HYDERABAD: The liabilities of the State have been increasing year-on-year, and over 75 per cent of the borrowings during the year 2019-20 were utilised to repay the debts pertaining to earlier years, affecting the asset creation in the State. About 97 per cent of the fiscal deficit was financed through the market borrowings, pointed out the Comptroller and Auditor General (CAG) report on “State Finance for the year ended March 31, 2020” tabled in the State Legislative Assembly on Tuesday.
The interest on State Development Loans paid in 2016-17 was Rs 6,319.02 crore, which increased to Rs 13,907.42 crore in 2020-21, the CAG report said. The ratio of outstanding public debt to GSDP increased from 18.42 per cent in 2016-17 to 23.68 per cent in 2020-21. The outstanding public debt increased by 19.09 per cent over the preceding year, at a significantly higher rate than the growth of GSDP, which grew by 2.42 per cent.
However, Chief Minister K Chandrasekhar Rao said the market borrowings should not be treated as “debts”. He termed them “resource mobilisation”.
The CAG report said there was an increase in all the components of committed expenditure within the revenue expenditure. Interest payments are increasingly consuming Revenue Receipts year after year. Huge capital expenditure of Rs 1,44,399 crore was incurred as of March 2021 on ongoing irrigation projects, the report said.
The CAG report pointed out that the State could not achieve Revenue Surplus during 2019-20 for the first time in five years. The other key fiscal targets prescribed by the Telangana State Fiscal Responsibility and Budget Management Act relating to fiscal deficit and ratio of total outstanding debt to GSDP of the State were achieved during the year.
“Budgetary assumptions of the State government were not realistic during 2019-20 and control over the execution and monitoring of budget was inadequate. Supplementary grants or appropriations were obtained without adequate justification and in some cases, despite the Legislature not approving supplementary provision, expenditure was incurred. Savings were neither surrendered on time nor were explanations provided to the Accountant General (A&E) for variations in expenditure vis-a-vis allocations. Departments were not cautioned against persistent savings; nor were their budgets varied in accordance with their ability to absorb the allocations. The State government has persistently been incurring excess expenditure over authorisation during the last few years, which is a cause for concern. While excess expenditure of Rs 84,650.99 crore incurred during the last five years was yet to be regularised by the Legislature, Rs 2,084.03 crore was incurred during 2019-20 without budgetary provision, which undermines the authority of State Legislature,” the report said.
Maturity profile of the debt
The maturity profile of outstanding stock of public debt as of 31 March, 2021, showed that 45.86 per cent (Rs 1,06,468 crore) of the total outstanding public debt is to be repaid in the next seven years. The State needs to augment its resources to meet the increasing debt repayment burden over the period.
“Out of the Rs 43,784 crore market borrowings taken during 2020-21, repayment of Rs 25,823 crore is due during the years 2041-2051. This indicates that in respect of 58.98 per cent of the loans taken during the year, the government has been preferring to borrow with longer maturity periods. The interest on these borrowings is ranging from 6.61 per cent to 7.20 per cent. Interestingly, the interest rates for shorter maturity periods, prior to the year 2041, are also similar ranging from 5.85 per cent to 7.60 per cent,” the CAG report added.
Some other observations