State’s bank guarantees to govt agencies cross ₹1 lakh crore

Alarmingly, in some cases, the state government bailed out agencies and departments that had defaulted on their loan repayments, officials said

Mumbai: Even as the cash-strapped Maharashtra government faces an estimated debt of ₹9,32,242 crore, the cumulative amount it has given over the years as a bank guarantee for various projects, social schemes and cooperative entities controlled by its leaders has crossed ₹1 lakh crore, according to officials from the finance department. Alarmingly, in some cases, the state government bailed out agencies and departments that had defaulted on their loan repayments, officials added.

Mumbai: Maharashtra Deputy CM Ajit Pawar arrives for the Budget session of the state Assembly, at Vidhan Bhavan in Mumbai, Monday, March 3, 2025. (PTI Photo/Shashank Parade)(PTI03_03_2025_000118A) (PTI)

According to figures in the state budget announced earlier this month, the cumulative bank guarantee amount was a whopping ₹81,507 crore at the end of FY 2023-24, out of which ₹24,029 crore was given during that financial year. While figures for FY 2024-25 are still unavailable, officials from the finance department said the amount has rapidly risen over the last few years and crossed ₹1 lakh crore.

Earlier this week, state finance minister Ajit Pawar said in the state assembly that the government had given a bank guarantee to agencies such as the Maharashtra State Road Development Corporation (MSRDC) and the Mumbai Metropolitan Region Development Authority (MMRDA).

“We have given a bank guarantee of ₹60,000 crore to MMRDA and ₹33,640 crore to MSRDC as they needed money to complete ongoing infrastructure projects. The government agencies have been paying their dues from their revenue regularly,” he said.

At the end of FY 2023-24, the bank guarantee given to the state urban development department (UDD), which governs MMRDA and MSRDC, was ₹29,100 crore. The figure is likely to be much higher at the end of FY 2024-25. The guarantee to the public works department for loans taken for road work stands at ₹18,640 crore, while the industries department raised loans worth ₹28,914 crore at the end of FY 2023-24.

Apart from the loans given to the MMRDA and MSRDC, the government guaranteed a margin money loan of over ₹2,700 crore to over 15 sugar factories controlled by politicians in FY 2024-25. According to experts and government officials, most of the loans given to these factories are unpaid, compelling the government to settle them.

“The government had to pay ₹1,590 crore to the Maharashtra State Central Cooperative Bank in 2019 for standing guarantor for loans given to sugar mills in 2008-09. The sugar mills failed to repay the loan. Similarly, the government had to make the provision of ₹78 crore in January to repay the interest and penalty to the National Cooperation Development Corporation towards a margin money loan taken by five sugar factories last year. Similar is the case with state-owned power generation companies that have been making huge losses also because of cross subsidies given to farmers and other consumers,” said a finance department official.

Government agencies and departments owe the state guarantee commission ₹3,898 crore, officials said. “The guarantee by the state government to the agencies and public sector undertakings (PSUs) and their failure to repay it badly affect the government’s credit rating. Although the rating is good owing to the government’s loan repayment record, it has never got a credit rating done from an indepedent agency in the recent past,” the official said.

Rupesh Keer of Samarthan, an NGO that studies state budget, said that the Comptroller and Auditor General (CAG) had slammed the state government over the matter last year. “The CAG had asked the state government to take a review of the statutory boards and corporations and scrap them as they have proved unproductive. Some of the bank guarantees given are towards these entities. Despite the strictures, the government announced 18 new corporations ahead of the assembly elections last year with a proposed allocation of crores of rupees. The bank guarantee results in more borrowing as the government ends up paying the loan owing to the agencies’ failure in repayment,” he said.