Borrow money, compensate states, Manish Sisodia writes to FM Nirmala Sitharaman

Deputy chief minister Manish Sisodia has written to Union finance minister Nirmala Sitharaman, urging her to consider that the Centre borrow money and compensate states to meet Goods and Services Tax (GST) revenue shortfall, instead of asking states to do so.

Deputy chief minister Manish Sisodia has written to Union finance minister Nirmala Sitharaman, urging her to consider that the Centre borrow money and compensate states to meet Goods and Services Tax (GST) revenue shortfall, instead of asking states to do so.

Deputy chief minister Manish Sisodia (Amal KS / HT Photo)

A senior government official said Sisodia wrote the letter on Tuesday, hours after he attended a meeting through video conference facility with his contemporaries in several non-BJP ruled states — including Punjab, Telangana, West Bengal and Kerala — to discuss alternatives to the two borrowing options presented to states by the Union finance ministry on August 27.

On August 27, at the 41st meeting of the GST Council, the Union finance ministry offered states two options to plug a shortfall in their revenue, estimated at Rs 2.35 lakh crore in the financial year that ends in March 2021.

In the first option, states can borrow ₹97,000 crore at reasonable interest rates from a special window that will be opened in consultation with the Reserve Bank of India (RBI). Both the principal and the interest payments under this option will come from cess collections.

Under the second option, the states can borrow the entire ₹2.35 lakh crore, but will have to bear the interest cost. The Centre has defined losses arising from the implementation of GST at ₹97,000 crore and the balance as losses arising from an “Act of God” (referring to Covid-19).

In the letter, which HT has seen, Sisodia said the Delhi government cannot accept any of the two options.

“Delhi on its part is therefore not in a position to accept either of the two options… The GST Council may authorise the government of India to borrow on its behalf and also consider to extend the levy of cess for meeting the repayment obligation of both interest and repayment (principal amount) beyond 2022.

Earlier that day, Delhi chief minister Arvind Kejriwal had written to Prime Minister Narendra Modi, urging him to consider a “viable” alternative to the two borrowing options provided to the states by the Union government on August 27 to meet the Goods and Services Taxes (GST) revenue shortfall, which, according to the CM, would “put an extremely onerous burden on the states”.