OFF
BUDGET BORROWING - ECONOMY
News:
Off-Budget borrowings- a
State-wise look
What's
in the news?
●
While tabling the Budget, Telangana
Finance Minister T. Harish Rao accused the Centre of "creating hurdles
after hurdles" in the development of the State.
●
He said that the State had resorted to off
Budget borrowings to complete Irrigation projects in the shortest time but the
Centre had imposed borrowing limits.
Key
takeaways:
●
Five
Southern States - Telangana, Andhra Pradesh, Kerala,
Tamil Nadu and Karnataka accounted for 2.34 lakh crore, around 93%, of the
total off-Budget liabilities of eleven major States.
Off-budget
borrowings:
●
Off-budget borrowings are loans that are
taken not by the Centre directly, but by another public institution that borrows on the directions of the central and
state government.
●
Such borrowings are used to full fill the
government’s expenditure needs.
Features:
●
According to the Comptroller and Auditor
General of India, these borrowings are not
included while computing the debt and the fiscal deficit of the Central and
State Governments.
●
However, the Central and State Government
is responsible for repaying the loan and servicing the debt from its budget.
●
As a result, a CAG report of 2019 pointed
out that this route of financing puts major sources of funds outside the
control of Parliament.
How are off-budget borrowings raised?
1.
Issuance of Bonds:
●
The Government can ask an implementing
agency to raise the required funds from the market through loans or by issuing
bonds.
2.
Utilizing savings:
●
The food subsidy is one of the major
expenditures of the Centre.
●
For example, In the Budget presentation
for 2020-21, the government paid only half the amount budgeted for the food
subsidy bill to the Food Corporation of India. The shortfall was met through a
loan from the National Small Savings Fund.
3.
Borrowing:
●
Other PSUs have also borrowed from the
government.
●
For instance, public sector oil marketing
companies were asked to pay for subsidized gas cylinders for PM Ujjwala Yojana
beneficiaries in the past.
4.
Bank sources:
●
Public sector banks are also used to fund
off-budget expenses.
●
For example, loans from PSU banks were
used to make up for the shortfall in the release of fertilizer subsidies.