In a bid to keep state fiscal deficit under control, Maharashtra’s Finance department has issued guidelines on availing external assistance loans from international funding agencies warning that “care should be taken to ensure these loans keep the fiscal deficit within the limits of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003”.
The guidelines issued by the state’s Finance department on Tuesday said, “External assistance loans are part of the Net Borrowing Ceiling approved by the Central Government. Therefore, while raising external assistance loans, care should be taken to ensure that fiscal deficit will remain within the limits of the FRBM Act and also within the limits of the Net Borrowing Ceiling approved by the Central Government.”
As per the FRBM Act, the Government is required to limit the fiscal deficit to 3 per cent of the gross state domestic product (GSDP). In the 2025-26 budget, the state managed to keep the fiscal deficit at 2.7 per cent , slightly lower than the 2.9 per cent in the previous fiscal. The guidelines have specified that the these loans should not be treated as a source to fulfill financial needs.
The guidelines have also mandated that the administrative department seeking loans must create a Preliminary Project Report (PPR) with the help of the Maharashtra Institution for Transformation (MITRA). MITRA was established in November 2022 for the state to achieve rapid and comprehensive development on the lines of NITI Aayog’s policy through the participation of the private sector and non-government organisations, taking into account the needs of the state. Once a request for a loan receives the Chief Minister’s approval, it will be uploaded on the Centre’s Department of Economic Affairs (DEA). After the request get an “approved” remark from the Planning department, it will be presented before ministries concerned at the Centre and NITI Aayog.
Once approved by the screening committee of the DEA, a detailed project report (DPR) will be presented at the earliest.
“The Detailed Project Report should adequately reflect the Strategic elements of technoeconomic (economic viability, social cost benefit, value addition etc.) ecological (land use, ecological sustainability etc.), socio-cultural (target population and gender matters, participation, social impact, etc.), and institutional (institutional and organizational analysis, capacity building, training etc.) dimensions in the project design in measurable terms. An objective oriented project design in a matrix format along with work plan, cost and time schedule indicating target/output, cash flow statement etc. should also be a part of DPR,” said the guidelines.
In the past, Maharashtra has received financial assistance from various international financial agencies for various infrastructure and socially-relevant projects.
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In July 2024, the Japan International Cooperation Agency (JICA) increased its funding from Rs 13,235 crore to Rs 21,280.45 crore for the underground Metro Line 3 that will connect Colaba to Bandra SEEPZ. JICA has also been supporting financial assistance to the Mumbai–Ahmedabad High Speed Rail project since 2017 with cumulative commitment worth around Rs 59,396 crore. It has extended Official Development Assistance worth Rs 13,715 crore for Mumbai Trans Harbour Link (Atal Setu). It has also shown interest in a proposed Vadhavan port in the State.
The International Bank for Reconstruction and Development (IBRD) has extended $188.28 million to Maharashtra to boost growth in backward districts. The International Find for Agriculture Development (IFAD) is working with Maharashtra government on a project which aims at empowering women. KfW, a German State owned bank has entered in to agreement with Maharashtra government for solar power projects of 390 MW capacity at a cost of around Rs 1,494 crore out of which 70 per cent of the amount will be from loans.