Off-budget loan norms relaxation upsets state

HYDERABAD: The Centre’s decision to relax norms for adjusting states’ off-budget loans has not gone down well with the Telangana state government. The state government feels that the Centre’s decision was only “an eyewash” and it would not help the state government to raise Rs 55,000 crore through market borrowings for which it had sought the Centre’s approval for this fiscal year (2022-23).

The Centre has recently imposed Rs 19,000 crore cut in market borrowings of the state government for 2022-23 citing its huge offbudget borrowings during previous fiscal years. The Union finance ministry on Thursday relaxed norms stating that offbudget borrowings of last fiscal year (2021-22) can be adjusted against their borrowing ceilings for the next four years till March 2026.

The Centre in March informed states that offbudget borrowings are to be equated with the states’ own debt and any such fund raised by the governments in 2020-21 and 2021- 22 would need to be adjusted out of the borrowing ceiling this year.

The Telangana government strongly objected to this on the ground that any new norms or restrictions should be imposed ‘prospectively’ from this fiscal year and not ‘retrospectively’ by taking into account off budget borrowings of previous two fiscals.

In the latest decision, the Centre relaxed the norm saying that it will take into account off-budget borrowings of only the last fiscal and even this will be adjusted in the borrowing limit of the state for the next four years till March 2026. Official sources in the finance department said that this relaxation would not help the TS government much as its major demand of imposing restrictions ‘prospectively’ was not met and the Centre still continues to impose restrictions retrospectively for the previous fiscal instead of two previous fiscals earlier. They said at the most it would help TS to secure an additional Rs 5,000 crore out of Rs 19,000 crore that was slashed by the Centre for this year.

The Centre has fixed the net borrowing ceiling of states at Rs 8,57,849 crore or 3.5 per cent of GSDP for this fiscal 2022-23. States are also eligible for additional borrowing of 0.50 per cent of GSDP linked to reforms in the power sector. However, the TS government refused to implement power reforms and decided to forego additional 0.50 per cent loans.