States should be allowed to borrow up to 5 per cent of their Gross State Domestic Product (GSDP) without any condition during FY22, West Bengal Finance Minister Amit Mitra urged the Centre on Friday.

He also pressed for borrowing ₹2.13-lakh crore to meet the GST Compensation shortfall during FY22 and not ₹1.58 lakh crore as discussed during GST Council meeting on May 28.

In a letter to Union Finance Minister Nirmala Sitharaman, Mitra recalled the decision taken by Centre during FY21 relaxing the borrowing limit of States to up to four per cent of GSDP (unconditional) and up to five per cent (conditional on certain achievements). However, the limit for the current year has been fixed at 4 per cent, out of which 3.5 per cent is unconditional and the remaining linked to capital expenditure limit.

‘Year of disaster’

“I am taken-aback that after a year like 2020-21, where revenue plummeted in the entire nation and our State was hit with twin disasters of Covid-19 and Cyclone Amphan, it is being expected that our capital expenditure would not only be back on track, but increase by more than 100 per cent since 2019-20 (from ₹15,970 crore to more than ₹34,000 crore this year),” he said while urging to raise the unconditional borrowing limit to five per cent of GSDP keeping in mind impasses on account of pandemic and natural disasters and the anticipated 3rd wave.

Talking about GST compensation shortfall, he said more than ₹63,000 crore is due to States for the 10-month period of April-January FY21. He reminded West Bengal alone has due of ₹4,911 crore. Raising the question on calculation of ₹1.58-lakh crore of borrowing to meet GST compensation shortfall, he suggested that it would be more realistic, if the notional revenue for FY22 is done considering the last nine month’s average revenue of FY21. Accordingly, requirement for borrowing would be ₹2.13-lakh crore. “Further, as GST revenue has not stabilised yet, the State Finances are reeling under numerous stresses of Covid-19 uncertainties and natural calamities, I would also urge you too to extend the compensation period for another five year (beyond June 2022),” he said.

Backs Punjab FM’s stance

Supporting the view of Punjab Finance Minister Manpreet Singh Badal stating decision of the GST Implementation Committee must be approved by the GST Council, Mitra said this is a fundamental issue and must be brought before the council for detailed discussion.

He expressed disappointment over high rates on Covid relief materials. He was also surprised that none of State FMs was included in Group of Ministers (looking into need for exemption/concession), who raised voice against the present duty regime.

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