Despite having met its enhanced debt limit, the West Bengal government has planned to raise another Rs 1,000 crore through market borrowing, implying a second relaxation by the central government on its borrowing spree this financial year.
Data from the Reserve Bank of India (RBI) shows it had already raised Rs 20,523 crore through 10-year state development loans (SDL) this financial year, against the borrowing limit of Rs 20,534 crore.
The original limit was Rs 17,828 crore, but the Centre had already enhanced it by Rs 2,706 crore in view of the dire state of Bengal’s finances.
With the latest borrowing, the total would be Rs 21,523 crore, a breach of the limit set by the Fiscal Responsibility and Budget Management Act, unless the Centre had enhanced it for a second time. H K Dwivedi, the state’s finance secretary, refused to comment on the issue.
On Wednesday, the Reserve Bank of India had said seven state governments had planned to raise Rs 5,600 crore through SDL auctions slated for the coming Tuesday. West Bengal was not among the seven. Today, in a revised list, Karnataka and West Bengal have joined the queue of state governments planning to raise loans through SDL.
In view of the accumulated debt of Rs 1,86,000 crore till March 2011, the latest borrowing should increase the total to about Rs 2,06,000 crore.
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On January 24, West Bengal raised Rs 1,000 crore through SDL loans, exhausting its borrowing limit for the current financial year.
It has already demanded from the Centre a moratorium on annual interest repayment of Rs 22,000 crore, on the accumulated debt of Rs 1.92 lakh crore. It had also sought relaxation in the borrowing limit to meet committed expenditure over the next two months. As much as 85 per cent of the revenue receipts have to be spent on committed expenditure such as salaries, interest payments and subsidies.
Last June, the Planning Commission approved a Rs 22,214 crore annual plan for the state, 27 per cent more than what the state got last year. Meanwhile, the state government is also unlikely to meet its much-needed revenue collection target for this year. Against the target of 31 per cent increase in collection, it has not even been able to reach the 20 per cent mark so far.
In August, the Centre committed a Rs 21,614-crore financial package for West Bengal. Of this, the recently-approved Rs 8,750 crore was on account of development of backward regions. The money cannot be used for meeting committed expenditure. Mamata Banerjee, chief minister since the middle of last year and a crucial, if fractious, political ally at the central government, has been insisting on a package of Rs 19,000 crore for the state, including a moratorium on its huge debt.
In December, for the first time in seven months, the state faced an overdraft situation, according to sources close to development.
The state has been replacing high cost debt with low cost borrowing.
Thus, it repaid about Rs 1,100 crore in loans from the West Bengal Infrastructure Development Finance Corporation (WBIDFC). Most were borrowed at more than 10 per cent interest.