Govt lowers borrowing target for FY23; to borrow Rs 5.92 lakh crore in second half

The government on Thursday slashed its market borrowing target for FY23 by Rs 10,000 crore, indicating buoyant tax collections which would be enough to bear Rs 44,762 crore additional expense on free ration distribution.

In addition to the Budgeted collection from direct and indirect taxes, the government is also expecting gains from the windfall profit tax on oil that was levied from July 1.

In a statement, the finance ministry said the government will do total borrowing of Rs 5.92 lakh crore during October-March period of the current fiscal, including from issuance of its maiden Sovereign Green Bonds of Rs 16,000 crore.

The government had in Budget for 2022-23 projected a gross market borrowing of Rs 14.31 lakh crore.

Of this, the government decided to borrow Rs 14.21 lakh crore during 2022-23.

"Accordingly, the balance amount of Rs 5.92 lakh crore (41.7 per cent of Rs 14.21 lakh crore) is planned to be borrowed in the second half (H2) of the fiscal year 2022-23 through dated securities, including Rs 16,000 crore through issuance of Sovereign Green Bonds (SGrBs) as per the announcement made in the Union Budget 2022-23," it said.

The government will continue to exercise greenshoe option to retain an additional subscription of up to Rs 2,000 crore against each of the securities indicated in the auction notification.

The amount raised through this option will be limited to 3 to 5 per cent of the gross issuance for second half and within the gross borrowing limit for the 2022-23.

The gross direct tax collections till September 17 grew 30 per cent to over Rs 8.36 lakh crore.

The statement further said the government will continue to carry out switch operations to smoothen the redemption profile.

"Out of the Rs 1,00,000 crore of budgeted (BE) switch amount, Rs 56,103 crore of switch auctions have already been conducted and the balance amount of switch auctions will be conducted in H2," it said.

The gross market borrowing of Rs 5.76 lakh crore (40.5 per cent) would be completed through 20 weekly auctions.

Gross borrowing includes repayment of past loans. The government raises money from the market to fund its fiscal deficit through dated securities and treasury bills.

The government on Wednesday extended by three months its programme to provide free rations to the poor at a cost of over Rs 44,700 crore, as it looked to ease pain from high inflation and make political gains in the upcoming Gujarat election.

The Cabinet decided to extend the Pradhan Mantri Garib Kalyan Anna Yojana (PM-GKAY) for about 80 crore beneficiaries, at an additional cost of Rs 44,762 crore.

"The market borrowing will be spread over 2, 5, 7, 10, 14, 30 and 40 years securities. The share of borrowing (excluding SGrB) under different maturities will be: 2 year (6.25 per cent), 5 year (12.15 per cent), 7 year (10.42 per cent), 10 year (20.83 per cent), 14 year (19.10 per cent), 30 year (15.63 per cent) and 40 year (15.63 per cent).

Weekly borrowing through issuance of Treasury Bills (TBs) in the third quarter (Q3) of 2022-23 is expected to be Rs 22,000 crore with net borrowing of Rs (-) 0.81 lakh crore during the quarter, it said.

There will be the issuance of Rs 10,000 crore under 91 DTBs, Rs 6,000 crore under 182 DTBs, and Rs 6,000 crore under 364 DTBs through each auction conducted during the quarter.

To take care of temporary mismatches in government accounts, the Reserve Bank of India has fixed the Ways and Mean Advances (WMA) limit for H2 of 2022-23 at Rs 50,000 crore.

WMAs are temporary advances given by the RBI to the government to tide over any mismatch in receipts and payments.

"The Reserve Bank may trigger fresh floatation of market loans when the government of India utilises 75 per cent of the WMA limit," it said.

The central bank further said it retains the flexibility to revise the limit at any time, in consultation with the government of India, taking into consideration the prevailing circumstances.

The interest rate on WMA will be equal to the repo rate and in case of an overdraft, it will be 2 per cent above the repo rate.