Centre cuts Telangana loan limit

Hyderabad: The state government is all set to face a shortage of Rs 20,000 crore in the current financial year 2022-23, following the Central government’s decision to reduce the state’s loan limit.

According to sources, the Centre has already communicated to the state government about slashing the loan limit by Rs 20,000 crore in the wake of massive off-budget borrowings made in the previous two financial years (2020-21 and 2021-22).

The official sources said that the state government had sought the Central government’s permission to raise Rs 54,000 crore through market borrowings and Rs 5,000 crore through corporations in this current financial year (2022-23). The Centre, however, appears to have only accorded sanctions for market borrowings worth Rs 40,000 crore.

The sources added that the state cabinet would meet soon to decide on whether to obtain loans through corporations or not and if yes, the quantum of funds to be raised through corporations.

The Centre already imposed a cut of Rs 8,000 crore in the first quarter of this fiscal (April-June) by approving only Rs 7,000 crore against Rs 15,000 crore sought by the state government. The Centre halted loans completely in April and May and gave permission to raise Rs 7,000 crore in two phases in June.

In the second quarter (July-September), the state government sought permission to raise Rs 9,000 crore loan. Of this, the Centre approved Rs 3,000 crore so far and the approval for the balance amount of Rs 6,000 crore is awaited. The state government had raised Rs 3,000 crore on Tuesday through the auction of bonds for the first time in the second quarter.

Since the Centre is keen to treat loans secured through corporations as part of the state government's overall debt, the state government would face a corresponding cut in market borrowings to the extent of loans it raises through corporations. Against this backdrop, the state government is adopting a wait-and-watch policy on loans to be raised through corporations.