Tamil Nadu goes for Option-1, gets permission to borrow an additional amount of ₹ 9,627 crore

21 States now allowed to mobilize ₹ 78,452 crore in addition to ₹ 1.1 lakh crore to meet the shortfall arising out of GST implementation

The Department of Expenditure, Ministry of Finance, has today granted permission to Tamil Nadu to raise an additional amount of ₹ 9,627 crore through open market borrowings. The permission was issued after the State formally communicated its acceptance for Option-1 to meet the shortfall arising out of GST implementation. 21 States and 2 Union Territories, Delhi and Jammu & Kashmir, have so far requested Option-1.

Yesterday, the Department of Expenditure had issued permission to 20 States to raise an additional amount of ₹ 68,825 crore through open market borrowings.  With today’s permission, 21 States have been granted permission to mobilize ₹ 78,542 crore so far.

The borrowing permission issued to the 21 States is over and above the borrowing permission of around ₹ 1.10 lakh crore to be issued to enable the States to meet the revenue shortfall arising out of GST implementation. A special window is being created by the Ministry of Finance to facilitate this borrowing.

The current additional borrowing permission has been granted @ 0.50% of the Gross State Domestic Product (GSDP) to those States who have opted for Option-1 out of the two options suggested by the Ministry of Finance. Under the terms of Option-1, besides getting the facility of a special window for borrowings to meet the shortfall arising out of GST implementation, States are also entitled to get unconditional permission to borrow the final instalment of 0.50% of GSDP out of the 2% additional borrowings permitted by the Government of India, under Atmanirbhar Abhiyaan on 17^th May, 2020. This is over and above the Special Window of ₹ 1.1 lakh crore.

Twenty States who were granted the permission yesterday were - Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Sikkim, Tripura, Uttar Pradesh and Uttarakhand.

Additional borrowing permission under Option-1 allows states to raise extra funds to meet GST shortfall. Permission under Option-1 permits States to raise additional open market borrowings calibrated at 0.50% of GSDP to address GST revenue shortfalls; participating States also receive unconditional permission to borrow the final 0.50% instalment from the 2% additional borrowings allowed previously, and a special window is being created by the Ministry of Finance to facilitate these borrowings.