After announcing Rythu Bharosa from Sankranti, Telangana decides to raise ₹30,000 crore market borrowings in Q4

Telangana Government plans to raise ₹30,000 crore in market borrowings in the last quarter of 2024-25. It has earlier announced to implement Rythu Bharosa from Sankranti.

Telangana Government has decided to raise a huge ₹30,000 crore market borrowings during the last quarter of the current financial year (2024-25).

The State has proposed to raise ₹10,000 crore each in the three months of the January-March quarter. Interestingly, it has proposed to participate in the auction of securities on all the 12 Tuesdaysin the quarter, according to the indicative calendar of market borrowings released by the Reserve Bank of India for the fourth quarter. RBI holds auction of securities on Tuesdays. State governments raises loans (market borrowings) through the auction.

The decision to raise ₹30,000 crore in the last quarter follows the Government’s announcement of implementing Rythu Bharosa, farmers investment subsidy scheme, involving crediting of ₹7,500 an acre into the accounts of eligible farmers whose lands are under cultivation, after Sankranti festival. The BRS Government used to credit ₹5,000 an acre under Rythu Bandhu involving an outgo of around ₹8,000 crore per crop season. Even though there is a scope for reduction in the quantum as the Government is reportedly contemplating payment of Rythu Bharosa to only lands under cultivation, it would still involve a huge expenditure as a majority of farmers covered under Rythu Bharosa own less than five acre land.

The huge market borrowings are proposed at a time when the Union Finance Ministry had imposed restrictions on the borrowing limits of the State Government since past couple of years citing financial management concerns. While the government had projected borrowings in excess of ₹61,000 crore in the budget estimates of the current year, the quantum had been subsequently reduced,by Union Finance Ministry, to ₹49,255 crore due to the restrictions.

The State had borrowed ₹37,850 crore till November end, according to the provisional data released by the Comptroller and Auditor General of India and the State had raised another ₹3,909 crore in December taking the total market borrowings in nine months to more than ₹41,750 crore and leaving scope for borrowing another ₹8,000 crore.

Given this background, doubts persist over whether the State Government would be allowed to raise the anticipated borrowings (of ₹30,000 crore) in the last quarter. Interestingly, the RBI said that the actual amount of borrowings would depend on the requirement of the State Governments/Union Territories, approval from the Government of India under Article 293 (3) of the Constitution of India and the market conditions.

Finance department officials were tight-lipped when asked whether the Union Finance Ministry had given its consent to the State to raise market borrowings over and above the ceiling fixed for the current fiscal.