State faced tough time in raising finances following restrictions imposed by the Centre

Market borrowings limit decreased significantly by the Union Finance Ministry

The State government has faced several problems in raising finances to meet its commitments for flagship programmes like Dalit Bandhu, Rythu Bandhu and others during the current year, thanks to the restrictions imposed by the Union Finance Ministry over open market borrowings.

The State, which could raise market borrowings without any hassles till March, was however restrained from raising resources since April although its financial commitments increased. In addition to salaries/wages and pensions amounting to ₹45,000 crore this fiscal, there were commitments like Rythu Bandhu (around ₹15,000 crore) and Dalit Bandhu (₹17,700 crore) for which provision was made in the Budget.

Trouble started in the initial stages of the financial year with the Centre not allowing borrowings at a time when the State had projected capital receipts in the form of borrowings and other liabilities at around ₹59,000 crore for the year. The Centre raised concern over the off budget borrowings by Telangana in the name of guarantees to different corporations, an issue that was even flagged by the Comptroller and Auditor General of India.

The CAG, in its State Finance Audit Report for March 31, 2021 said Telangana’s percentage of total outstanding liabilities to GSDP was 28.11, within the 29.5 per cent ceiling fixed by the XV Finance Commission. But the State had surpassed the ceiling, if the off budget borrowings were taken into consideration. The CAG lamented that the Telangana government is not fully disclosing all the guarantees given by it to various institutions claiming this would have dual impact of diluting financial management and legislative oversight and was in contravention of the recommendations of the finance panel.

The Central government insisted that the off budget borrowings, including outstanding guarantees and loans in the name of various corporations, would be brought under the FRBM Act purview. But the State registered its protest against the sudden change in the Centre’s stance claiming that the Budget estimates of borrowings were made after taking the latter’s consent. Repeated pleas went in vain and the State could not raise OMBs as expected during April and May.

Finance special chief secretary K. Ramakrishna Rao had to fly to New Delhi to convince the Union Finance Ministry to allow the State to raise OMBs to meet its financial commitments, majority of them on account of welfare schemes.

His visit was followed by Chief Secretary Somesh Kumar’s meetings with Union Finance Ministry after which the Union Government relaxed the restrictions and allowed the State to opt for OMBs to the tune of ₹39,000 crore for the entire fiscal. This meant that there was a reduction of close to ₹20,000 crore from the projected ₹59,000 crore receipts.