Odisha Cabinet approves amendment in FRBM Act

The Odisha Cabinet on Monday approved an amendment to the Odisha Fiscal Responsibility and Budget Management (FRBM), 2005, raising the level of fiscal deficit to 3.5% of the Gross State Domestic Product (GSDP) from 3% now.

The decision would give an additional leeway to the state government to go for higher borrowing for meeting its rising capex.

"According to the recommendations of the 14th Finance Commission, states with debt-GSDP ratio below 25% and interest to revenue receipts ratio not exceeding 10% can relax the fiscal deficit level by an additional 0.5%. Odisha meets both the criteria and hence, we can stretch the fiscal deficit limit", said Aditya Padhi, Odisha chief secretary, after the Cabinet meeting.

He said that Odisha's capex has grown substantially over the years and by the end of the current fiscal, it is estimated at 4.3% of the GSDP.

The hike in fiscal deficit means that the state government can not only opt for higher borrowing to meet its growing capex targets but also take over the loans of financially stressed PSUs like Gridco.

Padhi said that if the state government choses to take over 75% of Grdico's loans, it can raise the debt-GSDP ratio by 0.3%.

Apart from the amendment to the FRBM Act, the Cabinet also approved the formation of a State Food Commission. The commission would be chaired by the chief secretary and consist of five members not below the rank of a principal secretary, including a member convenor from the department of food supplies and consumer welfare.