Most BJP-Ruled States Opt For Rs 97,000-Crore Borrowing Plan To Meet GST Shortfall
Thirteen states have indicated their borrowing preference to the central government.
Most Bharatiya Janata Party-ruled states have opted to borrow Rs 97,000 crore from the Reserve Bank of India via a special window to finance a shortfall in compensation cess for the current financial year, according to a government official.
Thirteen states have indicated their borrowing preference to the central government, of which 12 have chosen the above mentioned plan, the official told BloombergQuint on the condition of anonymity.
The central government estimated the shortfall in compensation cess under the goods and services tax regime at Rs 2.35 lakh crore for the financial year ending March 2021. Of this, only Rs 97,000 crore is on account of GST implementation and the rest due to the Covid-19 pandemic, Finance Minister Nirmala Sitharaman had said after the GST Council meeting last month. The central government then proposed two options to states to resolve the issue of compensation cess shortfall.
- First, borrow Rs 97,000 crore via the RBI special window, and the remaining Rs 1.35 lakh crore will be paid after July 2022 once the principal and interest is repaid.
- Second, borrow the entire Rs 2.35 lakh crore from the market but states will have to service the interest on this debt.
The 12 states that have picked option 1 include those ruled by the BJP or its allies such as Bihar, Gujarat, Haryana, Karnataka, Madhya Pradesh, Meghalaya, Tripura, Uttar Pradesh, Uttarakhand, the official quoted above said. Andhra Pradesh, Odisha and Sikkim that are not ruled by the BJP, too, chose option 1.
An Andhra Pradesh government official, however, clarified that they want the central government or the GST Council to borrow and compensate states in full. But if there is no other option left, the state will choose the first plan, the official told BloombergQuint. Another official from Odisha said the state chose option 1 based on the political executive’s decision.
Only Manipur opted for option 2 that involves borrowing the entire Rs 2.35 lakh crore from the market, the first official quoted above said.
Goa, Assam, Arunachal Pradesh, Nagaland, Mizoram and Himachal Pradesh will list their preferences in a few days, he said, adding few states have submitted their views to Sitharaman, also the chairperson of the GST Council, and are yet to decide on the options.