In a recent development, the Department of Expenditure, operating under the Ministry of Finance, has given the nod for an additional borrowing ceiling of over Rs 60,876.8 crore to 22 states in the fiscal year 2023-24. This additional borrowing is specifically designated for the contribution to the National Pension Scheme (NPS) and surpasses the normal net borrowing ceiling set for states, which is 3% of their gross state domestic product (GSDP). Currently, the GSDP stands at Rs 8.59 trillion.
Moreover, the Finance Ministry has greenlit an extra borrowing allowance for states equivalent to the employer and employee shares of their employees’ contributions, going beyond the stipulated 3% ceiling. This move aims to support the states in meeting their financial commitments towards the NPS.
Open Market Borrowing and Negotiated Loans Approval
The Ministry has also given its approval for states to raise funds through open market borrowing (OMB) amounting to Rs 6.99 trillion and availing negotiated loans totaling Rs 69,370.81 crore during the fiscal year 2023-24. This strategic financial decision is expected to provide states with the necessary financial flexibility to meet their various expenditure requirements.
Continuation of Power Sector Reforms Incentives
This announcement follows a series of financial incentives granted to states for power sector reforms. In June, the Centre approved an additional Rs 66,413 crore to 12 states, as part of the initiative announced in the Union Budget 2021-22. Under this initiative, states are granted an additional borrowing space of up to 0.5% of the GSDP annually for a four-year period from 2021-22 to 2024-25.
Performance-Linked Borrowing
Highlighting the performance-based approach, the Ministry shared that in the previous fiscal years, additional borrowing was allowed to states based on their performance in the power sector. In 2021-22, Rs 39,175 crore was granted to 12 states, and in 2022-23, Rs 27,238 crore was allocated to 6 states, linked to their achievements in the power sector.
Borrowing Eligibility for 2023-24
For the ongoing fiscal year, states are eligible to borrow up to Rs 1.43 trillion based on the recommendation of the power ministry. This borrowing allowance is aimed at supporting states in advancing their power sector initiatives and achieving broader economic objectives.
In summary, these financial measures are designed to provide states with the necessary financial resources to contribute to the National Pension Scheme, meet their borrowing requirements, and incentivize power sector reforms for sustained economic growth.
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