The ruling Congress has pinned the blame on the previous Telangana government, led by the Bharat Rashtra Samithi (BRS), for its role in increasing the debt burden of the state.
The state’s outstanding debt (total principal and interest amount yet to be paid) of Rs 72,658 crore in FY 2014-15 (state formation year) grew at an annual average rate of 24.5% between FY 2014-15 and FY 2022-23, to reach Rs. 3,52,061 crore by FY 2022-23, said a white paper released by the Congress government in Telangana. As per budget estimates for FY 2023-24, the debt is estimated to increase to Rs. 3,89,673 crore.
Total debt on books, which includes debts that are serviced and guaranteed by the state, guaranteed but not serviced by the state, and neither guaranteed or serviced by the date, stands at Rs 6,71,757 crore currently, it said.
The white paper titled ‘Telangana State Finances’ released by Deputy Chief Minister Mallu Bhatti Vikramarka in the Legislative Assembly on Wednesday, December 20, said the Congress-led state government has to make budgetary provision of ₹ 86,957 crore in the coming financial years and an additional amount of ₹ 72,983 crore will have to be borrowed from various financial institutions to counter the problem.
The paper said the gigantic increase in debt (almost 10 times has created an enormous fiscal stress on the state’s finances in terms of its ability to service the debt.
The Congress in its report pinned the blame on off-budget borrowings made by the BRS government for the increase in debt burden. The borrowings mentioned in the document refer to money borrowed for mega projects like the Kaleshwaram Lift Irrigation Project, Palamuru Rangareddy, and Mission Bhagiratha. Multiple Special Purpose Vehicles (SPVs) were created to mobilise money for these mega projects.
“A total of 14 SPVs and institutions have raised an amount of ₹1,18,557 crore through off-budget borrowings which were guaranteed by the BRS government. As these institutions have revenues to service the debt, they can pay back the principal and interest. The total outstanding debt as of today in this category is ₹95,462 crore,” the report notes.
The Fiscal Responsibility and Budget Management Act (FRBM) was amended in 2020 by the BRS government which increased the annual incremental risk-weighted guarantees. Under the 2005 FRBM Act, the incremental guarantees were limited to 90% of the total revenue receipts of the previous year. The 2020 ordinance increased this limit to 200% of the total revenue receipts of the previous year.
The Congress alleged that large scale mobilisation of the off-budget borrowings and lack of revenue to the SPVs meant that effectively the government-guaranteed loans were being serviced by the government itself from the budgetary resources, thus increasing the debt servicing.
The white paper report also noted that the debt-servicing burden on account of off-budget borrowings grew at a much higher rate of 73%. Their contribution to the total debt-servicing burden increased substantially from 4% in Telangana’s first financial year in 2014-15 to 39% in 2022-23.
The total debt servicing burden as a percentage of the total revenue receipts has also increased significantly from 14% in FY 2014-15 to 34% in FY 2023-24, which indicates that an increasingly larger portion of revenue is being used to service debt, leaving less for other essential expenditures.
However, AIMIM leader Akbaruddin Owaisi has alleged that the numbers in the ’ white paper are flawed and asked for action to be taken on bureaucrats who helped prepare the report. “The total expenditure of united Andhra from 1956 to 2014 was 11.64 lakh crores but Telangana’s total expenditure since state formation has only been Rs 12.24 lakh crores,” he said adding that Telangana is a rich state and investors shouldn’t think otherwise.
The whitepaper said the Congress government will implement all the six guarantees promised by the party during the polls apart from measures to overcome fiscal challenges.