Centre Set To Overshoot Borrowings Plan

The Central government is overshooting the budgeted borrowing programme of Rs 1,18,852 crore with today's announcement of a twin auction of Rs 6,000 crore which will be conducted on December 5.

The Rs 6,000 crore auction is taking place at a time when the government needs to raise Rs 5,152 crore to complete its gross borrowing programme. Besides, another Rs 5,250 crore is slated to be raised through the auction of 364-day treasury bills.

The government has already completed 91.29 per cent (Rs 1,08,500 crore) of the budgeted borrowing programme.

The papers to be auctioned are an eight-year floating rate bond and the 10.71 per cent paper maturing in 2016 -- both for Rs 3,000 crore each. The floating rate bond will carry an interest rate calculated at a spread over a variable base rate.

The variable base rate would be the average rate of the implicit yield at cut-off prices emerging in the immediate previous six auctions of the Government of India 364-day treasury bills held prior to the half-year coupon period.

The overshooting of the government's borrowing programme is likely to be on the back of a low revenue collection by the Centre and the high government expenditure.

The gross fiscal deficit of Rs 57,262 crore stood 34 per cent, higher than the same during the first half of the last financial year. On the back of this, economists are expecting the overshooting of borrowings to be in the tune of Rs 30,000-35,000 crore.

Money market dealers, who were not expecting the auction announcement, felt that there could be open market sale of government securities by the central bank during the week.

Government security prices jumped by 15-20 paise at the medium and long end today amidst lacklustre trading. Prices are likely to remain stable ahead of the auction. Both the auctions are likely to get a good response on the back of excess liquidity in the system.