Shillong, Nov 9: Chief Minister, Conrad Sangma on Monday told the Meghalaya Assembly that the COVID-19 pandemic has caused unprecedented economic and social disruption to global, national and local economies, impacting the finances of both the union and state governments.
“Meghalaya’s own revenue sources are limited and inelastic. Our own tax and non-tax revues comprise only about 20 percent of our Total Revenue Receipts,†Sangma said in reply to a call attention motion tabled by Congress legislator from Mawlai, Process T Sawkmie.
Sangma said that the State is largely dependent on transfers from Government of India to both meet it’s committed expenditures like salaries and pensions and to invest in various development programs.
The Chief Minister also said that market borrowings also comprise additional revenue source for all state governments in addition to their own revenues and Government of India transfers.
He informed the House that every state is allowed to borrow annually upto 3 percent of its GSDP as per the Fiscal Responsibility and Budget Management Act.
“The borrowing permission is given from time to time by the Department of Expenditure, Government of India and States utilize the borrowings based on their need by raising State Development Loans through the Reserve Bank of India,†Sangma said.
He informed that for the current financial year, given the fall in revenues of both union and State governments, the Department of Expenditure, in May 2020, has allowed the States to avail additional borrowings of 2 percent of the GSDP, over and above the normal 3 percent borrowing limit.
“Of this additional borrowing of 2 percent, 0.5 percent was untied and the rest was tied to achieving some critical reforms in various sectors. The 0.5 percent of the GSDP for Meghalaya translates to Rs 194 crore and this was approved as additional borrowing in June 2020,†Sangma said.
He further informed the House that in September 2020, the Department of Revenue, Ministry of Finance, Government of India, held consultations with the State governments on the issue of compensation to States due to the GST shortfall.
He informed the House that due to the pandemic the collection of GST cess meant for the “GST Compensation Fund†has been affected from where states are being compensated for loss in revenue due to implementation of GST.
“Based on these consultations, the State Government agreed to the proposal of the Government of India that the shortfall in GST compensation will be met through a Special borrowing dispensation,†Sangma said.
According to the Chief Minister, this dispensation allows the States additional borrowing to make good the GST collection shortfall over and above the 5 percent borrowing already allowed.
He said that based on this dispensation, the State was immediately allowed to borrow another 0.5 percent of the GSDP, i.e., 194 Crore in October 2020.
Sangma also informed that State Government is prudently managing its expenditures during these difficult times for the economy and State finances.
“We are utilizing all available resources, to meet both establishment and development expenditure and to ensure that the State moves on the path of growth and prosperity,†Sangma said.
