HYDERABAD: The State government has sought to raise Rs. 1,400 crore through security bonds to tide over the present shortfall in revenue.
It has requested permission of the Reserve Bank of India to borrow money from the open market. It is likely to conduct an auction next week for the lending agencies, viz. banks, mutual funds and other financial institutions to buy AP Development loans, bonds at an interest determined by the supply-demand scenario. The government had raised its last two borrowings at an interest rate of 7.7 to 7.8 per cent.
The State government is supposed to restrict its market borrowings to four per cent of its Gross State Domestic Product (GSDP) which was close to Rs. 4 lakh crore last year. The limit for borrowings was raised from 3.5 per cent to 4 per cent of GSDP this year by the Union government.
Borrowing norm The market borrowings comprise not just security bonds, but also government guarantee for loans raised by different agencies and external aid. The market borrowings should not exceed Rs.14,000 crore during this financial year as per the Fiscal Responsibility Budget Management (FRBM) Act. In the last six months of the current fiscal, a sum of Rs.8,600 crore had already been borrowed.
However, officials maintain that the situation should not be construed as a financial crisis. It is a normal process of adjustment to balance revenue receipts and expenditure.
There was a shortfall in VAT due to economic slowdown and resultant negative impact on movement of goods, construction activity, spending on consumer goods and travel. Motor vehicle tax revenue too registered a decline due to the dip in sales of transport vehicles. Stamps and registration receipts fell by about 50 per cent due to poor real estate transactions.
Sunny side On the brighter side of it, there was slight increase in State’s share of indirect taxes and nominal eight per cent increase commercial taxes receipts at the end of July, compared to that of the previous year.
