In order to bridge a temporary cash flow mismatch, the Government, in consultation with the Reserve Bank of India, has decided to mobilise ₹51,000 crore more through auction of Treasury-Bills (T-Bills) during the remaining days of March.

In December, while finalising the calendar for auction of Government of India Treasury-Bills for the quarter ending March 31, 2020, it was decided to notify ₹24,000 crore for the issuance of T-Bills during the second half of March. Now, after reviewing the cash position, the Central Government, in consultation with the RBI, has revised the amounts for the issuance of Treasury-Bills for the remaining period of quarter ending March 2020.

With this revision, the total amount to be raised through T-Bills would be ₹75,000 crore during second half of March.

“FY20 is about to close, but the fiscal arithmetic of the Government continues to be in flux,” said Sunil Kumar Sinha, Principal Economist with India Ratings & Research. Therefore, “it has decided to borrow ₹75,000 crore between now and the March-end instead of the ₹24,000 crore announced earlier as the cost of borrowing via T-Bills is lower and it provides more flexibility compared to G-secs due to shorter tenure,” he said. This is being done at a time, when cash receipts, both through tax or non-tax means, are estimated to be lower than even the Revised Estimate.

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In a written answer in the Rajya Sabha, the Finance Ministry said that as on March 10, it managed to achieve 73.8 per cent of the Revised Estimate for direct tax and 88.71 per cent for indirect taxes. It is believed that the number for the last instalment of advance tax (in the direct tax segment) has not been encouraging. And, now, due to Covid-19, the GST collection in February is also likely to have been affected.

Similarly, in non-tax revenue, heavy selling in the stock market has affected the disinvestment process while earnings from other sources, such as recovery of dues, have not been up to expectation. All these have prompted the government to raise more money from the market without affecting the overall fiscal deficit. Normally, money mobilised through T-Bills is not accounted under the overall borrowing used to bridge the fiscal deficit.

What are T-Bills

Treasury-Bills are government borrowings for less than one year. Issued in three tenors — 91-, 182- and 364-day — T-Bills are zero coupon; they are issued at a discount and redeemed at face value.

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