HYDERABAD: In a much-needed reprieve, the cash-strapped Telangana government received approval from the Centre to raise an additional Rs 3,500 crore through bond auctions in November and December. Of this, the finance ministry has allowed the state government to raise Rs 1,000 crore on November 15.
In addition, the Centre gave the government permission to raise Rs 500 crore on November 29, Rs 1,500 crore on December 6 and Rs 500 crore on December 13.
The permission comes just as Rythu Bandhu scheme payments to farmers for the rabi season have become due. Besides, the state government needs money to purchase paddy grown in the Kharif season. For Rythu Bandhu alone, the government needs Rs 7,500 crore and the payment has been delayed by a month.
So far, the state government has raised Rs 25,500 crore through bond auctions. With the latest approvals, the state government’s total market borrowings for the nine months, from April to December 2022-23 will increase to Rs 29,000 crore.
As a result, the state government’s interest burden is expected to increase from Rs 17,584 crore in 2021-22 to Rs 18,912 crore this year (2022-23). The expenditure on payment of interest has been increasing with each passing year. It was Rs 14,385 crore in 2019-20 and Rs 16,841 crore in 2020-21.
According to the provisions of the FRBM Act, the Telangana government was initially eligible to borrow Rs Rs 53,970 crore (3.5 per cent of the Gross State Domestic Product) through market borrowings in the current fiscal year 2022-23. However, the Union finance ministry applied loan restrictions on the government.
It informed the state government that Telangana’s NBC (net borrowing ceiling) had been set at Rs 42,428 crore, taking into account off-budget borrowings through various corporations and bank guarantees over the last three years. If restrictions on off-budget borrowings are included, Telangana will face a total loan cut of Rs 15,033 crore.
The state government has asked the Reserve Bank of India (RBI) for permission to raise Rs 9,000 crore through bond auctions in the second quarter (July-September). The Centre, on the other hand, allowed the state government to raise Rs 10,500 crore.
In contrast, the Telangana government faced significant budget cuts in the first quarter (April-June). Further, the state government had requested permission to raise Rs 15,000 crore through bond auctions between April and June. However, the Centre suspended all loans in April and May, allowing the state government to raise only `7,000 crore in June, resulting in a `8,000 crore deficit.
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