Tamil Nadu is yet to borrow from the market so far in fiscal 2023. The State government had indicated that it will borrow ₹23,500 crore in the first quarter (April-June) 2022-23, as per the details released by the Reserve Bank of India.
Experts said this may be due to change in guidelines related to the permission for market borrowings in FY2023 granted by the Centre to States. The States including Tamil Nadu borrow from the market through auction of bonds known as State Development Loans (SDL).
According to Aditi Nayar, Chief Economist, ICRA Ltd, the change in guidelines include disclosure by the States of the off-budget borrowings undertaken by them in recent prior years (since 2020-21) and over-utilization against the borrowing limits.
As per The Department of Expenditure, Union Ministry of Finance, off-budget borrowings are borrowings by State Public Sector Companies, Special Purpose Vehicles among others and where the principal and / or interest are to be serviced out of the State budgets. The Centre will adjust such borrowings from this year’s borrowing ceiling, Ms. Nayar added.
It has allowed States to borrow 3.5% of their Gross State Domestic Product (GSDP) in 2022-23. An additional borrowing of 0.5% of GSDP is allowed based on fulfilment of power sector reforms and further based on their contributions into the National Pension System for government employees. Based on these adjustments, including carry forward of unutilized borrowing from previous years, the ceiling may be enhanced upward or downward for each State, Ms. Nayar said.
“It appears that several states are yet to receive the sanction for raising funds at least till mid-May 2022. It is possible that many of the States, which have not raised SDL borrowings in FY2023 till date, are either yet to submit the required information to the Government of India, and/or are awaiting the sanction of the borrowing permission,” she said.
According to sources in the government, Tamil Nadu has limited off-budget borrowings. They added that the debt of State power and transport utilities are mostly serviced from their own cash generation.
