Shillong, Nov 9: Chief Minister, Conrad Sangma who holds the Finance portfolio on Monday informed the House that for the current financial year, given the fall in revenues of both Union and State governments the Centre’s department of Expenditure, in May 2020, has allowed the States to avail additional borrowings of two percent of the GSDP, over and above the normal three percent borrowing limit.
Replying to a call attention motion taken up by Congress MLA from Mawlai, Process T Sawkmie, the Chief Minister said, “Of this additional borrowing of two percent, 0.5 percent was untied and the rest was tied to achieving some critical reforms in various sectors.”
Sangma informed the House that the 0.5 percent of the GSDP for Meghalaya translates to Rs 194 crore and this was approved as additional borrowing in June 2020.
The Chief Minister informed the House that the COVID-19 pandemic has caused unprecedented economic and social disruption to global, national and local economies, impacting the finances of both the Union and State governments.
Stating that Meghalaya’s own revenue sources are limited and inelastic, the State’s own tax and non-tax revenues comprise only about 20 percent of our Total Revenue Receipts.
“We are therefore, largely dependent on transfers from Government of India to both meet our committed expenditures like salaries and pensions and to invest in various development programs. Market borrowings also comprise additional revenue source for all State governments in addition to their own revenues and government of India transfers,” Sangma said.
It may be mentioned that every State is allowed to borrow annually upto three percent of its GSDP as per the Fiscal Responsibility and Budget Management Act
The borrowing permission is given from time to time by the department of Expenditure, government of India and States utilise the borrowings based on their need by raising State Development Loans through the Reserve Bank of India.
Further, in September 2020, the department of Revenue, Ministry of Finance, Government of India, held consultations with the State governments on the issue of compensation to States due to the GST shortfall.
“It is to be noted that the pandemic has also affected the collection of GST cess meant for the GST Compensation Fund from where states are being compensated for loss in revenue due to implementation of GST,” Sangma said.
The Chief Minister informed the House that based on these consultations, the State government agreed to the proposal of the government of India that the shortfall in GST compensation will be met through a Special borrowing dispensation.
This dispensation allows the States additional borrowing to make good the GST collection shortfall over and above the 5 percent borrowing already allowed to the States.
Sangma said that based on this dispensation, the State was immediately allowed to borrow another 0.5 percent of the GSDP, i.e., Rs. 194 Crore in October 2020.
“The State government is prudently managing its expenditures during these difficult times for the economy and State finances. We are utilising all available resources, to meet both establishment and development expenditure and to ensure that the State moves on the path of growth and prosperity,” the Chief Minister said.