New Delhi: West Bengal finance minister Amit Mitra has urged union finance minister Nirmala Sitharaman to take urgent fiscal measures to ease the fund crunch faced by states, including by raising their borrowing limits and increasing Goods and Services Tax (GST) compensation amount for FY22.

In a letter sent on Friday, Mitra drew Sitharaman’s attention to the financial hardships faced by West Bengal and other states -- a sudden dip in revenue in the face of the second wave of the pandemic. Mitra said West Bengal was also reeling under the impact of cyclones.

“You are aware that just like last year, there has been a sudden dip in revenues, threatening the fiscal stability of the states. In our case, we have been hit by a double-whammy—of second wave of the pandemic and cyclone Yaas," Mitra said.

He suggested that the borrowing limit of states for FY22 should be raised to 5% without any conditions. For FY22, the central government has fixed net borrowings of the state at 4% of Gross State Domestic Product (GSDP) out of which 0.5% is linked to capital spending targets. Mitra argued that the capital expenditure target was punitive given that the state was emerging out of a year impacted by both covid and cyclone Amphan and in the current year is facing the pandemic and the trail of destruction caused by cyclones in the east and west coast.

“You will agree that right now, we need to concentrate on those badly affected by natural calamities and on universal vaccination and other effective Covid-fighting measures. These are bound to take a huge toll on our capacity to make capital expenditure, at these hazardous times," said Mitra in his communication. 

He also argued that GST compensation to states in FY22 to be financed by borrowing needs to be raised to Rs2.13 trillion, from the Rs1.58 trillion calculated by the Centre. Mitra also suggested that since GST revenue collection has not stabilised yet and state finances are reeling under covid-related uncertainties and other stress from natural calamities, GST compensation to states should be extended by another five years beyond June 2022.

State governments have been voicing their hardships due to higher medical and humanitarian expenditure. Earlier this week, Kerala chief minister Pinarayi Vijayan wrote to 11 non-BJP ruled states proposing that states should jointly appeal to the Centre to procure all covid vaccines needed and supply them free of cost, Mint reported on Monday. Last month, Punjab finance minister Manpreet Singh Badal too had sought an extension of GST compensation beyond 2022.

Mitra also backed the suggestions from Badal to check the excessive delegation of powers to bureaucrats for rule making outside the oversight of elected members of the Council. An email sent to the finance ministry seeking comments for the story remained unanswered till press time.