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Debt Consolidation and Relief Facility (DCRF)

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The Twelfth Finance Commission (TFC) had recommended a Debt Consolidation and Relief Facility (DCRF) during its award period (01.04.2005 to 31.03.2010) to States.

This facility provided for (i) Consolidation of central loans from Ministry of Finance contracted till 31.3.2004 and outstanding as on 31.3.2005 for a fresh tenure of twenty years at an interest rate of 7.5% per annum and (ii) Debt waiver to states based on their fiscal performance. The facility is subject to the condition that states enact their Fiscal Responsibility and Budgetary Management (FRBM) Acts as recommended by the Commission. Under the scheme, twenty-six states out of twenty eight states (except Sikkim and West Bengal), which had enacted their Fiscal Responsibility and Budget Management Acts, had availed of the facility of consolidation of their loans. Those states which had improved their fiscal performance could also get their eligible debt waived.

The Thirteenth Finance Commission (FC-XIII) has extended the DCRF, limited to consolidation of their loans only, to the states of Sikkim and West Bengal during 2010-15, provided these states put in place their FRBM Acts as stipulated by FC-XIII. Sikkim and West Bengal have now enacted their Fiscal Responsibility Legislations.

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