TS among bottom 5 borrowers despite debt pile

Telangana’s outstanding public debts are set to touch Rs3.57 lakh crore in 2023-24, a jump of about 11 per cent over the previous year while the overall debt burden, including loans taken by state public sector enterprises, has reached Rs4.33 lakh crore.

As per 2023-24 Budget, the debt burden will increase to Rs3,57,059 crore. The same stood at Rs 3.22 lakh crore during 2022-23. However, in terms of percentage of Gross State Domestic Product (GSDP), the debt burden will come down to 23.8 per cent in 2023-24 against 24.3 per cent last year and will remain at permissible limits of less than 25 per cent of GSDP.

The interest payment during the current financial year will increase to Rs 22,407 crore against Rs 18,911 crore last year. Unfazed by the criticism from the opposition parties that it pushed Telangana into debt trap, the Bharat Rashtra Samithi (BRS) government maintains that its debts remain well within Fiscal Responsibility and Budget Management (FRBM) limits.

The debt burden of Telangana was Rs 2,44,019 crore in 2020-21 and in terms of percentage of GSDP it was 25.4 per cent. While the debts increased to Rs 2,83,452 crore in 2021-22 in GSDP terms it came down to 24.7 per cent. In 2022-23, the debt burden increased to Rs 3,22,993 crore as per the revised estimates, which was 24.3 per cent of GSDP.

The major component of the state government's debt is open market borrowings, which increased to Rs 3,10,363 crore in 2023-24. It was just Rs 2,03,199 crore in 2020-21, which increased to Rs 2,42,455 crore in 2021-22 and to Rs 2,79,089 crore in 2022-23. However, the opposition parties say that the actual debts of the state are much more than shown in the Budget. Union Minister for Tourism G Kishan Reddy said last week that the state's debts had mounted to Rs8 lakh crore.

“The budget debt of the state is Rs3.12 lakh crore, but if you see the debts raised through PSUs, corporation banks, NBFCs, NABARD, Power Finance Corporation and RBI, it is about Rs8 lakh crore,” he said. The BJP leader alleged that the BRS government has pushed Telangana into a debt burden over last nine years.

He alleged that the state government has slipped into a position where it is unable to pay salaries to its employees and bills to small contractors. As per the information provided by the Union Finance Ministry in February 2023, the total debt of the Telangana government and state public sector enterprises has reached Rs 4.33 lakh crore.

The Finance Ministry said that out of Rs 4.33 lakh crore, the state government debt stood at Rs 2.83 lakh crore. While loans availed by the state government enterprises/institutions from commercial banks were at about Rs 1.31 lakh crore, those taken from NABARD were Rs 19,431 crore.

Telangana, which celebrated its 10th formation day on June 2, had debts of Rs75,577 crore at the time of the state formation in 2014. In the last eight years, the state government took debt of another Rs2.07 lakh crore, revealed the Finance Ministry. However, Telangana remains among the bottom five major states with lowest debt to GSDP ratio for three consecutive financial years.

For financial years 2020-21, 2021-22, 2022-23, Telangana recorded fifth lowest debt to GSDP ratio of 28.2, 27.4 and 28.2 respectively. Union minister of state for finance Pankaj Chaudhary informed the Lok Sabha that the total outstanding debt of Telangana from the years 2014-15 to 2021-22 stands at Rs 2.83 lakh crore,

The outstanding public debt of Telangana has risen by almost four times since the formation of the state in June 2014 till the financial year 2021-22. In the first year of its formation, the state had resorted to the public borrowing of Rs 8,121 crore from several sources, the ministry stated. Every year, the state continued to borrow loans, resulting in mounting public debt. "During 2021-22, the state went in for a huge borrowing of Rs 39,433 crore, taking the overall outstanding public debt to Rs 2,83,452 crore," Pankaj Chaudhary said.

Besides these public borrowings, the state government had also stood guarantee for multiple state-owned public sector undertakings and corporations which obtained loans to the tune of Rs 1,50,365 crore from several public sector banks, National Bank for Agriculture and Rural Development (NABARD), central lending agencies like Rural Electrification Corporation (REC), Power Finance Corporation (PFC), Rural Infrastructure Development Corporation (RIDC), Warehouse Infrastructure Fund (WIF), etc., the Union minister said.

Some of these borrowings by the state-owned corporations and PSUs include Rs 1.30 lakh crore from 12 banks, Rs 11,424 crore from NABARD, Rs 8,871 crore from RIDC and Rs 972 crore from WIF, the reply stated. "This has taken the overall debt of the Telangana government to Rs 4,33,817 crore till October 2022," the Union minister said.

He pointed out that like all other states, Telangana, too, had enacted Fiscal Responsibility and Budget Management (FRBM) Act, according to which, the state legislature has to monitor debts of state-owned entities.

Though the public-sector banks had not given any loan to the Telangana government directly till October 22, they had given loans to the state-owned corporations and PSUs, the Union minister added. The minister also revealed in December 2022 that Telangana's debt to GSDP ratio increased from 15.7 per cent in 2016 to 27.4 per cent in 2022 (Budget estimates).

The state's debt to GSDP ratio was 12.4 per cent in 2017, 21.4 per cent in 2018, 22.1 per cent in 2019, 23.5 per cent in 2020 and 27.3 per cent in 2021 (revised estimates). Both the state and Central governments have blamed each other for mounting debts. In September 2022, state finance minister T. Harish Rao claimed that the union government owes Rs 1,05,812 crore to Telangana in the form of pending funds, grants and compensation.

If paid as per norms and recommendations, the state government can clear one-third of its Rs 3.29 lakh crore of state debts. "Let alone clearing debts, we would not even were required to obtain loans, if the Centre released these funds till date," he said, while explaining the adverse impact of the Centre's unilateral decisions and imposing restrictions against the state to obtain loans under Fiscal Responsibility and Budget Management (FRBM) limits.

He had told the state Assembly the Central government was adopting double standards in implementation of the FRBM Act by imposing restrictions on the states, but not practicing them itself. While the 15th Finance Commission recommended constituting a high-powered inter-governmental committee comprising the Central and the State governments to review the borrowings, the union government took unilateral decision to impose restrictions on the states borrowings without constituting the committee. Further, these restrictions are being imposed with retrospective effect.

Harish Rao also asserted that unlike the Union government, which obtained loans to repay its loans, the state government spent the borrowings on capital expenditure and created assets. "We took up irrigation projects like Kaleshwaram Project, Mission Bhagiratha, Mission Kakatiya and other programmes which in turn created assets for the state," he added. As per the Reserve Bank of India report, Telangana's debt rank is 23rd in the country.

He also dismissed the allegations by Union Finance Minister Nirmala Sitharaman and other BJP leaders over the per capita debt on each citizen of the state. He stated that while the Central debts resulted in the per capita debt of Rs 1,25,679 on every individual, the Telangana state debts amounted to Rs 94,272 per capita.

He said that Centre, which has borrowed Rs 100 lakh crore in the last eight years, has no right to point fingers at Telangana, whose debt position is well within permissible limits under FRBM Act. "Telangana figures fourth from the bottom in debt to GSDP ratio. This proves beyond doubt that our debt-burden is very low compared to several other states," he added.