Telangana to stake itself for corporations, sees no issues in raising Rs 12k crore
Hyderabad: The Telangana State government has come up with a novel way to borrow and beat FRBM norms on debt limit in one go. The state will stand as “guarantor” to corporations that borrow from the market, and the funds will be used to meet TS requirements. TS can borrow Rs 14,497 crore this year as per FRBM norms.
Telangana State plans to borrow more than the Fiscal Responsibility and Budget Management (FRBM) limit by standing as guarantor to corporations like Hudco, Nabard etc.
Though the government had estimated to earn Rs 13,500 crore though sale of lands, LRS and BRS schemes, it now expects to get only Rs 1,500 crore from these and plans to secure the remaining Rs 12,000 crore in the form of loans by standing as "guarantor".
As per FRBM norms, a state is allowed to borrow only up to 3 per cent of its GSDP. Thus TS is eligible for only Rs 14,497 crore, but it wants to raise over Rs 30,000 crore to meet its plan and non-plan expenditure of the Rs 1 lakh crore-budget for 2015-16.
For this reason, in the budget it had mentioned raising Rs 13,500 crore through "land regularisation and additional resource mobilisation", without specifying what "additional resource mobilisation" meant.
Finance department sources said that it was a conscious decision of the TS government to raise more than the FRBM limit by standing guarantor.
A senior official said, "If the guarantor route was mentioned in the budget copy to raise additional loans, it would amount to violation of FRBM norms. For that reason, we have avoided it."
TS government has not stood guarantor till date since coming to power though the state government in undivided Andhra Pradesh had secured loans as guarantor, which was divided between TS and AP. The TS share has been pegged at Rs 16,700 crore.
However, officials said that there were restrictions even on securing loans as guarantor as per FRBM norms. The norms stipulate that such loans should not exceed 90 per cent of total revenue receipts.
TS has estimated revenue receipts of Rs 80,000 crore for 2014-15. Going by this, the government can stand as guarantor for loans worth Rs 72,000 crore.
With TS inheriting guarantor loans of Rs 16,700 crore from undivided AP, it sees no problem in raising another Rs 12,000 crore this year.
"Though the government can stand guarantor for loans up to Rs 72,000 crore, plans are being prepared only to raise Rs 12,000 crore this year. The total will increase to about Rs 30,000 crore if TS' share of Rs 16,700 crore of undivided AP is taken. Raising more than Rs 12,000 will be risky as the government has to pay as guarantor if the corporations default on repayment," the official remarked.
