Telangana amends FRBM Act, extends borrowing limit

According to sources in the Finance Department, the gross borrowing was Rs 34,000 crore in 2020-21 Budget.

Published: 01st July 2020 08:34 AM  |   Last Updated: 01st July 2020 08:34 AM   |  A+A-

Rs 2000, cash,money

Image for representational purpose (Photo | PTI)

Express News Service

HYDERABAD: Governor Tamilisai Soundararajan on Tuesday promulgated ‘The Telangana Fiscal Responsibility and Budget Management (Amendment) Ordinance, 2020’.  

Thus, the State government accepted the recent decision of the Central government to expand the borrowing limit of the States under FRBM Act from the present three per cent to five per cent,  allowing the States to borrow more to face the present financial crisis arisen due to COVID-19 pandemic.

However, the States are eligible to go in for market borrowing up to five per cent of the Gross State Domestic Product (GSDP), only after fulfilling the conditions laid down by the Centre. The State may fulfil all the conditions, except reforms in the power sector. Even if the reforms in the power sector are not implemented, the State can raise a loan up to 4.5 per cent of GSDP this year.

According to sources in the Finance Department, the gross borrowing was Rs 34,000 crore in 2020-21 Budget. The net borrowing was Rs 30,000 crore at three per cent of around Rs 10 lakh crore GSDP. Thus, the State can raise extra loan up to Rs 20,000 crore in this fiscal under FRBM Act at 5 per cent of the GSDP. 

If the power sector reforms are not fulfilled, then the State can raise Rs 15,000 crore taking the total net borrowing of the State to Rs 45,000 crore. The State’s market borrowing are Rs 12,461.2 crore in the first quarter of 2020-21. Meanwhile, the State government accorded administrative sanction for Rs 2,587.9 crore for Kaleshwaram Irrigation Project, so that  the bills can be directly claimed in order to expedite the process of interest during construction (IDC) payable to banks in time. 

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