Odisha Government has opted for Option One offered by the Union Government to compensate GST Shortfall, officials say.
Union Minister Finance Nirmala Sitharaman offered two options to the State and requested to accept any one to meet GST Compensation Shortfall.
Option One, says that the State chooses to borrow to cover shortfall in compensation arising only due to the implementation of the GST, and not factoring in the impact of Covid-19.
That cumulative amount is estimated by the Centre at Rs 97,000 crore for all the States.
The State picking this option can borrow via a special window by the Reserve Bank of India that will be coordinated by the Ministry of Finance.
The borrowing will be permitted over and above any other borrowing ceilings eligible under any other normal or special permission notified by Department of Expenditure.
The Centre will endeavor to keep that cost of borrowing at or close to G-Sec yields and subsidize the difference if any.
The State will not have to service this borrowing from its own resources. The interest on the borrowing will be paid from compensation cess as and when it arises until the end of the transition period.
Post the transition period or July 2022, the principal and interest will also be paid from proceeds of the cess, by extending the levy compensation cess as may be required.
The borrowing under this special window will not be treated as debt of the state for any other norms prescribed by the Finance Commission.
The Centre has also relaxed conditions for overall borrowing limits that were enhanced recently on account of the Covid-19 Pandemic.
The State will also be allowed to carry forward unutilized extra borrowing ceilings subject to meeting the reform conditions, officials say.
Officials say that Option One is a better one than Option Two.