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The Telangana government stares at a huge financial burden over the next 14 years in the form of debt servicing of the loans taken to the construction of the Kaleshwaram project. The multi-stage irrigation project seeks to lift water from the low-lying Godavari and channelise the water to different projects in the State.
In its report submitted to the Telangana Assembly, the CAG pegged the future liability on the Kaleshwaram Project towards debt servicing would work out to ₹1.41 lakh crore over the next 14 years.
As the State registered a revenue deficit, it had to finance the revenue deficit from market borrowings. The State government will have to repay ₹2.52 lakh crore as principal and interest on the market borrowings by 2032-33 and this would put significant pressure on the government finances.
Apart from its total liabilities of ₹3.14 lakh crore, the State is also liable to pay principal and interest on account of its OBBs to an extent of ₹1.19 lakh crore. Taking into consideration the OBB and other liabilities that are being serviced out of the State Budget, the ratio of Debt to GSDP would be 37.77 per cent, which is 12.77 per cent higher than the set target of 25 per cent as per the TSFRBM Act.
This is also 8.47 per cent above the norms of 29.30 per cent as prescribed by the 15th Finance Commission.
It pointed out that the State borrowed heavily off the Budget for the Kaleshwaram project. The major portion of off-budget borrowings (₹66,854 crore) belongs to Kaleshwaram Project Corporation Ltd (KIPCL). It borrowed the money on behalf of the State government and as the Detailed Project Report of the Kaleshwaram Project did not envisage any revenue streams, the onus of bearing these huge liabilities would be on the State government.
“This will constitute huge burden on State finances constraining State finances severely and capacity of State to have any developmental plans in near future,” it said in the report on the State for the financial year 2021-22. Though the State registered a higher growth rate in Gross State Domestic Product (GSDP) over the previous year that was hit by Covid-19 and an increase of revenue receipts by 26 per cent, the State failed to register a revenue surplus for a third consecutive year.
The revenue deficit (₹9,335 crore) was understated by ₹1,157 crore due to non-discharge of interest liabilities, on account of certain misclassifications between revenue and capital expenditure and transfer of lapsed deposit amount to Revenue head.
“Non-discharge of interest liabilities also impacted the fiscal deficit (₹46,638 crore) which was understated by ₹182 crore,” it said.
Revenue receipts up
The CAG said the revenue receipts of the State increased by ₹26,555 crore (26 per cent) while revenue expenditure increased by ₹13,592 crore (11 per cent) in 2021-22 over the previous year.
The State’s Own Tax Revenue (₹91,271 crore) registered an increase as contributions from headers like Stamps and Registration, State Goods and Services Tax, and State Excise went up. The revenue expenditure (₹1.37 lakh crore) has increased by 11 per cent during 2021-22.
The report observed that the State has been persistently trailing in respect of expenditure on the education and health sectors. As a percentage to total expenditure, expenditure on education and health was eight per cent and four per cent respectively.
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