Telangana amends FRBM Act, enables govt to seek additional borrowings

HYDERABAD: The state government on Tuesday promulgated an ordinance, amending the Telangana Fiscal Responsibility and Budget Management Act-2005 allowing it to opt for additional borrowings over and above the limits set under the Act.
The Telangana FRBM (Amendment) Act 2020 now enables the government to go for additional borrowings under the existing Act. Sources said the state government’s additional borrowing limit can go up to Rs 20,000 crore now.
With the revenues during the current financial year taking a nosedive on account of Covid-19 pandemic and lockdown, the government was desperately looking to mop up additional resources to meet the unforeseen expenditure on account of coronavirus relief operations.
Chief minister K Chandrasekhar Rao had written to the Centre some time ago, seeking an increase in the borrowing capacity to 6% of GSDP from 3% of GSDP. The CM even highlighted how states would face unprecedented financial troubles during and after the lockdown and sought increase in the borrowing limit.
The Centre allowed an additional borrowing of 2% of GSDP over and above the normal limit of 3% during the current financial year, subject to carrying out the necessary amendment to the Telangana FRBM Act, 2005.
Accordingly, the state government promulgated the ordinance on Tuesday, thus enabling it to make use of an additional fiscal deficit of 2% above the permissible limit. “The CM was sure that the state would get the additional Rs 20,000 crore. That is why the ordinance was brought in so that the state could go for additional borrowings without any hassles,” sources said.
Sources also said the Centre had given permission to borrow additionally, subject to fulfilment of certain conditions like implementation of one nation-one ration card, reforms in ease of doing business, etc.
Due to the shortfall in the devolution of share from the central tax pool, the state was allowed an additional borrowing of Rs 1,435 crore as a one-time dispensation during the previous financial year.
“For the financial year 2020-21, the additional fiscal deficit of 2% over and above the permissible limit (3% of GSDP) will allow the state to get more borrowings,” sources explained.
Till now, the state had already used Rs 12,500 crore in the first 50 days of nine months of financial year. Under the earlier 3% of GSDP regime, the state could have borrowed Rs 15,051 crore for the nine months of the financial year.