The Centre allowed a number of states, including Uttar Pradesh, in July to borrow Rs 42,268 crore, taking the total debt limit for all states for the first three quarters of FY23 to Rs 6.14 trillion.
This amount represents 71.5% of their aggregate annual net borrowing ceiling (NBC) of Rs 8.58 trillion (3.5% of GSDP).
The approvals, which usually come by April in a financial year, have been delayed this fiscal after the Centre reviewed states’ off-budget balance sheets.
Like last fiscal, the borrowing by states for the April-December period of FY23 has been fixed at 75% of their annual ceiling. However, the total sanction amount is lower than this ceiling, as about Rs 41,000-crore off-budget debt of select states (in FY22) will be adjusted against their FY23 borrowing limit.
In June, the Centre decided to lift a virtual freeze on borrowings by some states with large off-budget liabilities. It has, however, decided to strike off at least 25 basis points (bps) from the NBC of 3.5% of GSDP of these states in FY23, in case off-balance-sheet borrowings in FY22 exceeded 25 bps of the projected GSDP in the current fiscal.
The balance debt, so estimated, will be brought above the line over three years to FY26 in equal tranches. The off-budget liabilities were being counted only from FY22 onwards.
Under Article 293(3) of the Constitution, states can’t borrow beyond the annual limits set by the Centre. However, they don’t need prior consent from the Centre to guarantee the loans and advances, and bonds issued by entities backed by them. This has now been made part of the states’ NBC if the loan is being serviced from their budget.
States in aggregate have raised Rs 1.98 trillion through state development loans (SDLs) till August 8, 9.4% lower than the year-ago period.