The Comptroller and Audit General of India (CAG) has raised serious concerns about the financial health of Telangana, highlighting a substantial increase in total liabilities, potential unsustainability of debt repayments, and mounting loans and debt servicing burdens.

The report, which captured the State’s financial health for 2022-23, reveals that Telangana’s total outstanding liabilities, including off-budget borrowings, have reached a staggering ₹4.68 lakh crore.

This figure significantly surpasses the target set by the Fifteenth Finance Commission. It represents 35.64 per cent of the state’s Gross State Domestic Product (GSDP), well above the prescribed limit of 29.70 per cent by the 15th Finance Commission.

The report also highlights the escalating debt servicing burden faced by the state. In the next ten years, Telangana will have to repay ₹2.67 lakh crore as principal and interest on market borrowings. This figure does not include the ₹19,210 crore principal repayment due for borrowings from other financial institutions.

The audit report, which was tabled in the Assembly on Friday, indicates that a significant portion of market borrowings was utilised for providing loans and advances to Public Sector Undertakings (PSUs), Special Purpose Vehicles (SPVs), and Autonomous Bodies (ABs) for servicing off-budget borrowings. This practice raises concerns about the sustainability of the State’s debt.

In addition, the State government’s capital expenditure has been significantly curtailed, reduced by about 40 per cent of the estimated amount.

Debt sustainability

Debt sustainability suggests that the net public debt available to the State Government would be negative after considering the outgo on servicing Off-Budget Borrowings. “This may put significant pressure on the State’s finances and may push the debt sustainability of the State to an undesirable level,” it said.

“Also, a substantial portion of market borrowings were utilised for providing loans and advances to PSUs/SPVs for servicing (principal and interest) of Off-Budget Borrowings. This is not a healthy practice from the perspective of debt sustainability,” it pointed out.

These findings paint a worrisome picture of Telangana’s financial situation, with increasing debt levels and potential challenges in meeting repayment obligations. The State government’s reliance on off-budget borrowings and the allocation of market borrowings for debt servicing raise questions about the long-term sustainability of its financial practices.

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