Telangana seeks tax breather, says can't pay interest due to cash crunch

Hyderabad: Telangana state government wants to defer paying interest to banks this month. The government needs to pay Rs 1,500 crore in interest per year.

With the government suffering a huge dip in revenues this month due to the impact of demonetisation, the government wants banks to postpone payment of interest for two-three months.

The issue was discussed at a meeting conducted by finance minister Etela Rajender with department officials at Secretariat.

However, the demonetisation has adversely impacted the revenues of state government since November 8. The government struggled to pay salaries and pensions for staff in December.

Though it could tide over the crisis in November, thanks to the revenue collections of October, the situation is grave in December, with lower collections from all major revenue-earning departments.

“The government now faces a major challenge to pay salaries for staff on January 1 besides adjusting funds for various welfare schemes and irrigation projects. In this scenario, payment of interest to banks would be a problem. We want to seek postponement by two-three months as the financial situation is likely to improve by then,” said an officer in the finance department.

The government is contemplating this idea to avoid the embarrassment of defaulting on payment of interest.

“It would be better if we write to all institutions seeking postponement in advance instead of defaulting on payment later,” the official added.