CAG punctures TS fundraising plans

State is worried about bankers’ response to bonds

The latest Comptroller and Auditor General’s (CAG) adverse report on Telangana State’s financial condition has cast a shadow on the state government’s plans to raise funds through loans for its flagship programmes in the election year.

The government is shocked over the CAG report which declared Telangana as a “revenue deficit state” contrary to the government’s claims of “revenue surplus state” since its formation in June 2014.

The government is worried that the CAG report may have an adverse impact on the government’s market borrowing plans and on getting approval from the Central government to enhance its borrowing limit to 3.50 per cent of GSDP under the FRBM Act.

The bonds floated by the state government in the past four years had seen huge demand due to the state’s revenue surplus tag. However, with CAG reversing this, the government is concerned over the fate of its bonds in the market now.

Chief Minister K. Chandrasekhar Rao is learnt to have directed finance officials to take up “damage control exercise” and to come out with figures on actual financial position of Telangana to clear apprehensions among investors, bankers and financial institutions.

The government is mostly relying on loans to complete Mission Bhagiratha (`40,000 crore), 2BHK scheme (`12,000 crore), irrigation projects (`50,000 crore), farmers coordination councils to ensure MSP (`5,000 crore) etc.

However, with CAG exposing flaws in TS balance sheets, it remains to be seen how banks and financial institutions would respond to the CAG data.

In the recently passed State Budget 2018-19, the government pegged revenue surplus at `5,520 crore and fiscal deficit at `29,077 crore.

With the latest CAG report, questions are now being raised about the nature of fiscal deficit. Experts wonder if the fiscal deficit of `29,077 crore is nothing but the loans shown as the revenue of the government in the Budget to project Telangana State as a ‘revenue-surplus state’.

In the recent Budget too, the government has pegged the total state’ revenue earnings at `1,30,975 crore. Of this, Central grants were estimated at `29,041 crore, centrally sponsored schemes `9,723 crore, finance commission grants `2,720 crore, special package `900 crore and other grants `15,698 crore despite fully aware that Centre was not giving even half of the amount estimated by the government during the last four years.