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Govt puts off Rs 5,000 crore borrowing

BS Economy Bureau in New Delhi

In the back of comfortable liquidity position, the Centre has taken the unusual step of putting off scheduled market borrowings of Rs 5,000 crore (Rs 50 billion) through auction during November 18-23.

According to a finance ministry statement issued on Thursday, the calendar for marketable dated securities for the second half of 2002-03 issued by the Reserve Bank of India on September 18 had announced an auction of 10-15 year security for Rs 5,000 crore (Rs 50 billin) between November 18 and 23.

Sources in the ministry said, the government actually had a surplus in its account with the RBI.

The cash reserve ratio cut announced on November 2 in the RBI credit policy and effective November 16 will also infuse about Rs 3,000 crore (Rs 30 billion) in the markets.

The Centre's decision not to tap the market as per the auction calendar comes as a surprise given that the RBI had just 10 days back said that the government might have to resort to additional market borrowings of Rs 15,000-20,000 crore (Rs 150-200 billion) in the current financial year.

Simultaneously, Finance and Company Affairs Minister Jaswant Singh cautioned members of Parliament about the need to reign in Plan expenditure, which was largely based on borrowed funds.

Addressing the MPs at the consultative committee meeting on Thursday, he pointed out that 80 per cent of the plan expenditure was funded by borrowings. Plan expenditure, hence, should be within reasonable limits, he said.

Singh further said the Centre was committed to improving the fiscal situation of the states.

He said a high-level committee had been constituted for the purpose and Prime Minister Atal Behari Vajpayee also met the chief ministers recently to evolve a consensus on various steps to be taken in this regard.

Referring to the debt swap scheme proposed by the Centre, he said it was intended to help states retire high-cost debt of Rs 25,000 crore (Rs 250 billion) in the first phase.

The minister said there was a broad consensus on the introduction of value added tax and a number of states had already enacted legislation in this regard.

He said that the Government of India would introduce a Bill in the ensuing session of Parliament for amendment to Article 269 of the Constitution to enable implementation of VAT from April 1, 2003 in the entire country. He requested the support of the Members of Parliament for the passage of the Bill.

In the meeting on Thursday, members of Parliament suggested wasteful expenditure can be reduced by downsizing government staff, closing down or privatising uneconomic enterprises in the states and undertaking administrative reforms to streamline some of the multiple and overlapping schemes.

They also suggested that the states need to take responsibility and ensure fiscal discipline.

The meeting was attended by the ministers of state Annandrao V Adsul and GN Ramachandran besides MPs including Nitish Sengupta, CP Thirunavukkarasu, Murli S Deora and Janardhana Pujari.

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