Centre's surplus cash earns Rs 690 crore

The finance ministry has in the current fiscal earned a whopping Rs 690 crore as interest from the investment of its surplus cash in securities of different tenors.

This is a first of sorts for the ministry, as the Centre has always needed to borrow from the Reserve Bank of India (RBI) to meet its immediate expenditure needs.

However, thanks to the redemption of Rs 46,602 crore worth of loans by state governments in 2003-04, the finance ministry's need to borrow from the apex bank for meeting its cash needs has been sharply reduced in this fiscal.

In addition, the active cash management undertaken by the Centre to ensure that there was least possible idle cash with the ministries has also paid dividends.

From July 2003, the ministry has had a positive cash balance in its treasury, helping the Centre avoid emergency borrowing.

At the end of January 2004, the cash surplus with the Centre was Rs 12,457 crore and the ways and means advance was nil.

The finance ministry expects the present state of affairs to continue into February and March because of the buoyant inflow of corporate and income taxes.

The last installment of advance corporate tax is due on March 15.

As a result, the Centre had to defer its proposed borrowing programme calendar in February for some time, and is expected to sharply reduce the quantum of borrowing in the first quarter of the next fiscal.

The Centre has generated interest from the investment of this surplus cash in securities of various denominations, which RBI makes available to it for the purpose.

Thanks to the easy cash position, the Centre is free to approach the market as per its needs and that too when the interest rates are soft.

In the past couple of decades, the Centre has never been able to generate so much interest income by parking its cash, as there was hardly ever any surplus left after meeting the expenditure demands of the government.