State govts to raise Rs 8,000 cr from bond issue

State governments could raise about Rs 8,000 crore through a bond issue this month, dealers said on Thursday.

The states could tap the market before the next central government bond auctions scheduled between May 16 and May 24, they said.

Normally, state governments make their first bond issue of each financial year in late April. Last month, on April 20, only Kerala state government tapped the market with a Rs 300 crore bond issue.

States' borrowing this year is expected to be significantly higher from last year because of the Twelfth Finance Commission recommendations, which gives the option to states to raise money from the market instead of borrowing from the central government.

As per the Finance Commission recommendations, states will get more grants from the Centre, but no loans from this year. This year states will have to raise about Rs 29,000 crore from the market for the annual plan besides raising funds for other regular expenditure.

States had raised a total of Rs 39,101 crore from the market in 2004-05 (April-March). This included Rs 16,943 crore raised for swapping high-cost debt with the Centre.

According to dealers, states' borrowings at this juncture will receive good demand. "There is a good opportunity for states to raise money from the market," a dealer with a state-owned bank said.

"There is money available and there is demand," he added. The central government is due to issue Rs 4,000 crore of a 15-19 year bond during May 16-24. The Centre has already raised Rs 20,000 crore since April by way of dated securities.

Money matters

• States will not get loans from the central government this year
• The central government, however, will give grants to the states