The burden of repayment of principal and interest of the fresh loans and those obtained by the previous Government continue to impact Telangana’s finances.

The State government has raised gross market borrowings of ₹12,900 crore in the auction of securities conducted by the Reserve Bank of India during April and May this year. But the net borrowings were only ₹6,400 crore with a deduction of ₹6,500 crore, according to the RBI bulletin on State finances till May end. This, senior officials said, was because of the repayment schedule of the previous year involving deduction of principal and interest pertaining to the loans obtained in the past.

“This is a sort of evergreening of loans. Governments tend factor in the repayment schedule of the previous loans and decide on the quantum of borrowings to make repayments as well as to meet the current requirements,” an official told The Hindu. The feature is however not unique to the State and was a common practice by the State governments.

The burden on the State government on account of repayment of interest on loans obtained by the previous government as well as the fresh loans it had taken since assuming power in December 2023 is mounting. The government had paid interest of ₹7,778 crore at the end of the April-June quarter of the current financial year, according to the provisional figures released by the Comptroller and Auditor General of India. This is 36.51% of the ₹21,304 crore allocated for interest payment in the budget estimates for the current fiscal. With nine more months to go for the financial year, the government is likely to exceed the projection for the year.

Coupled with the interest burden is the expenditure due to payment of pensions including social security pensions which crossed ₹7,300 crore at the end of the first quarter almost reaching the half way mark of the ₹14,736 crore budgeted for the fiscal year. Chief Minister A. Revanth Reddy’s recent announcement of pensions to patients suffering with some ailments will further add to the burden making it difficult for the government to raise finances.