Telangana Govt grappling to raise financial resources as debt burden increased from ₹72,658 crore to ₹6.71 lakh crore

Telangana Congress Government struggles with mounting debt, limited resources, and financial stress

A year into governance, the Congress Government that took over the reins in Telangana last year is grappling to find resources to finance the commitments due to the huge debt burden, which went up from ₹72,658 crore at the time of formation of Telangana to ₹6.71 lakh crore in the past decade.

While this debt burden has created enormous stress on the finances in terms of the ability to service the debt, no tangible fiscal assets in proportion to the money spent were created in the last 10 years, the government said in the White Paper on State Finances. As a result, the burden on account of debt servicing has been constantly rising.

For instance, the State had incurred expenditure of ₹15,162 crore on debt servicing during the first seven months of the current financial year. This is against ₹17,729 crore budgeted for the entire fiscal and the amount is likely to be much higher than the budget estimates with five months still remaining.

The State has also been increasingly depending on ways and means advances from the Reserve Bank of India on a daily basis. The State’s dependence on the financial accommodation instruments could be seen from the fact that it had depended on ways and means advances and special drawing facility for all the 30 days during September in addition to availing overdraft facility for 17 days.

From a situation where the State had positive balances for all 100% of days in 2014 to a situation where it has positive balances in less than 10% of the days, shows the enormous fiscal stress.

With the financial stress haunting it, the government finds itself in a piquant situation as it has reiterated its commitment to fulfil the promises more than once, but resources matching expectations are hard to come by. The Congress Government has no doubt initiated a series of welfare programmes like free bus travel to women, enhancement of health cover under Aarogyasri to ₹10 lakh, free power to eligible households up to 200 units a month and ₹500 per quintal bonus on fine rice.

The State’s financial situation can be gauged from the fact that its revenue receipts are not commensurate with its expenditure estimates resulting in wide gap in the budgeted amounts and actual expenditure on ground. Coupled with the shortfall in revenue receipts, the State is facing difficulties in raising market borrowings due to the restrictions imposed by the Union Finance Ministry on the borrowing limits citing fiscal prudence measures.