With the Centre deciding to borrow Rs 1.1 lakh crore on behalf of states to help them meet the GST revenue shortfall, the government on Thursday issued a fresh borrowing plan by including the additional amount in its calendar for the second half.
To operationalise the special window to states for meeting the GST compensation cess shortfall of Rs 1,10,000 crore, the Government of India (GoI) borrowing calendar is being modified in consultation with Reserve Bank of India (RBI), an official statement said.
"For the remaining period of the fiscal year 2020-21 (October 19, 2020 to March 31, 2021) GoI will borrow an aggregate amount of Rs 4,88,000 crore. The additional amount for meeting the GST compensation shortfall shall be raised equally at the rate of Rs 55,000 crore under the 3 year and 5 year tenors," it said.
Last month, the Finance Ministry had said the government will borrow Rs 4.34 lakh crore in the second half of the current fiscal to meet its expenditure requirement amid the COVID-19 crisis.
With the addition, the total borrowing in the second half will increase to Rs 5.44 lakh crore.
As per the earlier announcement, the borrowing was to done in 16 weekly auctions at Rs 27,000-28,000 crore and the tenures will be the same as the first half -- of 2, 5, 10, 14, 30 and 40 years.
The new weekly auctions range from Rs 17,000 crore to Rs 31,000 crore with addition of 3 years and 5 years government papers.
However, with the revision, Rs 5.44 lakh crore borrowing would be done over 22 weeks.
Of this, Rs 56,000 crore has already been mobilised by the government, so the remaining Rs 4.88 lakh crore would be raised in the remaining 20 weeks.
The Finance Ministry, in a statement later, said all the auctions covered by calendar will have the facility of non-competitive bidding scheme under which 5 per cent of the notified amount will be reserved for the specified retail investors.
"Like in the past, the RBI in consultation with the Government, will continue to have the flexibility to bring about modifications in the calendar in terms of notified amount, maturities, etc. and to issue different types of instruments, including Floating Rate Bonds (FRBs), including CPI linked inflation-linked bonds, depending upon the requirement of the Union government, evolving market conditions and other relevant factors," it added.
The RBI reserves the right to exercise the green-shoe option to retain additional subscription up to Rs 2,000 crore each against any one or more of the above security, which will be indicated in the auction notification.
The RBI will also be conducting switches of dated securities through auction on every third Monday of the month. In case third Monday is a holiday, switch auction will be conducted on fourth Monday of the month, it said.
Earlier in the day, the Finance Ministry said the Centre will borrow up to Rs 1.1 lakh crore on behalf of the states to bridge the shortfall in GST collections.
A slowdown in the economy since last fiscal has resulted in a drop in the Goods and Services Tax (GST) collections, upsetting the budgets of states which had given up their right to levy local taxes such as sales tax or VAT when GST was introduced in July 2017.
To make up for the shortfall, borrowing from the market was proposed.
"Under the Special Window, the estimated shortfall of Rs 1.1 lakh crore (assuming all States join) will be borrowed by Government of India in appropriate tranches," the statement said. "The amount so borrowed will be passed on to the States as a back-to-back loan in lieu of GST Compensation Cess releases."
The Centre borrowing on behalf of states is likely to ensure that a single rate of borrowing is charged and this would also be easy to administer.