Telangana accepts Centre's borrowing option to meet GST shortfall

Telangana has accepted Centre's borrowing proposal to meet GST revenue shortfall and will get Rs 2,380 crore through the special window.

"The Government of Telangana has communicated its acceptance for Option-1 out of the two options suggested by the Ministry of Finance to meet the shortfall in revenue arising out of GST implementation. The state has now joined 22 other states and 3 Union Territories (Delhi, Jammu & Kashmir and Puducherry) who have opted for Option-1," the Finance Ministry said in a statement.

The Centre has already borrowed Rs 18,000 crore on behalf of the states in three instalments and has passed it on to 22 states and 3 Union Territories on October 23, November 2 and November 9.  

Now Telangana will receive funds raised through this window and the next instalment of borrowings is likely to be released on November 23, the ministry added.

Under the terms of Option-1, besides getting the facility of a special window for borrowings to meet the shortfall arising out of GST implementation, states are also entitled to get unconditional permission to borrow the final instalment of 0.50 per cent of Gross State Domestic Product (GSDP) out of the 2 per cent additional borrowings permitted by the Government of India, under Aatmanirbhar Abhiyaan. This is over and above the special window of Rs 1.1 lakh crore.

On receipt of the choice of Option-1 from the Government of Telangana, the Government of India has today granted the State Government of Telangana additional borrowing permission of Rs 5,017 crore (0.5 per cent of Telangana's GSDP), the Ministry said.

States who have opted for Option-1 are – Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Rajasthan, Sikkim, Tripura, Tamil Nadu, Telangana, Uttar Pradesh, and Uttarakhand, along with the three Union Territories of Delhi, Jammu & Kashmir and Puducherry.

However, states like Kerala, Punjab, West Bengal, Chattisgarh, Jharkhand are yet to opt for the borrowing plan proposed by the Centre saying the Centre should borrow the entire Rs 1.83 lakh crore shortfall. Under the borrowing plan (Option-1), the Centre would borrow from market Rs 1.10 lakh crore which the revenue shortfall on account of GST implementation. The remaining Rs 73,000 crore shortfall is estimated to be the revenue impact of the COVID-19 pandemic.

The second option given by the Centre was for the states to borrow the entire Rs 1.83 lakh crore collection shortfall.