With a view to helping the states deal with the economic slowdown, the Union cabinet on Thursday approved easing of borrowing norms. With new guidelines, states now can borrow up to 4 per cent of their gross domestic product (GDP) in present financial as against 3.5 per cent earlier. The probable borrowings for the states can go up by Rs 21,000 crore during 2009-10 fiscal.

“The money that the states can borrow will go a long way in addressing impact of global economic slow down.… States, however, will have to suitably amend their respective fiscal responsibility legislation, if required,” Ambika Soni, information and broadcasting (I&B) minister, told newsmen.

The states will not lose benefits of relaxation in Debt Consolidation and Relief Facility (DCRF), provided they are in compliance with the modified fiscal deficit target. The finance ministry would write to the 13th Finance Commission to make appropriate adjustments, Soni said.

The finance ministry has been fixing annual borrowing ceilings for states largely in accordance with the fiscal deficit targets recommended by the 12th Finance Commission. Earlier, the target of 3 per cent for 2008-09 had been relaxed to 3.5 per cent in response to the economic slowdown.

The cabinet also gave its approval to enhance equity share capital of Telecommunications Consultants India Limited (TCIL) in its joint venture company – Tamil Nadu Telecommunications Ltd. (TLL) from Rs 6.95 crore to Rs 22.38 crore — due to an increase in share capital.

The TCIL equity would go up to 49 per cent, which amounts to conversion of loans to equity to the extent of Rs 15.43 crore and to authorise TCIL to provide bridge loans worth Rs 12.5 crore pending organisation of loans from banks. The move would help revive the company and TCIL shall not have to write-off loans and equity.

The cabinet also approved conversion of Hindustan Prefab Ltd (HPL)’s outstanding government loan to equity. The amount stood at Rs 128 crore as on March 31, 2008. With the approval, the accumulated losses will be set off against equity and the company is expected to emerge as a viable and profit making central public sector enterprises, Soni said.

The Cabinet Committee on Infrastructure gave its approval for implementation of multipurpose cargo berths at Kandla Port Trust, Gujarat. The four berths 13, 14, 15 and 16 would be upgraded at an estimated cost of Rs 755.50 crore.