Tamil Nadu

State plans to borrow ₹29,000 crore in Q2

The Tamil Nadu government plans to borrow ₹29,000 crore in the second quarter (July-September) of 2022-23, according to details released by the Reserve Bank of India (RBI). In the second quarter of the previous year, the State had borrowed ₹15,000 crore.

According to the RBI data, Tamil Nadu borrowed ₹8,000 crore in the first quarter of 2022-23. It had planned to borrow ₹23,500 crore in the April-June period.

The States borrow from the market through the auction of bonds known as the State Development Loans (SDLs).

According to ratings firm ICRA Ltd., 18 States and Union Territories had raised ₹1,10,200 crore in the first quarter of FY2023, nearly 42% lower than the indicated amount of ₹1,90,200 crore. It was also 23.7% lower than the year-ago level of ₹1,44,600 crore.

It pointed out that the lower borrowing reflected the States’ comfortable cash flow position, driven by a highly back-ended release of the tax devolution in FY2022, as well as the changes in the borrowing permission granted for FY2023 by the Centre to the States.

The Centre has allowed the States to borrow 3.5% of their Gross State Domestic Product in 2022-23. An additional 0.5% is allowed on fulfilment of power sector reforms and based on their contributions to the National Pension System for government employees.

Under the revised norms, the States must disclose the off-budget borrowing. Off-budget borrowing refers to the borrowing by State public sector companies and special purpose vehicles, among others, which is serviced out of the State budgets. The Centre will adjust such borrowing from this year’s ceiling.

While the State finances have been helped by higher tax devolution estimated by the Centre, there is uncertainty over the extension of the GST compensation period which ended on June 30. States, including Tamil Nadu, have sought an extension. Tamil Nadu has estimated a revenue loss of ₹20,000 crore if the period is not extended.

As per the unaudited provisional figures from the Comptroller and Auditor-General, Tamil Nadu’s revenue receipts stood at ₹29,223.06 crore in April 2022.

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Printable version | Aug 2, 2022 10:03:42 am | https://www.thehindu.com/news/national/tamil-nadu/state-plans-to-borrow-29000-crore-in-q2/article65595616.ece