TG Govt Faces Debt Crisis: Interest Payments Surpass Salary Bill

Hyderabad: The state government is grappling with a severe financial crisis as the burden of repaying loans and the interest has surpassed its expenditure on salaries and pensions. The government now allocates over Rs.5,000 crore per month for debt servicing, compared to Rs.3,000 crore towards salaries to three lakh employees and 1.5 lakh pensioners.

Deputy Chief Minister Mallu Bhatti Vikramarka, who oversees the finance portfolio, sought the intervention of Union finance minister Nirmala Sitharaman in August to reschedule high-interest loans inherited from the BRS government. The Centre is yet to respond.

Telangana’s financial woes trace back to the BRS government’s aggressive borrowing between 2014 and 2023 to fund projects like the Kaleshwaram irrigation scheme, Mission Bhagiratha drinking water project and construction of government infrastructure, including hospitals and collectorate complexes. Loans taken by government-run corporations — often at steep interest rates ranging from 8.93 to 10.49 per cent —further exacerbated the crisis. These corporations, many of which lack revenue-generating capacity, are fully dependent on the state government for repayment.

Data obtained from the finance department revealed that at the time of the state’s formation in 2014, debt servicing constituted just 4.1 per cent of Telangana’s total income. This figure has ballooned to 40.9 per cent, marking a nearly tenfold increase in a decade. Annual loan and interest repayments have skyrocketed from Rs.7,254 crore in 2014-15 to an estimated Rs.60,691 crore in 2023-24.

As of March 31, 2024, Telangana’s debt stood at Rs.6.85 lakh crore. This includes Rs.4.01 lakh crore raised through bond auctions by the Reserve Bank of India (RBI); Rs.1.2 lakh crore borrowed for irrigation and infrastructure projects; Rs.99,663 crore raised by corporations with state guarantees and Rs.63,140 crore borrowed without guarantees.

Finance department data reveals that five corporations account for 95 per cent of the loans raised by all state corporations. The BRS government’s practice of creating corporations with minimal or no revenue streams solely to secure bank loans has been a major contributor to the state’s financial troubles.

In 2021-22, the state corporations accounted for over 52.9 per cent of the total loans raised by all corporations across India, highlighting the scale of the state’s borrowing spree.

With debt servicing now a major challenge, the current Congress government is left with limited options to manage its finances.

Bhatti emphasised the urgency of rescheduling loans to ease fiscal strain but warned of further financial instability if immediate measures are not taken.

The state government faces the dual challenge of sustaining welfare and development initiatives while also tackling a debt burden that threatens to derail Telangana’s financial stability.

Infobox:

TG govt expenditure towards loan, interest payments on budget and off-budget borrowings:

Year---Budget borrowings....Off budget borrowings..... Total

2014-15--- Rs.6,954 crore..... Rs.300 crore....Rs.7,254 crore

2015-16... Rs.10,290 crore... Rs.651 crore... Rs.10,941 crore

2016-17... Rs.12,089 crore... Rs.1,231 crore.... Rs.13,320 crore

2017-18.... Rs.15,385 crore... Rs.2,580 crore.... Rs.17,965 crore

2018-19: Rs.19,479 crore... Rs.4,619 crore... Rs.24,170 crore.

2019-20: Rs.22,878 crore... Rs.7,366 crore... Rs.30,244 crore

2020-21: Rs.24,378 crore… Rs.9,133 crore... Rs.33,511 crore

2021-22: Rs.28,0004 crore... Rs.14,796 crore… Rs.42,800 crore

2022-23: Rs.33,805 crore… Rs.21,396 crore… Rs.55,203 crore

2023-24: Rs.35,856 crore... Rs.24,825 crore… Rs.60,681 crore