Raise States' Borrowing Limits: Bengal To Union Finance Minister

The West Bengal government on Friday suggested to Union Finance Minister Nirmala Sitharaman that the borrowing limits of states be raised to 5 per cent of the gross state domestic product (GSDP) without any condition to save them from a financial crisis.

In a letter to Ms Sitharaman, state Finance Minister Dr Amit Mitra also expressed disappointment over the proposal of hefty GSTs on items required to fight Covid-19 at the GST Council Meeting held on May 28.

"You are aware that just like last year, there has been (a) sudden dip in revenue, threatening the fiscal viability of the states. In our case we have been hit by a double whammy -- of a second wave of Covid-19 and the Cyclone Yaas," the letter read.

The Goods and Services Tax (GST) compensation due to the states from April 2020 to January 2021 has been estimated at Rs 63,000 crore, out of which West Bengal expects Rs 4,911 nominal gross state domestic product crore, Mr Mitra said.

Referring to the Centre relaxing the borrowing limit of states up to 4 per cent (unconditional) and up to 5 per cent (conditional on certain achievements), he said, "But for the current financial year, annual borrowing limit has been fixed at four per cent of GSDP, out of which only 3.5 per cent is unconditional and 0.5 per cent is linked to capital expenditure targets."

"In view of the present impasse and the anticipated 3rd wave (of the pandemic), I once again urge you to allow the borrowing limits of states to be raised to 5% of GSDP without condition," the state finance minister said.

Mr Mitra also urged Ms Sitaraman on revisiting the matter of the gap to be funded where, he claimed, the borrowing would be Rs 2,13,000 crore instead of the Centre's estimated Rs 1,58,267 crore.

"I am taken aback that after a year like 2020-21, it is being expected that our capital expenditure would not only be back on track, but increase by more than 100 per cent since 2019-20," the letter read.