Congress Government in financial tangle over mortgage of Kancha Gachibowli land

The land was mortgaged to raise Rs 10,000 cr and if SC declares it as forest land, government will be forced to clear the loan from its treasury on a priority basis

Hyderabad: The Revanth Reddy government finds itself caught in a Catch 22 situation, following the Supreme Court’s intervention in the contentious Kancha Gachibowli land issue. The entire episode has now snowballed into a complex financial issue, requiring the State government to clear a massive loan of Rs.10,000 crore from its treasury on a priority basis.
At the heart of the issue lies the massive 400-acre land parcel, valued at over Rs 30,000 crore, that was transferred to the Telangana Industrial Infrastructure Corporation (TGIIC) in June last year at Rs 75 crore per acre. Soon after gaining a favourable verdict in the IMG Bharatha case in May 2024, the State government moved swiftly to mortgage the lands through ICICI Bank, and raised Rs.10,000 crore through TGIIC with a government guarantee. Thus, the Congress government availed off-budget loan, while maintaining its borrowings records intact. Though the government maintained that the amount was meant to disburse Rythu Bharosa investment aid to farmers, it is unclear for what purposes the funds were utilised.
According to a RTI reply by TGIIC, the corporation did not inform the RBI about the loan, raising more doubts. When asked in the same RTI application how the TGIIC plans to repay the loan, the officials informed that the State government had to reply in this regard. The officials failed to explain how the loans obtained by TGIIC for industrial infrastructure development were diverted for other purposes by the government
Under these circumstances, the Revanth Reddy government proposed to auction the lands meant for industrial purpose and clear the loan. However, plans to auction the land to repay the borrowings hit a legal and public roadblock after widespread student protests, environmental concerns and the Supreme Court’s intervention, effectively putting the brakes on land clearance and auction.
To douse the growing unrest, the Congress government initiated damage control, appointing a high-level committee of Ministers, and invited students and activists for talks. The government indirectly threatened through selective media leaks to relocate the University of Hyderabad (UoH) and converting the land into a 2,000-acre eco park, if they cannot find a “mid-way.”
Experts warn that the situation could trigger a fiscal crisis. “If the Supreme Court declares the land as forest, the government must repay Rs 10,000 crore immediately from its treasury, as it had guaranteed for the loans,” a senior economist said, pointing out that forest land cannot be mortgaged. He dismissed the plans to turn entire UoH area into an eco park, terming it as a diversionary tactic.
The Congress government’s only fallback, experts note, is to adjust the off-budget loan under the Fiscal Responsibility and Budget Management (FRBM) Act, but this would shrink Telangana’s borrowing limit by Rs 10,000 crore from the sanctioned Rs 69,639 crore for the current fiscal, further constraining its borrowing ability. Amid mounting environmental pressure and fiscal obligations, the Revanth Reddy government faces a tough challenge, with no easy solution in sight.

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