States need 'hard cash', govt's 'letter of comfort' has no value: Chidambaram on GST compensation

Senior Congress leader P Chidambaram on Thursday said the Centre's reported proposal of giving "letter of comfort" to states to borrow money to bridge the GST compensation gap were "just words of comfort" on a piece of paper that has "no value".

He asserted that the states need "hard cash" and if they are forced to borrow, the axe will inevitably fall on capital expenditure by the states.

"Government says it will give a ‘Letter of Comfort' to the states to borrow money to bridge the GST Compensation gap. These are just words of comfort on a piece of paper that has no value," Chidambaram said in a series of tweets.


"What states need is hard cash. Only the central government has multiple options and the flexibility to raise the resources and pay the shortfall in GST compensation to the states," the former finance minister said.

If the states are forced to borrow, the axe will inevitably fall on capital expenditure by the states which have already suffered a cut, he said.

Chidambaram has been urging the government to take concrete measures to revive the economy and has called upon it to provide GST compensation to states, as promised to them at the time of GST implementation.