A finance department official told FE that Bengal finance minister Amit Mitra has sought an increase in ceiling of market credit availability, increase in way and means advances (WMA) from the RBI and increased central loans to tackle Bengals crippling finances.
Although this proposal is yet to be officially submitted to the Centre, Union finance minister Pranab Mukherjee is learnt to have agreed to it in-principle. This would be a part of the financial package the state would ask from the Centre after the new government places its budget in June.
In fact, the relaxations, which Mitra has sought, would add to the states debt burden of R2 lakh crore. But the state would require to submit a revival plan to the Centre to tide over the increased debt burden as well as recover from the bad state of finances. The Union finance ministry after ratifying the proposal, would place it before the Cabinet for approval after which the package would be cleared, the official said. However, the immediate assistance of R3000 crore might come through WMA and overdraft from RBI, since central funds, including grants and loans, can only come after the Cabinet clearance.
West Bengal, in this fiscal, so far resorted to WMA 12 times against 39 times in 2010-2011. So the new government feels that it still has the room to go for WMA. RBI charges repo tender rate currently at 7.25% for WMA loans. The overdraft, which the last Left Front government, took for only one time in 2011-2012 against seven times in 2010-2011, is charged at 1.15 percentage points above the reverse repo rate, which is currently at 6.25 %.
The new government feels that it has to opt for some more overdrafts before it can get central funds and loans to tide over the crisis. But the option of market borrowing can come at a cheaper cost provided it gets proper time to explore.
The former government has borrowed R7000 crore of the R14,000 crore limit for this fiscal. But if the Centre increases the limit that would be a help to the government, the official said.
Pranab Mukherjee on Sunday said the Centre would give all assistance to the state to come out of the financial crisis, but Mitra did not want to comment. He, according to sources, is busy preparing the Budget document and finding means to mop up revenue.