Government junks RBI warning report
Source: Chronicle News Service

Imphal, November 05 2021: Refuting a media report regarding RBI giving warning to the state government over an alleged overdraft of Rs 500 crore, and also mentioning certain issues regarding resources of the state, payment of salaries and pensions and developmental expenditure, with certain figures claimed to be obtained from reliable sources, the finance department has issued a clarification on certain claims made in the report.

In a release, the finance department informed that Overdraft (OD) and Ways and Means Advances (WMA) are a special facility provided by the Reserve Bank of India (RBI) to all state governments for management of their cash position.

RBI does not 'warn' state governments on their cash position but instead advises the state governments when a ban on treasury operations is likely.

The state government has not been in any danger of a treasury ban in the last financial year 2020-21 and the current financial year 2021-22 till date and no such 'warning' or advice' have been received by the state government from RBI.

There is no limit on the OD that can be availed by the state government, provided the conditions of RBI are fulfilled.

Overdraft (OD) on the state government account happens when there is a mismatch of receipts and expenditure.

This is due to various reasons and not necessarily due to developmental programmes.

When receipts such as tax collection, grants from Government of India, borrowings enter the State Account, the OD is wiped out.

Loans, mainly Open Market Borrowings, are resorted to regularly by all governments, both Central and State to meet their requirements and are not limited to Manipur only.

Apart from state's own resources, developmental works are also taken up through Centrally Sponsored Schemes (CSS) and Externally Aided Projects (EAP), which is the similar scenario in all states.

The state government receives Revenue Deficit Grant and Share in Central Taxes from the Government of India (GoI), on a monthly basis.

These are not entitlements but are based on the recommendations of the finance commission, which is a constitutionally mandated body.

Apart from these, the state also gets its own tax and non-tax resources amounting to an average of Rs 100-120 crore per month.

Although this has been affected by the effect of the COVID-19 pandemic, it has shown a recovery in the past few months.

Therefore, the claim that the government is run only on entitlements of GoI is false.

The state government has been meeting its committed expenditure such as Salaries, Pensions, Loan repayment along with developmental and social expenditure, despite the severe resource constraints on account of COV1D-19 pandemic.

The state government will continue to meet such expenditure in the future, and it is a wrong statement that it will not be able to do so without loan or a special package.

Monthly salaries and pensions have also been disbursed timely before the Ningol Chakkouba festival.

Although the state government has received the revenue deficit grant of Rs 211 crore on November 3 from the Government of India, there is no record of the Rs 450 crore as claimed in the news report.

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