Lok Sabha Question No. 8 (STARRED), answered on 2023-12-04
Subject: Borrowing Capacity of State Governments
Ministry: FINANCE
Asked by: N.K. Premachandran

## FINANCE MINISTER

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF EXPENDITURE

## LOK SABHA

## STARRED QUESTION NO. *8

## TO BE ANSWERED ON MONDAY 4 th  DECEMBER, 2023

## [13 AGRAHAYANA, 1945 (SAKA)]

## Borrowing Capacity of State Governments

## *8. SHRI N.K. PREMACHANDRAN:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government proposes to relax the existing terms for borrowing capacity of the State Governments considering the financial crisis of Government of Kerala and if so, the details thereof and if not, the reasons therefor;
- (b) whether  the  State  Government  of  Kerala  requested  to  relax  the  terms  for  borrowing considering the financial crisis and if so, the details thereof and the action taken thereon;
- (c) the  total  borrowing  capacity  of  the  Government  of  Kerala  and  the  total  amount borrowed by them till date;
- (d) whether the Government proposes to introduce any alternative to overcome the present financial crisis and if so, the details thereof;
- (e) whether it has come to the notice of the Government that Kerala is facing difficulty due to financial crisis; and
- (f) if so, the details thereof and the action taken or likely to be taken by the Government to help the State Government of Kerala in overcoming the financial crisis?

## ANSWER

(SHRIMATI NIRMALA SITHARAMAN)

- (a) to (f):  A statement is laid on the Table of the House.

## Statement referred to in reply to the Lok Sabha Starred Question No. *8 for answer on December 4 th , 2023 raised by Shri N.K. Premachandran regarding 'Borrowing Capacity of State Governments

(a) & (b) No Sir.  Presently,  there  is  no  proposal  to  relax  the  existing  terms  for  borrowing capacity of the State Governments including the Government of Kerala. The State Government of Kerala  has  requested  for  an  additional  borrowing  equivalent  to  one  percent  of  Gross  State Domestic Product (GSDP) over and above the borrowing ceiling fixed for the Financial Year (FY) 2023-24.  However,  Union  Government  applies  a  common  yardstick  while  fixing  the  annual borrowing limit of all the State Governments under Article 293(3) of the Constitution of India. In doing so, it is guided by the recommendations of the Finance Commission.

(c) In  the  FY  2023-24, the Gross Borrowing Ceiling of Kerala has been fixed at Rs. 47,762.58 crore. Out of this, Rs. 29,136.71 crore is Open Market Borrowing (OMB) while the rest is borrowing from other sources. Out of the total OMB, consent has already been issued to borrow an  amount  of  Rs.  23,852  crore  so  far.  Borrowing  from  other  sources  is  resorted  by  the  State Government from time to time as per its requirements.

(d) to (f) The  Union  Government  has  taken  a  number  of  measures  to  make  sufficient financial  resources  available  with  the  State  Government.  This  includes  higher  normal  Net Borrowing Ceiling of 4 percent of GSDP in FY 2021-22 and 3.5 percent of GSDP in FY 2022-23. Additional borrowing of Rs. 3,511 crore has also been provided to the State Government of Kerala equivant  to  combined  share  of  State  and  its  employees'  contribution  under  the  New  Pension System (NPS). Moreover, the Government of Kerala has been provided additional borrowing of Rs. 4,060 crore in FY 2021-22 and Rs. 4,263 crore in FY 2022-23 for meeting certain performance criteria in power sector. Similar facility for additional borrowing for performance in power sector is  also  available  to  the  State  Government  in  FY  2023-24.  In addition, an amount of Rs. 36,231 crore  has  been  provided  to  the  State  Government  of  Kerala  as  Revenue  Deficit  Grant  from  FY 2021-22 to 2023-24 (till November, 2023).

Additionally,  to  help  the  States  in  enhancing  their  capital  expenditure  and  managing liquidity stress,  the  Government of  India of  India is providing  50  years  interest free loan to the State  Governments  since  FY  2020-21  under  the  Scheme  for  Special  Assistance  to  States  for Capital  Expenditure  /  Investment.  An  amount  of  Rs.  2,141  crore  has  been  released  under  the scheme to the State government of Kerala during FY 2021-22 and FY 2022-23.

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