TRS president and CM KCR on Tuesday took strong exception to the Centre’s decision to reduce GST compensation and dues pending to the states and asking them to offset the losses by going in for additional borrowings.

KCR dashed off a hard-hitting letter to Prime Minister Narendra Modi demanding that the Centre itself should reverse its decision and borrow loans to pay states.

“The entire shortfall amount due to the states should be borrowed by the Centre itself, based on the strength of the receipts into the Cess amount. The entire debt servicing – both principal and interest can be paid from the cess collected for such an extended period beyond 2022 which can be decided by the GST Council,” he said.

KCR opposed the Centre’s decision to reduce the GST compensation payable to States from about Rs 3 lakh crore to Rs 1.65 lakh crore.

He had already shot a missive to Union Finance Minister Nirmala Sitharaman expressing the State’s opposition to the Centre’s move.

In his letter, Chandrashekhar Rao pointed out that the States were in the forefront of fighting the COVID-19 pandemic and reviving the State economies, and thus, in need of more resources than the Centre.

He stated that Telangana State suffered a revenue loss of 83 per cent in April this year whereas COVID-19 pandemic related expenditure increased.

He asserted that the Centre violated the provisions of GST Compensation Act by parking the surpluses of the Compensation Fund in its Consolidated Fund instead of parking them in the non-lapsable Compensation Fund in the Public Account.

KCR said the argument of the Centre that the additional borrowings by the Centre would influence yields on Central government securities and had other macro-economic repercussions was not convincing.

“The borrowings by the Centre as well as the States are from the same financial system and pool of investors and their impact on the macro-economic situation is not very different. Borrowings by the States will also push up the yields on government securities,” he said.

“Strong states make the nation strong. So far, all the decisions by the GST Council have been taken unanimously. I think we need to maintain this tradition in future too,” the chief minister said.