News Brief
Delhi: Days After Launching 'Revdi Par Charcha', AAP Requests Rs 10,000 Crore Loan From Centre Despite NSSF Risks
Delhi CM Atishi meets Arvind Kejriwal and his wife Sunita on Diwali 2024
Days after launching 'Revdi par Charcha' campaign for Delhi assembly elections, the Aam Aadmi Party (AAP) government in Delhi has sought to borrow Rs 10,000 crore from the Union government.
The proposal has been sent by Chief Minister Atishi requesting Rs 10,000 crore from the National Small Savings Fund (NSSF) to meet Delhi's expenditure for the current financial year, 2024-25.
Despite objections by the state’s finance department, given lower expected expenditure due to the Model Code of Conduct (MCC), the proposal has been sent to the Union Finance Ministry.
Delhi is set to have assembly elections early next year and the AAP national convener Arvind Kejriwal has promised the continuation of six revdis (freebies) and giving Rs 1,000 monthly to women.
It is believed that the additional money might have been needed for this scheme. However, the state's finance department reportedly advised the Delhi government to quit from the NSSF.
In addition to Delhi, only three states—Arunachal Pradesh, Kerala, and Madhya Pradesh—utilise loans from the NSSF, which is primarily funded by collections from small savings schemes after accounting for withdrawals.
Most states have opted out of this scheme due to the higher cost of borrowing compared to market alternatives. Similarly, Delhi’s Principal Secretary (Finance) Ashish Chandra Verma recommended so.
In a note dated 2 September, he recommended exiting the scheme, citing the significant interest liabilities and the potential reduction in spending caused by the MCC during the election period.
A Delhi government spokesperson clarified that annual borrowing decisions are administrative and based on various factors and claimed that Delhi's debt-to-GDP ratio is the lowest in India.
Verma’s note highlighted that only four months remain for scheme expenditure on account of capital works and challenges associated with the NSSF loan, including a substantial future interest burden.
What happened earlier
The Union Ministry of Finance estimates that continuing NSSF borrowing through 2038-39 would result in Rs 45,980 crore in additional interest costs and a repayment obligation of Rs 1.27 lakh crore in principal.
In July, the Union Ministry of Finance informed the Delhi government that opting for loans from the NSSF would be a one-time decision and not subject to annual renewal.
The Ministry requested confirmation on whether Delhi intended to continue borrowing under the initial terms and conditions while adhering to the stipulated repayment schedule. Two repayment scenarios were outlined:
Scenario I: Delhi could choose to exit the NSSF scheme, resulting in no additional liabilities after March 2039. The outstanding amount as of 1 April 2024, would remain Rs 31,697.47 crore.
Scenario II: If Delhi opted to continue with NSSF loans, Rs 10,000 crore would be disbursed annually from 2024-25 to 2038-39. This would lead to an estimated interest burden of Rs 57,661.68 crore on the borrowed amount by 31 March 2039.
The interest cost difference between the two scenarios amounts to Rs 45,980 crore. Under Scenario II, the total repayment obligation from 2024-25 to 2038-39 would rise to Rs 1,26,697.47 crore, compared to Rs 31,697.47 crore under Scenario I, which also eliminates any further liabilities.
The Ministry emphasised that the decision to continue with the NSSF scheme would be binding for future years and not subject to annual revisions, significantly influencing the financial planning of the Delhi government.
