With no help in sight from the Centre, the West Bengal government on Tuesday raised Rs 1,000 crore as a ten-year state development loan through the Reserve Bank of India bond auction window.
The state raised the money at a cut off yield of 9.28 per cent, according to data available with the Reserve Bank of India. The state is struggling to meet its committed expenditure of salaries and pension amidst an acute financial crunch.
In June, as an interim measure to pay off accumulated bills, due since November 2010, the state government had decided to go for Rs 3000 crore market borrowing.
West Bengal, one of the last few states to adopt the Fiscal Responsibility and Budget Management (FRBM )Act, has market borrowing limit of Rs 17,828 crore this financial year. In addition, according to Amit Mitra, finance minister, West Bengal, the earlier Left Front government had left uncleared bills worth Rs 3000 crore. In effect, the state was left to borrow Rs 9,616 crore over ten months.
Earlier, to tide over the financial exigency, Pranab Mukherjee, Union finance minister, had allowed the state to borrow Rs 2,706 crore in addition to the FRBM limit.
What has added to the state's woes is that on November 11 the Union finance ministry approved changes in the National Small Savings Fund schemes, whereby the minimum share of states’ net collection in the fund was reduced from 80 per cent to 50 per cent. It also linked the interest rate on such schemes to yield from government securities.
West Bengal has one of the highest shares of small savings in the country, and Bengal has an accumulated debt of debt of Rs 1.92 lakh crore. It is estimated that the share of small savings in the total debt of the state is about 42 per cent. The Centre gives each state a part of the amount raised through small savings as a 25-year loan, carrying 9.5 per cent interest. However, there is a moratorium of five years on the principal amount. In West Bengal, there are over 20 million small savers, making it the front runner among all other states.
As much as 85 per cent of the state’s revenue receipts have to be spent on committed expenditure such as salaries, interest payments and subsidies, leaving little room for expenditure on development projects.
