states. These four areas were ease of doing business, urban local bodies, power sector and the One Nation One Ration Card system.

Borrowing of the final 0.5 per cent would be enabled upon the states undertaking reforms in any three of the four areas mentioned.

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From these five states, only Telangana belongs to the group of ten states that have not yet decided on the two options of raising additional funds the Centre gave the states in lieu of a direct transfer of the goods and services tax (GST) compensation.

On Sunday, 21 states had agreed to the first option of a Reserve Bank of India-facilitated special borrowing window, totaling Rs 97,000 crore, to meet the GST compensation deficit, which the Centre estimated at Rs 2.35 lakh crore for FY21.



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