NEW DELHI: Even as some states are yet to accept the Centre’s plan to borrow Rs 1.1 lakh crore on behalf of states for meeting GST shortfall, Finance Minister Nirmala Sitharaman reached out to all states, assuring them that interest rate for this arrangement will be reasonable.
“The current financial year is truly unprecedented in terms of the severe impact on revenues. I am well aware of the financial difficulties that the states are facing,” the finance minister wrote, adding the interest rate for the back-to-back debt, which has to be paid by the states, will be reasonable.
“I am also sensitive to the fact that states need to be protected from the adverse consequences of higher borrowing in the form of interest liability and addition to debt,” she wrote. Sitharaman added that this Rs 1.1 lakh crore, which is the shortfall due to GST implementation and the extra Rs 1.06 lakh, which all states will be eligible if they choose the first option, will suffice the requirement of states for this financial year.
The Centre’s borrowing on behalf of states is likely to ensure that a single rate of borrowing is charged and this would also be easy to administer. While there will be no burden on the Centre as states will bear the interest, the finance minister assured that for other calculations of the Finance commission, this debt will not be considered.
Till Wednesday, a total of 21 states chose the first option. Meanwhile, finance ministry officials pointed out that the Centre has given time till this week for the states to finalise which option they want to opt for. Mostnon BJP-ruled states are yet to choose either of the two options.
“We have now revealed all the options, the rest of the states can join before Monday,” said a senior finance ministry official. While states like Kerala welcomed the move, they are yet to take a final call. Kerala has indicated that only after discussing the matter internally, they will be taking final call on this issue. Other states have said they are still weighing in other options.