Centre simplifies consent mechanism for market borrowing by states

The central government has simplified the consent mechanism for open market borrowings (OMBs) by state governments, allowing the states to prepare their borrowing calendar for the first nine months on a one-time consent for during the first nine months of the financial year.

A notification issued by the finance ministry stated this has been done in the spirit of co-operative federalism and in order to bring in transparency and predictability in the open market borrowings of states.

Under Article 293 (3) of the Constitution, states were required to obtain quarterly consent from the central government for raising OMBs within the net borrowing ceiling (NBC) fixed for each state as per the formula prescribed by the Fourteenth Finance Commission (FFC). The simplified mechanism would, however, allow the states to prepare their borrowing calendar for the first nine months and seek one-time consent for raising OMBs during the first nine months of the financial year.

The centre would, thereafter, based on the assessment of details of borrowings and repayment thereof (actuals for first 3 quarters and estimates for last quarter), give consent for the first two months of fourth quarter will be given. The consent for the last month, ie, March, will be given based on the re-assessment of actual borrowings for the first 11 months by the states.

Thus, the simplified procedure will ensure that consent under Article 293(3) is issued only on three occasions during the year, one in the month of April for first nine months after fixation of borrowing ceilings, second in the month of December for the first two months of the fourth quarter and last in the month of March after the assessment of actual borrowings by the states.

The centre also on Thursday decided to give special assistance of Rs1,976.50 crore to Andhra Pradesh during 2016-17, as part of its commitment to the people of Andhra Pradesh and to compensate the financial impact arising out of the bifurcation of state.

With this sanction of funds, the central government has so far provided assistance of Rs8,379.50 crore to Andhra Pradesh, which includes Rs4,403 crore released during 2014-15 and Rs2,000 crore released during 2015-16.