Like many other States, Telangana is likely to ask the Centre to take a loan and disburse it to them as GST compensation in view of their financial suffering this year due to COVID-19.
Finance Minister T. Harish Rao confirmed to The Hindu that the State government asking the Centre to take the loan was on the cards but Chief Minister K. Chandrasekhar Rao would hold a meeting on Monday to take a final decision after the Finance department sent a note on option best suited to the State.
As the biggest component of tax revenue, GST collection in Telangana was only ₹3,956 crore against the budget estimate of ₹32,671 crore, a mere 12.11%, in the first quarter of this financial year.
Two days after the 41st GST Council meeting on August 27, the Centre on Saturday gave two options to States — one, giving them a special window to borrow collectively ₹97,000 crore, which is the shortfall arising out of GST implementation and, two, allowing States to borrow through issue of market debt entire shortfall of ₹2.35 lakh crore, which is their compensation requirement in the current financial year.
‘Apprehensions’
Mr. Harish Rao expressed apprehensions of States that if they opted either way, which would ultimately be facilitated by the RBI, it was not certain how much and when the Centre would disburse the amount. Telangana would not agree to release of money in instalments. If release of money in one go was not assured, then the State government would have no option but to ask the Centre to take loan and disburse it to States.
On the other hand, Union Finance Secretary Ajay Bhushan Pandey in the letter to Finance Secretaries of all States on Saturday cautioned that it was not in the collective interest of Centre and States and in the interest of the nation and of all economic entities, including the private sector, not to do any avoidable borrowing at the Central level when it could be done at State level.
The letter also said "while additional borrowing by the Centre influenced yields on Central government securities (G-secs) and has other macro economic repercussions, yields on State securities do not directly influence other yields and do not have the same repercussions".
In this background, the States were asked to communicate their preference within seven working days. A meeting of State Finance Secretaries with Mr. Pandey and Secretary (Expenditure) T.V. Somanathan was scheduled for September 1 for clarifying issues.
Therefore, the Chief Minister was expected to hold a meeting on Monday and announce the stand of the State government.
