The Centre has permitted Bengal to raise open market borrowings of up to Rs 20,362 crore in the first nine months of 2020-21 – but state government officials say it will hardly be enough to mitigate the distress of the cash-strapped, revenue-squeezed state in a year ravaged by the virus pandemic.

Details about the cap on the state’s borrowings emerged from a March 23 directive that the Union finance ministry had issued to the RBI’s internal debt management department. It said the Centre had accorded “consent to the state governments under Article 293 (3) of the Constitution of India to raise open market borrowings on the basis of 50 per cent of net borrowing ceiling for the year 2020-21…under the proposed borrowing programme of the state for financing the state’s Annual Plan 2020-21.

The RBI publicised the directive on Thursday to discredit “certain media reports that the Centre has allowed states to avail up to 50 per cent of their borrowing requirement for the financial year 2020-21, in April 2020 itself.”

“This is a procedural and routine affair. It happens every year. This allowance would not help us fight the economic fallout of Covid-19,” a Bengal government official said.

Earlier in the week, state finance minister Amit Mitra had written to the Union finance minister Nirmala Sitharaman urging a front-loaded release of central funds under several heads and relaxing the limit on budgetary deficits under the Fiscal Responsibility and Budget Management (FRBM) Act for this fiscal. The cap on fiscal deficit — currently set at 3 per cent of the state gross domestic product — limits the ability to access the market borrowing window that is managed by the RBI.

Bengal had urged the Centre to raise the fiscal deficit ceiling to 5 per cent. Mitra wrote to Sitharaman again last Monday where he raised the demand once again. It was his sixth letter in the past eight days.

The Centre had granted some headroom in 2019-20 by raising the FRBM limit to 3.34 per cent. However, it has been winched down again to 3 per cent for 2020-21. A 2 percentage point increase in the limit would enable Bengal to borrow at least Rs 24,000 crore. However, such allowance cannot come on a piecemeal basis and the Centre would have to allow all the states to borrow more.

There is an apprehension that the Centre itself will raise more than the Rs 7.8 lakh crore gross borrowings budgeted for this fiscal as it comes under pressure to cobble a stimulus package to revive the economy.