Mamata Banerjee on Tuesday wrote to Prime Minister Narendra Modi, urging him to relax the borrowing limit under the Fiscal Responsibility and Budgetary Management (FRBM) Act, 2003, to allow states to borrow 5 per cent of its state domestic product (SDP) from the market so that more resources were at disposal for the fight against the novel coronavirus.
At present, states can borrow up to 3 per cent of the SDP from the market, which is called market borrowing.
“You would agree that as a result of acutely necessary lock downs and closure of business in many states of the country, including our own, the capacity of the states to mobilise resources will be severely crippled... I sincerely urge you to allow the states to borrow more by raising the FRBM limits of the states to at least 5 per cent of their SDP during the fiscal year 2020-21,” the Bengal chief minister wrote.
As Bengal’s GDP was about 14.7 lakh crore in the 2018-19 fiscal, the state was allowed to borrow Rs 44,100 crore from the market in the 2019-20 financial year.
“The limit has already been exhausted and we need more funds to battle the spread of the virus. That’s the reason why the chief minister wrote the letter,” said a senior finance department official.
So far, the state government has set up a fund of Rs 200 crore to battle Covid-19 in the state.
“But the fund is almost exhausted as we had to buy masks, protective gears, sanitisers and other equipment for doctors and health workers. As the Centre has helped little in arranging the required items, we should be allowed to borrow more from the market this year,” Mamata said at Nabanna on Tuesday.
The chief minister has cited in her letter that lower collection of GST, which makes 70 per cent of the state’s earnings, is almost inevitable because of the emergency-like situation. Moreover, lower collection of tax by the Centre, would also affect the states as the devolution of central taxes to the states would “plummet”.
“The Centre has to either give funds to fight the virus or allow states to borrow more from the market. The
chief minister has actually
put the ball on the Centre’s court by raising the issue,” a senior government official said.
He added that the letter would definitely put the Narendra Modi government under pressure.