The cash-strapped Bengal government will exhaust 71% of its borrowing limit on Tuesday when it raises a fresh tranche of debt of Rs. 2,000 crore.
This would leave the government with only Rs. 6,621 crore to be raised in the last three months under the Fiscal Responsibility & Budget Management (FRBM) Act.
While finance department officials think at least Rs. 9,000 crore would be necessary to just scrape through the bare minimum commitments, contractors are worried that they may not get paid at all. Bengal’s borrowing limit is Rs. 22,821 crore.
“Who would have taken this responsibility if we knew the situation was so disastrous. If this state is put up on auction, none would bid for it,” chief minister Mamata Banerjee remarked at a programme on December 12, hinting at the crippled finances of the state.
“There are two options left for the state government. Either put off the obligatory payments to the next fiscal, or use funds earmarked for development expenditure for meeting such expenditures. The first option is tough, as non-payment of bills would mean discontinuation of service by contractors. The second option is unfortunate, but seems inevitable,” said a finance department official.
State government sources said the borrowing would be used for payment of salaries and retirement benefits to state government employees. According to a notification issued by the RBI, Bengal along with 10 other states are going for a fresh borrowing to the tune of Rs. 9,700 crore. Out of this amount, Bengal would alone borrow 21%.
Besides Bengal, Maharashtra is borrowing R1,250 crore while Bihar, Gujarat and Karnataka are taking a loan of Rs. 1,000 crore each. Jharkhand, Punjab, Rajasthan and Uttarakhand are borrowing just R500 crore each. The last market borrowing by the Bengal government was on November 20, 2012, when it borrowed Rs. 1,500 crore from the market.
With bleak chances of getting a nod from the Union finance ministry to borrow beyond the FRBM limit, state sources told HT that managing the remaining three months and a half would be extremely difficult.
In the last financial year (2011-12), Bengal borrowed beyond the limit twice because of the personal initiative of the former Union finance minister Pranab Mukherjee.
Sources said with the fresh borrowing on December 18, the state would have exhausted almost 80% of its borrowing limit for the fiscal, had not the Centre increased its borrowing limit from Rs. 20,071 crore to Rs. 22,821 crore. As on March 31, Bengal’s total debt was Rs. 2,08,382 crore and considering that the state will exhaust its entire borrowing limit of Rs. 22,821 crore, its total debt burden at the end of this financial year will be Rs. 2,31,203 crore.