India: Debt raised by state PSUs to be considered borrowing by state: FM Nirmala Sitharaman

  • Finance Minister Nirmala Sitharaman said the borrowing by state public sector undertakings or their special purpose vehicles (SPVs) will be considered as borrowing by the state government needing consent.
  • Instances of borrowing by certain state public sector companies, SPVs and other equivalent instruments, where principal and/or interest are to be serviced out of the state budgets, had come to the notice of the Ministry of Finance, she said in a written reply to the Lok Sabha.
  • “Considering the effect of bypassing the Net Borrowing Ceiling (NBC) of the States by such borrowings, it was decided and communicated to the States in Mar 22 that such borrowings shall be considered as borrowings made by the State,” she said.
  • This kind of borrowing would need the consent of the Union Government under Article 293(3) of the Constitution of India, she said.
  • All States have enacted their Fiscal Responsibility and Budget Management (FRBM) Act Compliance to the State FRBM Act is monitored by the respective State Legislatures.
  • Department of Expenditure, Ministry of Finance generally follows the fiscal limits mandated by the accepted recommendations of the Finance Commission while exercising the powers to approve borrowings by States under Article 293 (3) of the Constitution of India.
  • The normal Net Borrowing Ceiling (NBC) of each State is fixed by the Union Government in the beginning of each financial year.
  • Adjustments for the over-borrowing by States during previous years, if any, are made in the borrowing limits of subsequent year.
  • In reply to another question, she said, the Budget Estimates of Expenditure for FY23 do not presume any particular price level of crude oil. The Budget does not provide subsidy for petroleum products except LPG, she said.

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