Telangana: Rs 15,776 crore repayment raises red flags in Kancha Gachibowli land deal

The Congress government would be effectively repaying nearly double the amount it borrowed within 10 years

Hyderabad: The Congress government’s decision to mortgage 400 acres of prime Kancha Gachibowli land to raise a Rs 9,995 crore loan has sparked fresh concerns over the staggering financial burden it imposes on the public exchequer. A closer look at the borrowing terms reveals a long-term liability of Rs 15,776.93 crore to be repaid over the next 10 years, raising serious concerns over fiscal prudence.

After payment of necessary taxes, charges and Rs 169 crore commission to Trust Investment Advisors Private Limited for mediation, around Rs 8,476 crore was deposited in the TGIIC account through the sale of bonds. Thus, the government would be effectively repaying nearly double the amount it borrowed within 10 years.

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At an interest rate of 9.3 per cent, well above the prevailing government borrowing rates, the loan will accrue a cumulative interest of Rs 5,781.93 crore over the next 10 years. The instalments are required to be paid at the end of each quarter in a financial year. In the first two years i.e., till December 2026, the TGIIC will pay Rs 1,933 crore towards interest alone.

Experts point out that such high-cost borrowing by a State agency with no revenue-generating plan to match the debt service raises questions on viability and intent. Except for the fact that the TGIIC loan is guaranteed and serviced by the Telangana government, the loan raised at such huge interest is not being used for capital expenditure.

“Such action will affect the State’s reputation in the market,” a financial advisor said.

According to IT and Industries Minister D Sridhar Babu, the amount was spent for the crop loan waiver, Rythu Bharosa investment support and also Rs 500 bonus per quintal for fine variety rice.

Breach of ethical standards

Around 37 entities, including banks and institutional investors, are reported to have subscribed to these bonds. Adding to the discomfort is the Rs 169 crore paid as commission to Trust Investment Advisors Private Limited, the firm that facilitated the loan by acting as the lead arranger. Interestingly, Trust Investment Advisors, along with its group subsidiaries Trust Capital Services (India) Pvt Ltd and Trust Financial Consultancy Services Pvt Ltd, later subscribed to Rs 525 crore worth of the very same bonds they helped issue.

Ballooning liability

With a total repayment obligation of Rs 15,776.93 crore over 10 years, TGIIC would need to repay an average of over Rs 1,500 crore annually. There is, however, no clear roadmap on how the agency plans to generate revenues of that magnitude. The assumption appears to be that the Kancha Gachibowli land auctions or monetisation of State assets will fill the gap. However, if the courts decide that Kancha Gachibowli meets the criteria of a deemed forest, then the entire land would come under the Forest (Conservation) Act, 1980. Any non-forestry use of this land would require prior approval from the Union Ministry of Environment, Forest and Climate Change. And this will block the State’s plans to auction these lands, thus making the bonds financially toxic.