Telangana is worried as it has not yet been allowed to raise funds through borrowing from the open market
Telangana is worried as it has not yet been allowed to raise funds through borrowing from the open market
The delay by the central government in allowing the Telangana government to raise funds through open market borrowing (OMB) through the Reserve Bank of India (RBI) is becoming another contentious issue between the Center and the state.
Telangana is eagerly waiting for the Centre’s nod to raise funds through OMBs, which has not come since the beginning of the financial year 2022-23. The state has several programs including the Dalit Bandhu Yojana, under which the government provides a one-time grant of ₹10 lakh each to eligible Dalit families to start a business of their choice. According to the state government, on an average 400 beneficiaries are being paid every day, which is ₹ 40 crores per day. While the government is meeting its requirements through internal resources, the pressure is likely to be felt when payments under Rythu Bandhu will start next month. Under this scheme, the government provides Rs 5,000 per acre twice a year to more than 60 lakh farmers enrolled under this scheme. The first installment is likely to cost around Rs 7,400 crore, which the government will face difficulties in mobilizing if it is not allowed before the start of the kharif season. The state had accordingly proposed to raise ₹15,000 crore through OMBs in an auction conducted by RBI in six instalments. But it is yet to get the benefit of even a single installment of OMB as the Center has not given its approval as per the provisions of Article 293 of the Constitution.
The Centre’s approval, a routine matter, became a complicated issue when the Union finance ministry raised questions about state finances and off-budget borrowings. Union Finance Secretary TV Somanathan raised questions about borrowings in the name of various corporations in excess of the limits prescribed in the Fiscal Responsibility and Budget Management (FRBM) Act with the condition that the Center will consider these borrowings as part of the FRBM norms. The Comptroller and Auditor General (CAG) of India also expressed concern over off-budget borrowings. In its report submitted to the legislature in March, the CAG observed that the government is not fully disclosing its off-budget borrowings/liabilities and is bypassing the FRBM norms. Loans outstanding at the end of the year increased by 19% as compared to the previous year.
The State argued that the borrowed amount was raised in the name of Kaleshwaram Irrigation Project Corporation, Telangana Drinking Water Supply Corporation and State Water Resources Infrastructure Development Corporation. It states that the expenditure should be treated as capital expenditure. It questioned the Centre’s intentions to raise questions about the state’s finances “in a retrospective manner”, saying it exposed the “discriminatory attitude” of the Center towards Telangana, whose finances are expected to be adversely affected by the pandemic. After that was returning to normalcy.
Special Chief Secretary, Finance, K. Ramakrishna Rao was upset by the Union Finance Secretary’s claims that off-budget borrowing would also be taken into account while assessing the financial health of the state in line with the recommendations of the 15th Finance Commission. The state wondered how the central officials were speaking when the central authority had not made any such suggestion regarding the recommendations of the finance panel. Mr Rao pointed out that it was the Center that allowed states to borrow ₹ 1.27 lakh crore outside the FRBM norms. The issue is expected to be resolved soon as the Center has assured Telangana that the concerns identified will be thoroughly investigated.
rajeev.madabhushi@thehindu.co.in