State's latest loan: Rs 1000 cr

State's latest loan: Rs 1000 cr

Open market borrowings could touch all-time high of Rs 8,000 cr

Previously, on July 29, the State government had raised Rs 1,000 crore in auctions of 10-year state development loans.

According to sources in the finance department, the rate of interest payable by the state on the securities auctioned on August 4 is 7.95 per cent, 30 basis points higher than the stock auctioned on July 29.

A sum of Rs 2,000 crore borrowed so far in this fiscal has been credited to the state exchequer and the proceeds of the loan would be utilised for the annual plan 2009-10.  

The government is slated to enter the market a few more times during the current fiscal.

According to the budget estimates 2009-10 the State government plans to borrow from the open market, loans to the tune of Rs 6,061.43 crore.

However, with the state’s own revenue generators - commercial taxes, excise, stamps and registration and motor vehicles tax-  facing a dip due to economic slowdown, the borrowing could touch Rs 8,000 crore, an all-time high.

To make matters worse, the share of central taxes to the state is stated to decrease due to decline in central tax collections.

The shortfall for the state is calculated at around Rs 300 crore. Last month, the legislature passed the Karnataka Fiscal Responsibility (Second Amendment) Bill 2009, allowing the state government to go for additional borrowings of Rs 2,800 for the fiscal 2009-10.

The amendment to increase fiscal deficit to a limit of four percent of the estimated State Gross Domestic Product (SGDP) will help the government to go in for additional borrowings. The previous limit stood at three per cent of the SGDP.

Besides the open market, the state can borrow from the Government of India, procure loans from Life Insurance Corporation, RBI, National Cooperative Development Corporation (NCDC) etc. The state government plans to borrow Rs 2,245 crore from these sectors besides Rs 1,258 crore from public accounts.

The commutative liabilities in the state as per the budget estimates for 2009 will add up to a whopping Rs 67,546 crore.

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