Amit Mitra wrote to Nirmala Sitharaman urging her to call a meeting of the GST Council (File)
Calcutta:
West Bengal Finance Minister Amit Mitra wrote to Union Finance Minister Nirmala Sitharaman urging him to call a meeting of the GST Council for discussions on borrowing from the Center to close the gap recovery.
In the letter written on November 13, Mr. Mitra said that many states argued at GST Council meetings held in August and October that the central government was borrowing from the RBI special window to bridge the gap between protected revenues at a growth rate of 14% and GST. collections.
In this regard, Mr Mitra said that West Bengal Chief Minister Mamata Banerjee also wrote to Ms Sitharaman on the matter on October 10.
He said it was unanimously agreed at the meetings to extend the collection period beyond 2022 to cover the debt service by the borrower.
However, Mr Mitra said the Center has presented a new proposal whereby it will borrow two-thirds of the shortfall set at Rs 1.10 lakh crore until January 2021, while the remaining shortfall of Rs 72,000 crore to be received by the States only after June 2022.
He said the new proposal also provided for an additional 0.5 percent borrowing limit from the GSDP to states to facilitate borrowing of Rs 72,000 crore.
This, he said, is up to the Center to borrow only two-thirds of the shortfall and indicates the remaining part, if needed, in the market.
According to Mr. Mitra, the loans of Rs 1.10 lakh crore at the special counter of the RBI will have no impact on the budget deficit of the Center which will be entirely financed by the collections of the cess.
Mr. Mitra said the Center was able to borrow from the special window at five percent while states had to pay over 6.8 percent, implying that the burden of debt service will be placed on them.
In this context, Mr. Mitra said that due to the interest rate differential, the Center would have to borrow the full amount of the special window.
He said that due to the pandemic and Cyclone Amphan that hit West Bengal, the state is already in an acute financial crisis. Mr. Mitra said the Center should convene a board meeting to reach a unanimous decision and thus maintain the spirit of cooperative federalism.
(Except for the title, this story was not edited by GalacticGaming staff and is posted from a syndicated feed.)
