Telangana, which was a revenue surplus State in 2014 and has one of the fastest growing economies in the country, now had no money even to meet daily expenditure, said Bhatti Vikramarka
Hyderabad: Presenting a grim picture of the State’s fiscal status with an estimated outstanding debt of Rs.6,71,757 crore by the end of the current financial year, the Congress government on Wednesday declared that Telangana was staring at a debt crisis.
Presenting a 42-page white paper on Telangana’s finances during a short discussion in the State Assembly on Wednesday, Deputy Chief Minister and Finance Minister Mallu Bhatti Vikramarka said the total debt of Telangana was Rs.72,658 crore in 2014-15. Telangana, which was a revenue surplus State in 2014 and has one of the fastest growing economies in the country, now had no money even to meet daily expenditure, he said.
Blaming the financial indiscipline by the previous government during the last 10 years for this fiscal stress, he said that due to the increased fiscal stress, the State had to depend upon the ways and means advances from the Reserve Bank of India on a daily basis.
The white paper, which was aimed at placing before people facts relating to the financial position of the State as inherited by the present government, he said the objective was to foster public debate.
In the white paper, Vikramarka said of the total outstanding debt of Telangana of Rs.6,71,757 crore, the government borrowings were Rs.3,89,673 crore under FRBM (Fiscal Responsibility and Budgement Management) Act as per the Budget estimates of 2023-24. Government-guaranteed loans raised by Special Purpose Vehicles (SPVs) but are serviced by the government were Rs.1,27,208 crore. Government guaranteed loans raised by SPVs and serviced by them were Rs.95,462 crore, while non-guaranteed loans raised and serviced by SPVs/corporations/institutions were Rs.59,414 crore.
“In the last 10 years, the total debt of the state and the Special Purpose Vehicles (SPVs) has gone up to Rs.6,71,757 crore from Rs.72,658 crore in 2014-15. This gigantic increase in the debt (almost 10 times) has created an enormous fiscal stress on the State’s finances in terms of its ability to service the debt. Further, no tangible fiscal assets in proportion to the money spent were created in the past 10 years,” the white paper said.
As a result, the government stated that the debt servicing burden of monies, borrowed on the budget and off-budget, had increased enormously and was consuming 34 per cent of the State’s revenue receipts. Further, salaries and pensions of employees consumed another 35 per cent of State revenue receipts. This committed expenditure meant that very little fiscal space was available for undertaking any welfare measures for poorer sections of the society and growth enhancement measures for the development of the economy, it said.
The paper says that from a situation where the State had positive balances for all the 100% of days in 2014, the situation now was that the State had positive balances in less than 10% of the days. This shows enormous fiscal stress, it says, adding that the State has not been able to spend enough money on critical sectors such as education and health where the budgeted amount as the proportion of the total expenditure was amongst the lowest in the country.
Bhatti Vikramarka stated that in 2014, Telangana had started on a firm footing on the fiscal front and there was a revenue surplus during the first five years, where the fiscal responsibility norms were also broadly adhered to.
“The situation of the State started changing quite drastically once the off-budget borrowings started being mobilized in the name of mega projects such as Kaleshwaram, Palamuru Rangareddy, Sitarama and Mission Bhagiratha. Special Purpose Vehicles (SPVs) were created to mobilise the necessary resources for undertaking these mega capital-intensive projects,” he said, going on to state that the Fiscal Responsibility and Budget Management Act was amended in the year 2020 so that the quantum of guarantees that could be given by the State government was enhanced consequently from 90 percent of revenue receipts to 200 percent.
“Large scale mobilisation of the off-budget borrowings and lack of revenues to the SPVs meant that effectively the government guaranteed loans were being serviced by the government itself from the budgetary resources. This meant a rapid increase in the debt servicing by the State. Therefore, the balance of fiscal space available for the welfare and development of the State of Telangana came down year by year,” he said.
“After 10 years of the previous government rule, a situation has come that the debt burden including the off-budget borrowings of the State has become enormous. This has created distress on the fiscal front. The present white paper is an attempt to give a clear picture as to where the State finances stand as of December 2023,” he added.
Stating that the government was determined to overcome the fiscal challenges in a responsible, prudent and transparent manner, the Finance Minister said the white paper was the first step in that direction.