State paid 40k crore in interest for loans in 2 yrs

THIRUVANANTHAPURAM: Even when the state government has been accusing the Centre of slashing the state’s borrowing limit, it has been making huge interest payments on its present loans. In the past two years alone, the state paid over Rs 40,000 crore in interest for loans, as per the figures available with the accountant general.
The government has repaid Rs 23,302.82 crore in 2021-22 and Rs 17,329.25 crore in interest till January 31, 2023.
At the same time, from the domestic market, it raised only Rs 20,317.49 crore in loans in 2021-22, and only Rs 10,000.33 crore till January 31, 2023.
While the state did not borrow any funds from the Centre in 2021-22 (in fact, the figure is minus 24.67 crore), in 2022-23, till January 31, it borrowed Rs 909.44 crore from the Centre.
In short, the state’s borrowings are much smaller when compared to the huge interest it has been repaying.
The state borrows from the open market, LIC, GIC, Nabard, special securities for the national small savings schemes, and other agencies.
These are in addition to the foreign loans, borrowings, and advances from the Centre. While the resources raised from the open market have time-bound repayment and interest rates, the repayment for foreign loans and loans from agencies like Nabard begins only after three to four years after the loan is availed.
As per the state government’s figures submitted in the assembly, the state’s debt was pegged at Rs 3,70,342 crore, which is 36.38% of the GSDP. The government had also agreed to the fact that the state has been facing difficulties due to the huge mismatch between the revenue and expenses and that it is ‘acting on the basis of a clear roadmap’ to address the issue.
Finance minister K N Balagopal has further stated that “the state government is trying to address the gap between the income and the expenditure by raising loans within the borrowing limit set by the Centre”.
However, given the huge interest payments and the state’s borrowing limits as per the Centre’s latest intimation being only Rs 15,390 crore for the first nine months of the ongoing financial year, the state is unlikely to be able to address the issue and meet its requirements.
Financial experts attribute the state’s huge financial burden to its committed but non-return-yielding expenditures---salaries, pensions, and the interest payments on loans. The revision of salaries and pensions based on the recommendations of the 11th pay commission alone had caused an additional burden of Rs 15,000 crore annually to the exchequer.
After KIIFB’s loans--mainly spent on projects that yield no returns---have also been included by the Centre in the state’s borrowings, the state finances have been heading to dire straits, according to finance department sources.