According to a statement from the Narendra Modi government, disbursed a balanced amount of Rs 40,000 crore to states and union territories (UTs) with legislature under the back-to-back loan facility instead of GST compensation on Thursday the ministry of finance.
“After accounting for the previous release of Rs 1,15,000 crore (Rs 75,000 crore on July 15, 2021, and Rs 40,000 crore on October 7, 2021), the total amount disbursed in the current fiscal year as a back-to-back loan instead of GST compensation is Rs 1,59,000 crore,” the finance ministry said.
This is in addition to the regular GST compensation, which is paid out of the entire cess collection every two months.
“Following the 43rd GST Council Meeting held on 28.05.2021, it was decided that the central government would borrow Rs 1.59 lakh crore and release it to states and UTs with the legislature on a back-to-back basis to meet the resource gap due to the short release of compensation due to the insufficient amount in the Compensation Fund,” the statement said.
It stated that this sum is by the principles taken for a similar facility in FY2020-21 when Rs 1.10 lakh crore was provided to states under a similar arrangement. This sum of Rs 1.59 lakh crore will be in addition to the compensation of more than Rs 1 lakh crore (based on cess collection) that is expected to be disbursed to states/UTs with the legislature during the current fiscal year. “The entire amount of Rs 2.59 lakh crore is projected to exceed the amount of GST compensation accruing in FY2021-22,” the government said.
All eligible states and UTs (together with the legislature) have agreed on finance arrangements for the compensation gap through the back-to-back loan facility. All states and UTs play a critical role in the successful reaction and management of the COVID-19 pandemic, as well as an increase in capital spending. The ministry of finance has frontloaded the release of assistance under the back-to-back loan facility of Rs 1,59,000 crore during FY2021-22 to support states/UTs in their endeavours, it said.
The latest release of Rs 44,000 crore is funded by GoI borrowings in 5-year notes issued in the current fiscal year at a Weighted Average Yield of 5.69 percent. The central government is not planning any extra market borrowing as a result of this release.