Center worries as states borrow from future revenues and government assets

NEW DELHI: From collectors and taluk offices to municipal parks, some states have resorted to raising loans from banks by offering sovereign assets as collateral or sequestering their future income, incentivizing the Center raise the red flag, especially following the crisis in Lanka.
Between 2019-20 and 2020-21, at least five states – Andhra Pradesh, UP, Punjab, MP and Himachal – blocked future revenue, finance secretary TV somanathan said during a presentation to chief secretaries last month. More states may have used such means, but the data was not immediately available, sources told TOI.
Escrow refers to entrusting resources to a third party or banks until a loan or liability is settled. On June 20, TOI was first to report that the Center had raised concerns about high debt levels in some states.
The concern stems from states offering securities to raise loans when they have no sources of revenue, which the Comptroller and Auditor General has also frowned upon in the past.
As spending increases, experts say, governments are increasingly resorting to off-budget borrowing and pledging their revenue streams or sovereign assets.
While the Center itself had significant off-budget borrowing, for food grants, funding Air India losses and oil bonds, it has sought to wipe its books in recent years. At the same time, he is pushing states to be more fiscally responsible, but is facing political resistance, as was the case on Tuesday when several opposition parties opposed the presentation of Economic Affairs Secretary Ajay Seth at a meeting of political parties on the Lankan crisis.
Under current rules, the Center allows states to borrow up to 3.5% of the state’s gross domestic product (GSDP), with another 0.5% allowed that is tied to government sector reforms. electricity.

Comments are closed.