Jharkhand rejects Centre’s loan offer in lieu of GST compensation

The Jharkhand government on Friday rejected the loan offer of the Centre in lieu of the GST compensation, a day after the union finance ministry announced that the Rs 1.1 lakh crore estimated shortfall in Goods and Services Tax (GST) compensation cess will be borrowed by the central government and “passed on to the states as a back-to-back loan”.

Speaking to reporters after the state cabinet meeting here, chief minister Hemant Soren said he would write and speak to the Prime Minister over the issue, even as he hit out at the Centre for asking the RBI to deduct the outstanding dues of the central power generator Damodar Valley Corporation (DVC) directly from the state’s consolidated fund.

“This is the first instance in my knowledge that the Centre has invoked such a rule to directly deduct money from the Consolidated Fund of a state. Our condition financially is grim due to the pandemic and the Centre knows about it. This act is an attack on the federal structure,” Soren said.

“Yesterday the Union finance minister wrote to us and also called up to consider the loan offer. This is a strange situation. On one hand they are deducting our funds (Rs 1417 crore in reference to DVC payment by RBI) and on other they are pressuring us to accept loan (back to back loan provision by Centre laid out by Finance Ministry for GST compensation cess dues). Things won’t work this way. The cabinet today has decided to outrightly reject the loan offer,” the CM added.

As per the state government, the Centre currently owes around Rs 3300 crore as GST dues to the Jharkhand government. The chief minister underlined that he would speak to the Prime Minister over these issues, besides writing to him officially.

“We will be deliberating on the next possible steps in the best interest of the state. We need to understand in detail what could be potential fiscal implications of this proposal on our state coffers which is facing severe onslaught both from pandemic and of non-clearance of multiple dues, central share dues, GST dues etc by Centre, including the unilateral decision to deduct Rs 1417 crore from the state govt’s account with the RBI,” the CM said in a separate statement.

Earlier this month, the Centre directed the RBI to auto deduct Rs 1417.50 crore in October, 2020 from the account of Jharkhand government maintained by the top bank as the first instalment for settling the outstanding dues of the state government’s power discom JBVNL to the DVC.

While the state government has questioned the total outstanding amount claimed by the DVC, the chief minister said it’s baffling why the Centre did not deduct the money during the previous BJP regime. He also warned of a ‘people’s surge’ against such moves of the Centre.

“This entire due being claimed by the DVC accumulated during the five years of Raghubar Das government. There was zero debt when we left the government in 2014. We are also paying regularly to DVC now. This tripartite agreement was also signed by the Raghubar Das government. I wonder why the money was not deducted when they were in power. This is an attempt to target a non-BJP government in the state,” said Soren.

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