Telangana eyes Central grants, higher borrowings for 2026-27 budget

Telangana’s finances are under severe strain, with revenue mobilisation faltering and borrowings overshooting sanctioned limits. The Congress government has sought Rs 1.3 lakh crore in grants and project approvals from the Union government, alongside aggressive borrowing plans.

Hyderabad: With internal revenue mobilisation faltering and market borrowings already overshooting annual estimates during the current fiscal year, the State budget of Telangana for the next fiscal is set to hinge heavily on Central grants and expanded borrowing.

The Congress government in Telangana is seeking a massive Rs 1.3 lakh crore from the BJP-led Union government for various development works, besides plans to raise over Rs 1 lakh crore through aggressive borrowing including off-budget loans.

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Official sources indicated that revenue receipts have reached only 55 percent of the budget estimate of Rs 2.29 lakh crore for the current financial year at the end of December. With limited internal resources, the State is increasingly dependent on debt to sustain expenditure.

Borrowings have already hit Rs 69,300 crore as of December 30, well above the sanctioned Rs 54,000 crore for the current financial year, and are projected to rise to Rs 79,900 crore by March. This will mark one of the steepest intra-year borrowing escalations in the State’s financial history.

Under these circumstances, the Congress government is now banking on enhanced Central support and seeking massive grants, infrastructure allocations, interest-free loans and project approvals to plug fiscal gaps and drive next-year spending.

Key demands include converting 50-year interest-free loans into grants, doubling Central assistance, exempting education and health spending from FRBM limits, and increasing the fiscal-deficit cap for states to 4 per cent.

The government is also pressing for massive project sanctions towards Hyderabad Metro Phase 2, Regional Ring Road, new airports in four districts, national status for the Palamuru-Rangareddy Lift Irrigation Scheme, and major allocations for Musi Riverfront development, radial roads and city sewerage expansion. Each of these requires substantial Central participation, given the State’s constrained finances.

“Together, the State government has proposed for nearly Rs 1.3 lakh crore financial assistance from the Centre towards various projects, apart from approvals to borrow around Rs 33,000 crore loan for Young Indian Integrated Residential Schools, superspecialty hospitals and other health infrastructure. We sought these loans in addition to around Rs 70,000 crore market borrowings, outside Fiscal Responsibility and Budget Management (FRBM) limit,” official sources in the Finance Department said.

Additionally, Telangana has flagged the erosion of its share in Central taxes. Despite a recommended 41 per cent devolution by the Finance Commission, cesses and surcharges have reduced actual receipts to about 30 per cent.

The State has sought a sizeable portion of the Rs 1.55 lakh crore collected through surcharges and cesses, to be routed into infrastructure funds or added to the divisible tax pool.

As a result, without significant Central grants and expanded borrowing limits, Telangana might struggle to sustain ongoing schemes, let alone execute new development programmes in the coming year.