Telangana issues ordinance for higher borrowings to tackle COVID-19 economic crunch

The ordinance was promulgated on Tuesday, to amend the Telangana Fiscal Responsibility and Budget Management Act 2005 (FRBM).
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The Telangana government has issued an ordinance to amend an Act, enabling it to go for additional borrowings in view of the COVID-19 pandemic over the set limit of 3%.

The ordinance was promulgated, on Tuesday, to amend the Telangana Fiscal Responsibility and Budget Management Act 2005 (FRBM), for higher borrowings.

"Provided further that for the financial year 2019-20 additional fiscal deficit of Rs 1,435 crore shall be permissible over and above 3.25 per cent of the Gross State Domestic Product (GSDP) as a one-time special dispensation. For the financial year 2020-21, additional fiscal deficit of 2 per cent over and above 3 per cent of the GSDP (up to 5 per cent of the GSDP) shall be permissible," the ordinance said.

Due to shortfall in the devolution of share of central taxes, the state has been allowed an additional borrowing of Rs 1,435 crore during the last fiscal as a one-time measure.

There has been an unprecedented impact on the state revenues during the current fiscal due to the COVID-19 pandemic and related lockdown. The state needs additional revenues to meet the unforeseen expenditures on relief measures, which may force the government to go for additional borrowings to mop up resources, Chief Minister K Chandrasekhar Rao had said earlier.

The Centre recently allowed states additional borrowings of up to 2% of the GSDP over and above the normal limit of 3% (total up to 5% of the GSDP) during the current fiscal, subject to carrying out the necessary amendments to the respective FRBM Acts. 

In May this year, KCR had slammed the Centre for giving inadequate support to state governments in handling the economic crisis.

Pointing out that Telangana's monthly revenue had come down from Rs 17,000 crore to Rs 1,600 crore, KCR had said, "The Centre has a broad fiscal policy. It has the powers. Either transfer powers or give us money."

"Please increase the FRBM (Fiscal Responsibility and Budget Management Act) limit as loans will be borne by the states and the Centre has to bear nothing. We have loans and I asked for a deferment but there is no response. I am surprised what burden this will put on the Centre. What is this policy I am not able to understand," he had added.

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