Interest burden hits Telangana State

The government has to pay interest amounting to Rs 6,000 crore this year and it is struggling to make allocations for interest payments in the ensuing Budget with the Centre giving no assurance on relaxing the FRBM Act so far.

At present, the outstanding loans of Telangana stand at Rs 67,359 crore. These loans were secured in the undivided state and were distributed between AP and Telangana in the ratio of 58:42. Andhra Pradesh’s loan share is Rs 90,809 crore.

Interestingly the Telangana government is trying to secure more loans to pay the interest. However, it is eligible for only Rs 9,000 crore loan this year as per FRBM norms, which state that the debt should not exceed 3 per cent of GSDP.

The government is not in a position to allot Rs 6,000 crore out of this loan amount for payment of interest on earlier loans.

The Telangana government has sought exemption from the FRBM Act, on grounds of being a new state, to secure more loans to tide over the present financial crisis. However, there has been no response from the Centre on this issue so far.

The existing loans were secured in three ways. The first being sale of bonds through RBI in the open market, the second being loans sanctioned by the Centre and third through external funding agencies like World Bank, JICA etc.

“We are a new state, formed just four months ago. It takes at least three years to stabilise the financial condition. One cannot expect the new state to pay Rs 6,000 crore towards interest of previous loans secured in the undivided state without relaxing FRBM norms,” said finance minister Etela Rajendar.

Meanwhile, the Telangana government is in the process of finalising its first Budget, which is set to be presented to the legislature on November 5. Sources said the Budget would be of Rs 85,000 crore, of which Rs 35,000 crore would be plan expenditure and Rs 50,000 non-plan expenditure.