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No proposal to relax borrowing limits for Kerala, other states: Union FM Nirmala Sitharaman

Sitharaman said the Centre applies a common yardstick while fixing the annual borrowing limit of all state governments under Article 293(3).

ByPTI

Published Dec 04, 2023 | 6:36 PM ⚊ Updated Dec 04, 2023 | 6:36 PM

Upper bhadra project in Union Budget 2023

Finance Minister Nirmala Sitharaman presenting the Union Budget. (Screengrab)

Union Finance Minister Nirmala Sitharaman on Monday, 4 November, said there was no proposal to relax the existing terms for the borrowing capacity of state governments, including Kerala for 2023-24.

Kerala has requested the Centre to allow an additional borrowing equivalent to one per cent of Gross State Domestic Product (GSDP) over and above the borrowing ceiling fixed for 2023-24 fiscal year.

In a reply in the Lok Sabha, Sitharaman said the Centre applies a common yardstick while fixing the annual borrowing limit of all state governments under Article 293(3) of the Constitution.

In doing so, it is guided by the recommendations of the Finance Commission, she said.

Also read: LDF government extravagance responsible for Kerala crisis: Centre

The current issue in Kerala

To a question on whether the Centre proposes to relax the existing borrowing terms considering the financial crisis of Kerala, Sitharaman replied in the negative.

For the current fiscal year, the gross borrowing ceiling of Kerala has been fixed at ₹47,762.58 crore. Out of this, ₹29,136.71 crore is Open Market Borrowing (OMB) while the rest is borrowing from other sources.

Out of the total OMB, consent has already been given to borrow an amount of ₹23,852 crore so far, Sitharaman said. Borrowing from other sources is resorted by the state government from time to time as per its requirements.

An amount of ₹36,231 crore has been provided to the Kerala government as Revenue Deficit Grant from 2021-22 to 2023-24 (till November 2023).

Additionally, to help states enhance their capital expenditure and manage liquidity stress, the Centre has been providing 50-year interest-free loans to state governments since 2020-21 under the Scheme for Special Assistance to States for Capital Expenditure / Investment.

“An amount of ₹2,141 crore has been released under the scheme to the state government of Kerala during FY 2021-22 and FY 2022-23,” Sitharaman added.

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