TN opposes conditions on borrowings
Tamil Nadu

TN opposes conditions on borrowings

S Murari

Tamil Nadu, May 18, 2020 Government Edappadi K Palanisamy, in a letter to Prime Minister Narendra Modi, has strongly protested against “onerous conditions “ imposed on the State Government by Finance Minister Nirmala Sitaraman in measures to reboot the Covid hit economy.

In the letter sent to Modi on Tuesday, Palanisami said Nirmala Sitaraman has imposed “needlessly onerous conditions”on States seeking additional borrowings beyond their limits.

He said:" The States sought the additional borrowing limit, beyond 3 percent of GDP mainly because of the significant shortfall in revenues due to the lockdown imposed in the wake of the Covid 19 pandemic. There are also large additional expenditure commitments. These are borrowings by the State Government, which have to be repaid from future tax revenues of the States. They are not grants from the Centre. To attach needlessly demanding conditionalities to the additional borrowing requirements appears unreasonable”.

He also castigated Nirmala Sitaraman for going in for structural reforms at this juncture too without consulting States and said it was against the spirit of federalism.

He said: “Aggressively pushing a reform agenda on which a consensus is yet to be developed at a time when States have approached the Centre for additional borrowing out of sheer desperation, is not in keeping with the spirit of cooperative federalism. Ideally, the proposed reforms ought to have been discussed in detail with the States, a consensus developed depending on the specific conditions in each State and the reforms linked to special Central Covid grants, and not to additional borrowing by the State. Linking the Central Government’s power under Article 293(3) of the Constitution to permit additional borrowing by the States to conditionalities, is unprecedented”.

Noting that power sector reforms was one of conditions for additional borrowing, he said Tamil Nadu had already initiated these reforms without expecting any financial assistance.”We are strongly opposed to removing free power supply to farmers”, he said and added that disbursement of subsidy should be left to concerned States.

He said:” Since a consensus is yet to emerge on these issues, I request you to instruct the concerned Ministries to remove the requirements to reform the power sector from amongst the proposed conditionalities and also allow greater latitude to States in implementing the reforms.”

Reiterating that “imposing needlessly onerous conditions on borrowings will constrain the State Governments in finding funds to meet essential expenditure in the wake of a serious financial situation”, he hoped the Prime Minister would ensure that that necessary changes were made in the guidelines on borrowings set out by Nirmala Sitaraman.