Finance Minister Pradip Amat is likely to be forced to resort to market borrowings to ease out the stress on the State exchequer due to less grants from the Union Government.
While the Minister is reportedly reluctant for more borrowings, his departmental officers are not averse to the idea of getting support of the market, sources said.
While the net tax revenue to be paid by the States to the Centre has been projected to increase by about three per cent (from Rs9.20 lakh crore in Budget Estimates to Rs9.48 lakh crore in Revised Estimates) for 2015-16, the tax devolution to the States has gone down by about 3.5 percent.
This is indicative of the fact that the Centre is depriving the States of their shares through levy of cess and surcharge, which do not form part of the sharable pool.
The shares of States are down from the recommended level. In their pre-Budget meeting with Union Finance Minister Arun Jaitley, the States had demanded that the Centre release the long-pending compensation for phasing out the Central Sales Tax (CST) and provide more funds in the Budget.
That being the position, Odisha’s finances are likely to be stretched because of less-than-anticipated transfer of resources from the Centre. This was the reason why the Odisha Government decided to place its Budget after presentation of Union Budget. Now, it turns out to be a case of clear-cut reduction of funds.
In other words, Odisha didn’t gain much by waiting for the Union Budget. Because Central grants fell short of expectations, the State Government had no other choice but to trim the size of its Budget to be presented by Amat in the Assembly on March 18.
The State’s 2016-17 Budget was expected to touch Rs1 lakh crore but has been pegged at Rs94,000 crore.
This means that to meet the resource need, the State Government would go in for open market borrowing. The State Government had discontinued market borrowing since 2006-07 but resumed it last year taking Rs3,000 crore citing fund crunch due to closure of mines.
But this time, the borrowing is going to be more because the Centre is likely to slash the State’s share by Rs4,600 crore.
Keeping in view the panchayat elections in February next year, the State Government has to make adequate Budget provisions for the social security schemes and creating infrastructure at the panchayat level too. This indeed appears to be a difficult situation.