CAG expresses concern over Telangana Government utilising borrowed amounts for repayment of public debt

The CAG said the extent to which the fiscal deficit, as represented by borrowed funds, had been channelised towards the creation of capital assets was an indicator of prudent financial management. The borrowings of Rs. 46,995 crore in the year was partly utilised to meet the capital expenditure of Rs. 28,883 crore and loans and advances of Rs. 8,469 crore.

The Comptroller and Auditor General of India (CAG) has expressed concern the State Government had utilised borrowed funds for repayment of public debt in the financial year 2021-22.

“Normally, public debt is discharged using revenue surplus. However, the Government incurred revenue deficit of Rs. 9,335 crore during 2021-22. The borrowed funds were utilised for the repayment of public debt,” the CAG said in its report tabled in the Legislative Assembly on August 6.

The CAG said the extent to which the fiscal deficit, as represented by borrowed funds, had been channelised towards the creation of capital assets was an indicator of prudent financial management. The borrowings of ₹46,995 crore in the year was partly utilised to meet the capital expenditure of ₹28,883 crore and loans and advances of ₹8,469 crore. The outstanding public debt of Telangana is ₹3.14 lakh crore, 27.4% of the GSDP which was against the State Government’s own target set for maintaining outstanding public debt of less than 25% of the GSDP.

The State at the end of 2021-22 had a revenue deficit of ₹9,335 crore and a fiscal deficit of ₹46,639 crore. A revenue deficit of ₹9,335 crore was against the target of maintaining revenue surplus status at the time of presenting the medium-term fiscal policy and strategy statement presented by the Government along with the 2021-22 budget. The fiscal deficit at ₹46,639 crore as per the accounts was 4.06% of the GSDP during the period while the Government’s assertion was it would not exceed 3%, the CAG said.

The fiscal deficit was met from net of borrowings and other liabilities (public debt of ₹42,936 crore), public account (₹3,773 crore) and cash balance (-₹70 crore). Around 50% of the revenue receipts (₹1.27 lakh crore) was spent on committed expenditure like salaries (₹30,375 crore), interest payments (₹19,161 crre) and pensions (₹14,025 crore).

In 2021-22, loans totalling to ₹45,716 crore at interest rates varying from 6.89% to 7.37% repayable between 2032 and 2051 were raised from the open market. In addition, the State Government also raised ₹1,279 crore from other financial institutions like LIC, GIC and NABARD. A huge ₹67,274 crore was availed as ways and means advances and repaid during the year. “Thus the internal Debt raised during the year excluding Ways and Means Advances was ₹46,995 crore. Repayments of Internal Debt of State Government excluding Ways and Means Advances was ₹8,333 crore,” the CAG said.

The total loans and advances made by the Government was ₹52,379 crore including ₹8,441 crore towards loans and advances to government companies/corporations. Non-Government institutions and local bodies and ₹28 crore as loans to government servants during the financial year. Interest due on these loans amounted to ₹4,171 crore and only ₹47 crore (0.09% of the total outstanding loan of ₹52,379 crore) was received towards repayment of loans and advances and this pertained to the loans given to government servants.