Telangana government has acquired close to Rs. 61,000 crore as debt during the past one year of its tenure, reveal a Right to Information (RTI) reply received on a query from Forum for Good Governance. As per data collected by the forum, the government has obtained Rs. 23,348 crore from sale of bonds, Rs 24,000 crore from the Rural Electrification Corporation (REC) and Rs 4,000 crore from Power Finance Corporation.

The government has also approached the World Bank for another Rs. 10,000 crore and the matter is under negotiation. The figures were obtained from State government records. Already, at the time of Telangana State formation, the government had inherited Rs. 70,000 crore debt that was incurred before bifurcation. Going by the fact that the State generates revenue mostly by collection of taxes from its people, each person in the State with a population of 3.5 crore has a burden close to Rs. 40,000 on their shoulders, Forum members pointed out.

While the sale of bonds is at 9 percent interest, loan from REC is at 11 percent interest. The World Bank loan will be at 3.3 percent interest.

Debt trap

“The State is moving towards debt trap if it does not check its expenditure. Only financial discipline can aid the State in the long run,” said M. Padmanabha Reddy, secretary of the Forum. The loans obtained by the State will have to be paid by 2024 in some cases and 2025 in others. Usually States are not allowed to loan funds higher than 3 percent of GDP, the Forum pointed out.

Welfare schemes

“In this case, the government has maintained that Telangana is a surplus State to obtain hefty loans. But pinning welfare schemes on loans is not a sustainable financial model,” Mr. Chelikani Rao of the Forum.

Most loans obtained are to be spent on Thermal power plants including Yadagiri plant. The funds will also be used for schemes including Mission Kakatiya, the Forum members said. This, when close to 60 percent of the State’s annual budget is allotted for non-plan expenditure including salaries of employees, maintenance of resources and vehicles for government use.

“Ideally 50 percent of any State’s budget should be plan budget for welfare schemes and the remaining 50 percent for non-plan or dead spending,” Mr. Reddy said. Telangana is the only State which charges 4 percent tax on food grains.

White paper

“This even as the government doesn’t charge tax on diamonds and just one percent tax on gold,” Mr. Reddy pointed out in a media conference held in the city on Wednesday.

The Forum demanded the government to produce a white paper listing a clear plan of repayment to reassure citizens.

As per data collected by the Forum for Good Governance, the government has obtained Rs. 23,348 crore from sale of bonds, Rs 24,000 crore from the Rural Electrification Corporation (REC) and Rs 4,000 crore from Power Finance Corporation