‘net borrowing ceiling’
States and the Centre’s fetter of ‘net borrowing ceiling’
Centre’s NBC step and, subsequently, Kerala’s move to approach the higher judiciary on the issue, highlight the need to revisit Article 293 of the Constitution
central government, in 2023, imposed a ‘Net Borrowing Ceiling’ (NBC)
on the State of Kerala to restrict the maximum possible borrowing that the State can make under the law. This ceiling is 3% of the projected Gross State Domestic Product (GSDP) for FY2023-24.
The NBC now encompasses / have all borrowing avenues, including
- open market loans,
- financial institution loans,
- and liabilities from the public account of the State.
- to stop States from takimg the borrowing cap through State-owned enterprises, the ceiling has been extended to cover certain borrowings by these entities as well.
इसके अलावा, राज्यों को राज्य के स्वामित्व वाले उद्यमों के माध्यम से उधार सीमा का उल्लंघन करने से रोकने के लिए, इन संस्थाओं द्वारा लिए गए कुछ उधारों को भी कवर करने के लिए सीमा को बढ़ा दिया गया है।
इसका कितना असर पड़ेगा केरल पर ?
This has been a huge blow to the financial position of the State, with Kerala finding it
- difficult to meet its expenditure
- restrained the State from investing further in developmental and welfare activities.
- ignited political and legal controversies - which have created an incompatible situation between the Centre and the State.
- Kerala approached the Supreme Court - of India on the issue of the encroachment on the executive power that is conferred on the State under Article 293 of the Constitution of India to borrow on the security and guarantee of the Consolidated Fund.
- Article 293 has come up for interpretation - केरल ने क्या कहा ? that the State’s fiscal autonomy, as guaranteed and enshrined in the Constitution of India, has been illegally curtailed by the Centre. This has been the first case in the history of the Court wherein Article 293 has come up for interpretation.
Borrowing powers and provisions
Chapter II of Part XII of the Constitution
deals with the borrowing powers of the Centre and States.
Article 292
speaks about the borrowing power of the central government which entitles the central government to borrow loans upon the security of the Consolidated Fund of India.
Article 293 empowers the State government to borrow within the territory of India upon the security of the consolidated fund of the State.
in Article 293(2), the Government of India may grant loans to any State subject to conditions laid down by any law made by Parliament up to the limits fixed under Article 292.
The central government can also provide guarantees upon the Consolidated Fund of India in respect of loans raised by any State.
Article 293(3) imposes a restriction on the State government
if the repayment of loans or a guarantee which has been given by the Government of India (if taken by the predecessor government is still outstanding).
In such a case, the consent of the central government is essential to raise such a loan.
Article 293 के बारे में
of the Constitution is adopted from Section 163 of the Government of India Act, 1935. In the Constituent Assembly, while Article 293 (draft Article 269) was debated on August 10, 1949,
a member, Ananthasayanam Ayyangar, noted that the issue of borrowings and loans requires greater scrutiny as borrowing imposes heavy obligations on not only the present generation but also future generations. He suggested that a commission akin to the Finance Commission may be constituted.
Section 163(4) of the Government of India Act, 1935 :
regarding ‘consent’
stated that while exercising the power given under Section 163(3) regarding ‘consent’, the Federation shall not refuse or make unreasonable delay in granting the loan or providing guarantee, or impose any unreasonable conditions when sufficient cause is shown by the provinces. If any dispute arises out of the matter stated it was to be referred to the Governor-General whose decision shall be final.
But this clause was not adopted into the Constitution. The reason was that this provision was included in the Government of India Act, 1935 as it expected that a different agency that was not a national of India would be in charge of the administration. But after the Independence, it was felt that such a provision was not necessary as State governments replaced the provinces and a national government was established at the Centre.
Eliminating revenue shortfall
Article 292 और (FRBM) Act
(FRBM) Act, 2003
To implement the mandates in Article 292, the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 was enacted to
- maintain financial restraint
- elimination of revenue shortfall
- reduction of fiscal deficit.
target of 3% of GDP
To eliminate the revenue shortfall and the budgetary deficit, a target of 3% of GDP is established for the Centre’s yearly fiscal deficit ratio (FD).
As in the Centre’s directives, States enacted their own pieces of legislation to control their fiscal deficit.
The FRBM Amendment Act, 2018
says , to central government to ensure that the fiscal deficit did not surpass 3% of GDP and
that the total public debt did not surpass 60% of GDP. By 2025–26, the government expects to reduce the fiscal deficit to less than 4.5% of GDP.
Article 293 raises key questions
about fiscal decentralisation, State fiscal autonomy and past borrowing practices, the Court has referred the issue of a State’s borrowing powers to a Constitutional Bench.
The matter also touches on whether the fiscal regulations imposed by the Centre have negatively impacted the Reserve Bank of India’s control over fiscal consolidation.
it is time to revisit
Article 293 of the Constitution. Section 163(4) of the Government of India Act, 1935 warns the unnecessary refusal or delaying or the imposing of conditions in granting loans by the Centre.
Section 163(4), could have been adopted in the Constitution when a dispute arises.
There is a need to strengthen this Article
Article 293 of the Constitution must be strengthened in the following manner.
As suggested by Ananthasayanam Ayyangar
a commission akin / same to the Finance Commission is essential to decide any issues that may arise regarding the
- approval of a loan upon considering the financial position of States
- and Centre’s goal of limiting fiscal deficit.
When exercising the wide powers granted under Article 293(4)
transparency
in decision-making thereby ensuring that the procedures and standards for accepting or rejecting governmental borrowings are transparent to the public;
consultative process
where there is consultation with State governments before prescribing any terms or limitations on borrowing which enhances cooperative approach;
ensuring equitable treatment
where there an employment of borrowing terms and restrictions applied uniformly for all States to eliminate prejudice or favouritism;
fiscal autonomy
ensuring that there is financial autonomy for a State, the restrictions are reasonable and do not unduly hamper a State’s ability to manage its finances effectively.
सोर्स द हिन्दू
Comments
Post a Comment