The current Congress government in Telangana finds itself wrestling with an enormous debt burden, largely accumulated under the previous Bharat Rashtra Samithi (BRS) administration. To keep daily operations afloat, the state is increasingly dependent on financial support mechanisms offered by the Reserve Bank of India.
Official figures from the RBI reveal the depth of this reliance. In July alone, Telangana utilized the Special Drawing Facility every single day, borrowing a staggering ₹5,046 crore. Additionally, it accessed ways and means advances for 28 days, amounting to ₹1,750 crore, and resorted to overdrafts on 11 occasions, drawing ₹1,933 crore. This heavy dependence paints a stark picture of the state’s financial decline, transitioning from a robust economic position to one heavily reliant on emergency fiscal measures.
A report on State Finances for 2022-23, compiled by the Comptroller and Auditor General (CAG) of India, meticulously detailed the extensive borrowing by the previous government over a nine-year period (2014-15 to 2022-23). The CAG had previously highlighted how Telangana was caught in a dangerous cycle, borrowing new funds simply to service existing debts.
This spiraling debt is clearly visible in the state’s escalating interest payments. Each year, the actual interest paid significantly surpasses the amounts initially projected in budget estimates. For example, in the 2024-25 fiscal year, Telangana spent an alarming ₹26,889 crore on interest payments, a substantial jump from the anticipated ₹17,729 crore.
Such interest expenditures consistently exceeded 10% of the state’s revenue receipts, which were estimated at ₹2.21 lakh crore. A similar pattern emerged in 2023-24, with ₹23,337 crore spent on interest, exceeding the ₹22,407 crore budgeted against ₹2.16 lakh crore in projected revenue receipts. The financial year 2021-22 also showed a similar trend, underscoring the severe financial strain caused by the government’s accumulated loans.
The CAG report further detailed that Telangana’s official budgetary debt stood at ₹3.56 lakh crore, compounded by an additional ₹1.98 lakh crore in off-budget borrowings – primarily in the form of guarantees extended to state-owned corporations such as the Kaleshwaram Irrigation Project Corporation Limited. This pushed the total debt past the alarming ₹5 lakh crore threshold, a stark contrast to the ₹79,880 crore debt when the state was formed. Consequently, Telangana now holds one of the highest rankings nationally for off-budget borrowings, a heavy financial legacy that the new Congress government must manage.
Grappling with this immense debt and the soaring costs of servicing it, the Chief Minister A. Revanth Reddy-led government has been actively seeking relief from both the Central government and various financial institutions. These efforts are beginning to yield some results, with the Union Government agreeing to a proposal to restructure high-interest loans into lower-interest ones through new borrowings. However, the state is still on track to exceed its allocated borrowing limit for the current fiscal year.
A senior Finance official, speaking to The Hindu, expressed cautious optimism, stating, ‘We anticipate gaining more flexibility for borrowings. The process of loan restructuring is already underway.’