Debt raised by State PSUs to be considered borrowing by State: FM Sitharaman

Finance Minister Nirmala Sitharaman on Monday 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 March 2022 that borrowings by State Public Sector companies/corporations, Special purpose vehicles (SPVs) and other equivalent instruments, where principal and/or interest are to be serviced out of the State Budgets and/or by assignment of taxes/cess or any other State’s revenue, 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 with 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 FY 2022-23 do not presume any particular price level of crude oil.

The Budget does not provide subsidy for petroleum products except LPG, she said.

The Economic Survey for 2021-22 assumed crude oil prices to be in the range of $70-75 per barrel while projecting the GDP growth rate during 2022-23 to be 8-8.5% in real terms, she said.