The State government’s hopes of the Central government permitting open market borrowings as projected in the budget estimates are unlikely to materialise going by the statement made by Union Finance Minister Nirmala Sitharaman in Parliament on Monday.
The Finance Minister made clear that borrowings by State public sector companies/corporations, special purpose vehicles and other equivalent instruments where principal or interest are to be serviced out of the State budgets and/or by assignment of taxes/cess would be considered as borrowings by the State itself for the purpose of issuing consent under Article 293 (3) of the Constitution. This is likely to land the State in a piquant situation as the government had been trying hard to see that the Centre relaxed the conditions for raising borrowings as it could have serious impact on the ongoing programmes.
The State’s total outstanding liabilities at the end of financial year 2021-22 increased to ₹3.12 lakh crore as against the ₹2.67 lakh crore in 2020-21 and ₹2.25 lakh crore in 2019-20, according to the RBI’s report on study of budgets of 2021-22. The State has been struggling to raise resources after the Union Finance Ministry had reportedly pruned the borrowings for the current year to ₹23,000 crore. This would be almost ₹30,000 crore less than the ₹52,167 crore open market borrowings indicated in the provisional details submitted to the Comptroller and Auditor General of India.
The CAG, in its State Finances Audit Report for the year ended March 31, 2021, placed in the Assembly, said the State’s percentage of total outstanding liabilities to GSDP was at 28.11 %, within the 29.5 per cent ceiling fixed by the XV Finance Commission. But this would be way above the limit if the off budget borrowings were taken into consideration. The CAG said the State government was not fully disclosing all the guarantees given by it to various institutions and this would have dual impact of diluting public financial management and legislative oversight and was in contravention of the recommendations of the XV Finance Commission.
Ms. Sitharaman said instances of borrowings by certain State public sector companies, special purpose vehicles and other equivalent instruments had come to the notice of the Finance Ministry. Considering the effect of bypassing the net borrowing ceiling of the States by such borrowings, it was decided to treat borrowings by these institutions as borrowings by the State itself.
