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Centre turns heat on T’gana for ‘high debt’
The report released by the finance minister also pointed out that new sources of risks have emerged in the form of rising expenditure on non-merit freebies, expanding contingent liabilities, and the ballooning overdue of power distribution companies (Discoms)
As the war of words between the ruling Telangana Rashtra Samithi (TRS) and Bharatiya Janata Party is getting intensified, the BJP-ruled Centre has charged the K Chandrashekar Rao government with poor financial management in the state.
Winding up her three-day tour of Telangana on Saturday evening, Union finance minister Nirmala Sitharaman released a status report on the state finances, which displayed concern over alarmingly increasing debts and poor spending on key sectors like health, education, rural development and roads.
According to the report, the cumulative debt burden on Telangana stands at a whopping ₹312,191 crore, as per the budgetary estimates for 2022-23. This, apart from the off-budget borrowings of the state to the extent of ₹97,940 crore till March 31, as per the state finance audit report of the Comptroller and Auditor General of India, tabled during the budget session in March this year
“The CAG pointed out that the ratio of outstanding debt to state gross state domestic product had been continuously rising from 2016-17 to 2020-21. Considering the off-budget borrowings as on March 31, 2021, the debt-GSDP ratio was 38.10%, which is much higher than the national average of 31 per cent,” the report said.
Quoting the CAG, Sitharaman said as many as 14 public sector undertakings and six autonomous bodies of Telangana had mobilised ₹21,802 crore during 2020-21 and ₹111,898 crore to the end of March 2021 from various banks on behalf of the state government for which principal and interest would be serviced out of the state budget.
She pointed out that the Centre had written a letter to the state government on March 31 this year, stating that such borrowings shall be considered as borrowings made by the state government itself, as they are against the norms of fiscal transparency and detrimental to the fiscal sustainability of the states. “The magnitude of borrowings is huge in Telangana,” she said.
Against the national average of 0.7%, Telangana has an off-budget borrowing of 4.65% of its GSDP, she said.
The report released by the finance minister also pointed out that new sources of risks have emerged in the form of rising expenditure on non-merit freebies, expanding contingent liabilities, and the ballooning overdue of power distribution companies (Discoms).
It further said Telangana leads the chart of the states that have defaulted on subsidy payments to power distribution companies with a cumulative outstanding of ₹11,915 crore, leading to huge loss to the discoms, which in turn have defaulted on payments to power generation companies towards power purchase.
It also pointed out that during the 2022-23 budget of Telangana, the allocations for sectors like education, health, rural development, roads and bridges were very low.
“Only 7.3% of its total expenditure was allocated for education in the 2022-23 budget of Telangana, which is lower than the national average of 15.2%. Similarly, the allocation was only 5 % for the health sector, 3.9% for rural development and 3.2% for roads and bridges,” the report pointed out.
State finance minister T Harish Rao strongly opposed the hegemony of the Centre on the borrowings of the state governments. “Nirmala Sitharaman says the Centre has powers to control the borrowings of the state as per the Constitution. But the Centre itself has been indulging in borrowings beyond permissible limits. Has the Constitution given any such extraordinary powers to the Centre?” he asked.
He reminded that the Centre, too, would go in for off-budget borrowings to balance the budgeted revenue and expenditure and overcome the fiscal deficit. “How can it object to the states resorting to similar off-budget borrowings? There cannot be separate norms for the states and the Centre,” he argued.
Rao also alleged that the finance minister had been silent on the 15th finance commission recommendation on amending the Fiscal Responsibility and Budget Management Act, to enable the states to borrow more loans. “How can the FM ignore such a crucial recommendation and try to impose restrictions on the states?” he asked.
