Finance minister Nirmala Sitharaman had said she has the support of 20-21 states with even those such as Opposition-ruled Maharashtra asking the Centre to borrow funds, while simultaneously suggesting that states could raise Rs1.1lakh crore (revised from Rs 97,000 crore earlier) through the special window in case the Union government could not borrow. Even Tamil Nadu, which had originally opposed the proposal, suggested something similar at last week’s GST Council meeting.
In its letter to the states suggesting the options, the Centre had also proposed to bear the margin in case the cost of funds was higher than the yield on government securities through a subsidy.
A fresh duel is likely on Monday after last week’s discussions did not see a vote, as was demanded by some of the states, with officers at the Centre later saying the GST Council is not empowered to decide the modalities for borrowing. They have argued that the all-powerful ministerial panel’s mandate was limited to extending the levy of compensation cess beyond June 2022 and the details of the borrowing programme needed to be discussed with the Union expenditure department. “This is very surprising,” said Chhattisgarh minister T S Singh Deo.
The dispute is over agenda item 9A from last week’s meeting, with officials at the Centre suggesting that the issue was only meant for discussion and not for voting. They are arguing that even the legal opinion has suggested that borrowing has to be decided between the states and the expenditure department. Officials said communication over email with regard to borrowing options was between the expenditure department and the states.
The finance minister of an Opposition-ruled state questioned the latest stand taken by the Centre, arguing that an officer of the GST Council had circulated the note on borrowing to the states. “What has been reported by the media has come as a shock since we spent five and a half hours in the first meeting and another seven and a half hours last week discussing this… I am only hoping this is the figment of imagination of some officer or the other,” added West Bengal FM Amit Mitra.