Additional loan burden on Telangana Government

Hyderabad: The Government of Telangana has promulgated an ordinance to amend the Financial Responsibility and Budget Management (FRBM) Act that allows it to hike its borrowing limit to 5 percent of GSDP, from the existing 3 percent.

The Central government had recently announced that the states can borrow an additional 2%, over the threshold of 3% of GSDP. This move is a response to counter the COVID-induced financial crunch being faced by the state governments.
This will allow the government to borrow another 1.5 lakh crore, in addition to the Rs. 1.13 lakh crores already borrowed in the form of guarantees. In the budget document, the government also mentioned that it would raise 33,000 crores from the auction of financial instruments as a part of regular exercise.

The ordinance would allow raising an additional 20,000 crores. The cumulative loan burden may add up to 4 lakh crores.

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The government borrowed the Rs. 1.13 lakh crores from various nationalized banks and corporations for various projects including Mission Kakatiya, Mission Bhageeratha, Kaleshawaram lift irrigation Project among others. Before the lockdown was announced, the government had entered into an agreement with nationalized banks and a consortium of banks that would provide loans to meet the government’s expenditures.

Chief Minister K Chandrasekhar Rao had earlier commented on the need to relax the FRBM Act, for the states to handle the economic crisis. He had also mentioned that the state’s monthly revenue fell from Rs. 17, 000 crores to Rs. 1, 600 crore

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