Hyderabad – In a determined move to stabilise Telangana’s finances, the newly-elected Congress government is intensifying its efforts to restructure the colossal debt inherited from the previous BRS administration. The state’s Finance Department is now in overdrive, exploring multiple avenues to ease the burden on the exchequer by swapping high-interest loans for more favourable alternatives, a move officials say could save hundreds of crores annually.
The Legacy of High-Interest BRS Loans
The root of the problem lies in the extensive off-budget borrowings (OBBs) undertaken during the BRS tenure. To fund ambitious projects like the Kaleshwaram Lift Irrigation Scheme and Mission Bhagiratha, the previous government raised tens of thousands of crores through various state-owned corporations. The financial mechanism behind these projects involved securing high-interest loans taken by the BRS from financial institutions at rates reportedly as high as 9.5% to 10.5%.
A senior Finance Department official explained the gravity of the situation. “We are saddled with a financial hangover. These are high-cost obligations eating into our state’s revenue. Every month, a significant portion of our earnings goes towards servicing this expensive debt, leaving less for welfare schemes and essential development.”
A Multi-Pronged Restructuring Strategy
The current government’s strategy is a multi-pronged financial manoeuvre focused on debt consolidation and restructuring. Chief Minister Revanth Reddy’s administration has directed officials to aggressively negotiate with a consortium of nationalised banks and financial powerhouses like the Rural Electrification Corporation (REC), Power Finance Corporation (PFC), and NABARD.
The goal is to secure fresh loans at current market rates, which hover around 7-8%, and use these funds to pre-pay the older, costlier loans. This loan-swapping process is a standard treasury practice, but the scale of this effort is unprecedented for the state.
“We are essentially refinancing the state’s mortgage,” the official added. “Even a one percentage point reduction on a ₹10,000 crore loan translates into a saving of ₹100 crore every year. The potential savings are immense.”
From Fiscal Prudence to Public Welfare
This move is also a significant political statement. The Congress government has been vocal about the alleged fiscal indiscipline of its predecessor, even releasing a white paper on the state’s financial health. By actively cleaning up the balance sheets, the administration aims to demonstrate its commitment to responsible governance.
Crucially, the success of this initiative is vital for implementing the Congress party’s ‘six guarantees’. The savings unlocked by reducing the interest burden will be directly channelled to fund these flagship welfare programs, which include financial assistance for women, increased pensions, and free electricity.
While negotiating large-scale refinancing presents challenges, the government’s intent is clear. The state intensifies efforts to ease the burden on the exchequer and steer Telangana’s economy away from a debt trap, ensuring that public money works for the public, not just the banks.
