HYDERABAD: The Telangana government’s efforts to raise funds through bonds met with success for the second time in April on Tuesday, as it managed to raise Rs 2,000 crore. The state government has so far raised Rs 4,000 crore through bonds this month alone.
The state government auctioned securities to raise Rs 1,000 crore for a six-year period, while another Rs 1,000 crore was raised for an eight-year period. Both competitive and non-competitive bids for the auction were successful and each bond was issued for Rs 10,000.
As many as 85 bidders bid for the bonds that are to be repaid by the state government in six years, while 153 bidders bid for the bonds that are to be repaid in eight years. The state government has been allowed to raise Rs 15,051 crore this year between April and December as per 3% GSDP ratio.
The state had borrowed Rs 24, 600 crore in the 2017-18 financial year, and Rs 26, 740 crore in 2018-19. However, it borrowed only Rs 4,000 crore in 2019-20, which is equivalent to the money raised this month, indicating that the state government is under pressure to borrow money. The money raised in bonds is expected to provide much relief to the government in the present crisis fuelled by the lockdown. The interest rate of the bonds is around 6.5%. Though the current securities market is weak, the bonds issued by the state government received a good response owing to the high ratings.
State governments auction State Development Loans ( SDL) in regular process. Given the market’s preference for maturities of 10 years and below, states also prefer to issue SDLs of preferred maturities. The state issued bonds on April 12 with an eight-year repayment schedule. The state in a month gets an income of about Rs 14,000 crore, including through tax devolution from the Centre, other transfers and around Rs 10,000 crore through taxes. Chief minister K Chandrasekhar Rao had earlier stated that the state received an income of only Rs 4 crore in the first 10 days of April. The state has been urging the Centre to increase the percentage of the allowed limit of the states to borrow from 3.5% to 6% under the Fiscal Responsibility Budget Management Act.
The state government auctioned securities to raise Rs 1,000 crore for a six-year period, while another Rs 1,000 crore was raised for an eight-year period. Both competitive and non-competitive bids for the auction were successful and each bond was issued for Rs 10,000.
As many as 85 bidders bid for the bonds that are to be repaid by the state government in six years, while 153 bidders bid for the bonds that are to be repaid in eight years. The state government has been allowed to raise Rs 15,051 crore this year between April and December as per 3% GSDP ratio.
The state had borrowed Rs 24, 600 crore in the 2017-18 financial year, and Rs 26, 740 crore in 2018-19. However, it borrowed only Rs 4,000 crore in 2019-20, which is equivalent to the money raised this month, indicating that the state government is under pressure to borrow money. The money raised in bonds is expected to provide much relief to the government in the present crisis fuelled by the lockdown. The interest rate of the bonds is around 6.5%. Though the current securities market is weak, the bonds issued by the state government received a good response owing to the high ratings.
State governments auction State Development Loans ( SDL) in regular process. Given the market’s preference for maturities of 10 years and below, states also prefer to issue SDLs of preferred maturities. The state issued bonds on April 12 with an eight-year repayment schedule. The state in a month gets an income of about Rs 14,000 crore, including through tax devolution from the Centre, other transfers and around Rs 10,000 crore through taxes. Chief minister K Chandrasekhar Rao had earlier stated that the state received an income of only Rs 4 crore in the first 10 days of April. The state has been urging the Centre to increase the percentage of the allowed limit of the states to borrow from 3.5% to 6% under the Fiscal Responsibility Budget Management Act.
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