Finance Ministry writes to states on additional 2% borrowing

Finance Minister Nirmala Sitharaman (File image: Reuters)

The finance ministry has written to the states on additional borrowing of 2 percent of their projected GSDP in the current financial year, amid stress in revenue due to coronavirus-induced lockdown.

Further, public and private sector banks have together sanctioned loans worth over Rs 1.20 lakh crore, while the disbursal amount stood at Rs 61,987 crore, under the Emergency Credit Line Guarantee Scheme for MSMEs.

As part of the Aatmanirbhar Bharat package announced in May, Finance Minister Nirmala Sitharaman had announced that the Centre has decided to accede to the request and increase borrowing limits of states from 3 per cent to 5 per cent, for 2020-21, which will make available extra resources of Rs 4.28 lakh crore.

However, she had said part of the increased borrowing limit would be linked to specific reforms undertaken by the states in areas of universalisation of One Nation-One Ration Card, ease of doing business, power distribution and urban local body revenues.

"In an effort to support the financial position of the state governments presently suffering from stress on account of revenue losses due to lockdown, the Department of Expenditure issued a communication to all the state governments for additional borrowing of 2 per cent of projected GSDP (gross state domestic product) to the states in 2020-21, subject to implementation of specific State Level Reforms," according to an official statement.

Further, the economic package also included a Rs 3-lakh crore collateral-free automatic loans for businesses, including micro, small and medium enterprises (MSMEs).

With regard to a Rs 30,000-crore special liquidity facility for non-banking financial companies (NBFCs), housing finance companies (HFCs) and microfinance institutions (MFIs), the ministry said the scheme has been launched.

"RBI (Reserve Bank of India) has also issued a circular to NBFCs and HFCs on July 1, 2020, itself on the scheme. SBICAP has received 24 applications requesting about Rs 9,875 crore of financing as on July 7, 2020, which are being processed. The first application in this regard has received its approval and the remaining are also being considered," the statement added.

The government had in May announced an economic package of Rs 20 lakh crore, equivalent to 10 per cent of India's gross domestic product, to fight the COVID-19 pandemic.

"The ministries of finance and corporate affairs have immediately started implementation of the announcements related to the economic package under the Aatmanirbhar Bharat Abhiyaan. Regular reviews and monitoring of the implementation of economic package is being overseen by the finance minister personally," the statement added.

To give effect to certain measures announced in the package, the Department of Expenditure has amended present Rule 161 (iv) of General Financial Rules, 2017 and GFR Rules relating to Global Tenders, giving a major relief to local MSMEs.

"Now, no global tender enquiry shall be invited for tenders up to Rs 200 crore, unless prior approval is obtained from Cabinet secretariat," the statement said.

In a relief to contractors, it was announced by the finance minister that all central agencies, such as Railways, Ministry of Road Transport and Highways, and Central Public Works Department, will give an extension of up to 6 months for completion of contractual obligations, including in respect of EPC (engineering-procurement-construction) and concession agreements.

"In this regard, the Department of Expenditure has issued instructions that (due to the COVID-19 pandemic) on the invocation of Force Majeure Clause (FMC), contract period may be extended for a period not less than three months and not more than six months without imposition of any cost or penalty on the contractor/concessionaire," the statement said.

It added that "instructions were also issued to return the value of performance security to the contractor/ suppliers proportional to the supplies made/ contract work completed to the total contract value. The same is being implemented by various Departments/Ministries".