Congress government focusing on debt restructuring to ease financial crisis

Facing declining revenues and a heavy debt burden of over Rs 6.85 lakh crore, Telangana is seeking Central approval to restructure Rs 2 lakh crore in loans, alongside exploring low-interest foreign borrowing to fund welfare and development programmes

Hyderabad: Worried over depleting revenues and lack of additional resources to generate more revenue, the Congress government is now focusing on restructuring the State debts of about Rs 2 lakh crore to bail out from the financial crisis, subject to Central government’s approval.

This is in addition to the plans being chalked out to get loans from institutions in other countries at low rate of interest.

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On a few occasions, Chief Minister A Revanth Reddy had claimed that the Central government had approved restructuring of Rs 26,000 crore loan for over 30 years. This initiative had helped the State government get relief of nearly Rs 4,000 crore annually, he claimed.

Under debt restructuring, the State government can negotiate extension of loan tenure for convenient repayment or appeal for reduction in rate of interest. However, the Centre imposes a few conditions like adherence to Fiscal Responsibility and Budget Management (FRBM) norms, prudent debt management etc before permitting restructuring the State government’s loans.

At the 16th Finance Commission meeting in September last year, the State government had strongly appealed for debt structuring.

“Despite strong advantages, and a good economy, we are facing huge challenges. We have a heavy burden of debt, which now stands at over Rs 6.85 lakh crore, as of end of last financial year. This includes both budgeted and off-budget borrowings,” the Chief Minister had said at the meeting.

“If we don’t manage our loans and interest payment, it will slow down our progress. We seek your support in helping us address this problem. Give us options to either restructure debt or kindly offer us additional assistance,” he had appealed.

According to official sources, the State government was now making another appeal to the Central government to permit restructuring Rs 2 lakh crore.

This would provide much-needed relief to the government. It would also aid in arranging funds for welfare and development works, a senior official said, adding “Much will depend on the Central government’s support”.

The Central government’s recent move to reduce GST has resulted in an adverse impact on the State revenue.

Annually, about Rs 6,500 crore to Rs 7,000 crore would be lost due to the new GST rate norms. This was huge and an appeal had been made to the Centre to compensate for the loss, the official added.