Centre halts FRBM loans, Telangana welfare schemes to be hit

HYDERABAD: The worst fears of the State government have come true. The Centre on Monday restrained the State government from going in for open market borrowings under the Fiscal Responsibility and Budget Management Act (FRBM). In a virtual meeting with Finance Secretaries of various States, Union Finance Secretary TV Somanathan did not commit himself to making any assurance that the Centre would permit the Telangana government to raise loans under the FRBM for this financial year.

The Union Finance Secretary said “we will examine”, which is a major cause of concern for the State that has been implementing various welfare schemes like Rythu Bandhu and Dalit Bandhu.If the Centre does not allow the State to raise loans, it may turn into a Centre-State face-off and take a political turn. The option before the State is to go to the Supreme Court. There is a possibility of convening an extraordinary session of the Legislature to discuss the crisis.

“The Central government is imposing conditions which will adversely affect the borrowings of three States — Andhra Pradesh, Telangana and Kerala. Already, the Centre has cut the borrowing capacity of Andhra Pradesh by Rs 30,000 crore in the current financial year. If the same rules are applied to Telangana too, we may not get any loan in 2022-23,” an official in the Finance Department told Express.

Centre vindictive, says TS
The State government described as vindictive and partisan the Centre considering off-budget borrowings as State government debts. This will have an adverse impact on development works, it has pointed out. It considered as discriminatory the Centre’s practice of bringing some debts under FRBM while treating others like loans from HUDCO and NCDC as State debts.

The State proposed to raise Rs 53,970 crore open market borrowings in the 2022-23 Budget. In the first quarter of this financial year 2022-23, the State government proposed to raise Rs 15,000 crore, according to the Reserve Bank of India’s indicative calendar of market borrowings by the State governments. As per the calendar, the State has to raise Rs 6,000 crore loan up to May 2. 

Rs 53,970 cr
Open market borrowings were proposed to be raised by the State in 2022-23 

•  If the Centre does not allow the State to raise loans, it may turn into a Centre-State face-off 
• The Centre has cut the borrowing capacity of AP by Rs 30,000 crore. If the same rules are applied to TS, the State may not get any loan in 2022-23