In a direct signal to the Centre, the Maharashtra government, which has inherited a public debt of Rs 4.75 lakh crore, has rejected the conditions announced by Finance Minister Nirmala Sitharaman to raise public debt from 3 per cent to 5 per cent of the Gross State Domestic Product (GSDP), because of the financial stress following the coronavirus pandemic. The Maha Vikas Aghadi (MVA) government partners Shiv Sena, Nationalist Congress Party (NCP) and Congress, on Wednesday, at a joint interaction with the press, clearly said that the state government will borrow money on its terms and at a cheaper rate, but will not accept the Centre’s conditions.
Sitharaman, while announcing the Rs 20.97 lakh crore economic package, had said an increase of 0.5 percentage points will be unconditional, while a further 1 per cent raise will be released in four tranches of 0.25 percentage each linked to states' performance in the areas of one nation, one ration card scheme, ease of doing business, power distribution and urban local body reforms. The final increase of 0.5 percentage points will be given only if the states achieve their targets in three of the four outlined areas.
As reported by the Free Press Journal, the Maharashtra government can borrow a total of Rs 1,40,000 crore in the current fiscal 2020-21, which will be up to 5 per cent of GSDP. The state government, in its budget presented on March 6, had budgeted Rs 52,000 crore, which was 1.7 per cent of the GSDP. But with FM’s announcement, it can borrow an additional Rs 88,000 crore in the current fiscal based on the conditions laid down in the economic package.
NCP veteran and Water Resources Minister Jayant Patil said the government won’t accept the conditions laid down by the Centre in its economic package, but will raise debt on its own terms. ‘’The state government cannot discontinue subsidies given for electricity supply to farmers. Under the garb of ease of doing business, the state cannot do away with labour laws. Thirdly, the state government cannot simply accept the Centre’s condition with regard to reforms in urban bodies and change property tax in line with the revision in ready reckoner rates. In a nutshell, the government will not accept the Centre's conditions and will borrow money on its terms,’’ he noted.
Officers from the state finance department hinted that the government has enough headroom and can raise borrowings without disturbing the long term fiscal health of the state. As soon as the economy and state finances resume their normal trajectories, these additional borrowings can be tapered off.
