The Telangana government which has already borrowed more than Rs 2 lakh crore is getting ready to seek more debts. It issued an ordinance this week revising the FRBM limit in the name of guarantee for corporations, as it would enable the state government to go for more debts. Through the ordinance, the state government has relaxed the borrowing limit from 90 per cent to 200 per cent.
The FRBM limits put a check on the state governments and preventing them from borrowing as much as they want.
It may be recalled that the Centre has relaxed the FRBM limits for all the states in view of the Covid-19 pandemic and the lockdown imposed to check its spread.
As there is no assembly session, the TS government got the Ordinance passed with the Governor’s consent. The Ordinance included two changes in the FRBM Act, 2005. The second change made to the Act is likely to push the state treasury into debts.
All debts made under the FRBM Act should be included in the Budget. However, if money is borrowed in the name guarantee fund of Corporations, they need not be shown in the Budget.
Whatever be the clause, finally, the government has to repay the borrowed amount.
In the last six years, the TS government had borrowed at least Rs 1.13 lakh crore in the name of corporations for Mission Bhageeratha, Mission Kakatiya and other irrigation projects.
The state governments also have a limit for the legal guarantees it can undertake. As per the Sec (9) of the FRBM Act, the total of guarantees should not cross 90 per cent of the state’s revenue. However, in the latest Ordinance, the state government changed this clause.
As per the change, the debts to be drawn in the name of corporations will be double the income, which means it will be more than Rs 2 lakh crore.
Economy into uncertainty
Financial experts feel this imbalance will drive the Telangana economy into uncertainty. It is also being alleged that corporations were being created only to borrow money.
As per the FRBM limit, the state government has set a target to borrow Rs 55,000 crore this fiscal. In 2020-2021 Budget, the government had declared that it would take debts to the tune of Rs 33,000 crore. By increasing the FRBM limits, the TS government is getting ready to borrow Rs 55,000 crore.