A day after Chief Minister K Chandrasekhar Rao demanded that the Centre lift “economic sanctions” it has imposed on the State, the Reserve Bank of India (RBI) allowed the State government to opt for Rs 4,000 crore open market borrowings (OMB) through an auction of government securities to be held on June 7.
Following a two-month struggle by the State government, the Ministry of Finance has finally agreed to let the State raise loans under the Fiscal Responsibility and Budget Management Act (FRBM) this year.
Telangana has decided to take out FRMB loans worth Rs 53,000 crore for this year. However, the centre may impose a 20% cut on this amount. Therefore, the state can only borrow Rs 43,000 crore.
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“The Ministry of Finance permitted raising the loans. However, the quantum of loan to be raised by the state for the entire financial year of 2022-23 will be known next week” according to an official of the finance ministry quoted by The New Indian Express.
K Ramakrishna Rao, Telangana’s finance secretary, was in New Delhi for a five-day visit. Rao outlined the state government’s demands for open market borrowing. This argument appears to have convinced the ministry.
Telangana’s willingness to approach the Supreme Court in order to have the ban revoked indicates the seriousness of the issue. The centre has enabled Telangana to borrow on the open market in anticipation of the state’s victory in the apex court.
In the first quarter of this year, the State plans to raise Rs 15,000 crore. After the Centre finalizes the annual loan eligibility, the State could raise the pending loans as well. In this way, the State government will not have any problems implementing Rythu Bandhu for Kharif.
At the beginning of May, the centre stopped Telangana’s FRBM, preventing it from open market borrowing.
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