The Centre has permitted 22 states an additional borrowing limit of Rs 60,877 crore to ensure they are not disadvantaged by adopting fiscal reforms under the National Pension System (NPS). The amount is around 0.25% of GDP, roughly equivalent to all states’ annual contribution to the NPS for their employees in FY24.
This would be in addition to the normal borrowing limit of 3% of GSDP for FY24 that states are allowed and 0.5% linked to power-sector reforms.
“Extra borrowing ceiling of Rs 60,876.80 crore (is) allowed to 22 states in 2023-24 as on October 27, 2023, for NPS contribution by complying states,” the finance ministry said on ‘X’.
“States allowed extra borrowing ceiling equivalent to employer and employee share of contribution of its employees with actual NSDL/trustee bank as per the guidelines of NPS, over and above the normal net borrowing ceiling of 3% of GSDP, for FY2023-24,” said a finance ministry statement.
The state governments of Rajasthan, Chhattisgarh, Jharkhand, Punjab and Himachal Pradesh have informed the central government and the Pension Fund Regulatory and Development Authority (PFRDA) about their decision to revert to Old Pension Scheme (OPS) for their state government employees. However, Punjab has also informed the Centre that it continues to pay staff and government contributions to the NPS, the finance ministry told Parliament on Tuesday.
In the wake of some states announcing their plan to return to non-contributory defined benefit system OPS, the Centre had offered this additional borrowing limit equivalent to NPS contribution in FY23 also to encourage states to remain in the reform-oriented fiscal reform to reduce future unfunded liabilities.