BJP-ruled Karnataka on Wednesday chose to accept one of the two options proposed by the Centre for states to reduce their GST revenue shortfall, which means it will mobilise Rs 11,324 crore from the market under a special, low-cost window. This is even as many states, including West Bengal, Tamil Nadu, Kerala, Chhatisgarh, Delhi and Punjab, are refusing to accept either of the options and insist that the Centre borrow instead and foot the part of the compensation bill beyond the cess fund.
West Bengal chief minister Mamata Banerjee on Wednesday reiterated the state’s stance that the Centre should borrow for compensating states.
After the GST Council meeting last week, the central government had sent a detailed note to states with two options – borrow Rs 97,000 crore, which will not be considered debt in states’ books and the entire interest cost will be borne by compensation cess fund, or take out Rs 2.35-lakh-crore loan, which would be serviced by states and and a large chunk of it would be treated as states’ debt.
Earlier in the week, Chhatisgarh, Tamil Nadu, Punjab and Telangana wrote to the central government asking it to borrow while Kerala and Delhi have publicly taken the same line.
However, after the GST Council meeting where the two borrowing options were proposed to the states by the Centre, Bihar deputy chief minister Sushil Modi had said that the relation between the Centre and states is not that of ‘giver and taker’ and the GST Council will have to work out a mid-way solution for making good the GST collection shortfall keeping in mind the central government, too, is bearing huge revenue loss due to Covid-19.
Karnataka chief minister BS Yeddyurappa on Wednesday said that the state has evaluated both the options and has chosen the first option, which provides an incentive of carrying forward the unutilised borrowing limit to the next fiscal while exempting states from any interest burden.
West Bengal chief minister wrote to Prime Minister Modi saying: “The Centre must borrow to meet the shortfall at this critical hour of the Covid-19 pandemic and I am sure that the states will reciprocate in supporting resolution that cess collection continues beyond 5 years till the entire debt of the Centre is totally liquidated, along with entire interest payment cost.”
Banerjee also said that while Centre can monetise its debt, borrow at a lower interest rate and also mobilise additional resources to service debt, while the states lack such capacity.
Source : Financial Express