Uncertainty on quantum of borrowings puts govt. in a fix

The State Government appears to be in a fix over the implementation of it flagship programmes like Rythu Bandhu, Dalit Bandhu and Aasara pensions in the coming months thanks to the uncertainty over the quantum of borrowings it will be allowed to raise.

Rythu Bandhu entails an annual outgo of around ₹16,000 crore and the government had made budgetary allocation of ₹17,700 crore for Dalit Bandhu, the scheme aimed at financial empowerment of dalits. This apart, the State Government has decided to reduce the age limit for availing of the Aasara social security pensions from the existing 63 to 57 years from this year itself and this would further burden the exchequer.

The government however landed in a piquant situation after the Union Finance Ministry raised questions relating to financial management and warned that the off-budget borrowings raised by the State in the name of state-owned corporations would be brought under the purview of FRBM Act. The Finance Ministry had not given its consent for raising open market borrowings for two months initially, but allowed the State to raise ₹11,000 crore in four instalments subsequently and this has helped the State meet the financial commitment under the first instalment of Rythu Bandhu.

But clarity is yet to evolve on the quantum of borrowings that would be allowed for the current fiscal.

While it was initially assumed that there would be cut to the tune of ₹19,000 crore out of the estimated ₹52,167 crore, but the Chief Minister’s Office in an official release claimed that the State would be allowed to raise only ₹23,000 crore for the year. Finance department officials held a series of meetings with the Union Finance Ministry in recent weeks and this was followed by Chief Secretary Somesh Kumar himself calling on Union Finance Secretary T.V. Somanathan a couple of days ago.

“The final annual figure is not known yet,” was how a senior Finance official responded when asked whether the Centre gave its consent for raising open market borrowings in line with budget estimates. The State had no doubt taken steps to augment its own resources like enhancing liquor prices, sale of lands and residential units and enhancement of life tax on all types of vehicles, but still the gap between the revenue and expenditure persists.

“We have no issues for another five to six months,” the official said. But a major chunk of the State’s revenues would go for meeting its commitments like interest payments and payment salaries/wages and pensions. Expenditure on interest payment was almost ₹5,000 crore (₹4,930 crore) by the end of the first quarter and payment of salaries/wages (₹8,853 crore) and pensions (₹4,645 crore) had already cost in excess of ₹13,000 crore during the period. The two heads together accounted for almost 50 per cent of the revenue receipts which stood at ₹37,513 crore by the end of the first quarter.

Given this background, the government is likely to face a Herculean task in raising the resources especially at a time when the State is on the verge of entering the election year.

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Printable version | Sep 19, 2022 9:58:16 pm |