Interest payment, debt service this fiscal year to cross 17,500 cr.

The main debt service component is 14,635.34 crore of interest on open market loans

State government interest payments and debt service for the current fiscal year are set at 17,594.38 crore.

This is almost 3,000 crore more than 14,625.36 crore according to revised estimates from the previous year. Of the total debt service this year, the interest on the internal debt alone stands at 16,502.1 crore, more than 2,500 crore than 13,898 crore the previous year.

According to the State Budget Handbook “State Finances: A Study of 2021-22 Budgets” published by the Reserve Bank of India, a major component of debt service is 14,635.34 interest crores on open market loans borrowed by the state government. Interest on central government loans for the current year is set at 281.82 crore p.a., almost 100 crore more than 188.05 crore of the previous fiscal year.

Interest on the National Social Security Fund (NSSF) and interest on small savings, state provident funds and other instruments is set at ₹ 787.77 crore and ₹ 800.45 crore respectively.

The state government had opted for open market borrowing since the onset of the coronavirus pandemic (COVID-19) to meet immediate financial needs as well as to implement a series of social protection schemes like Rythu Bandhu .

Tax loans

Borrowings during the current fiscal year are approaching the 30,000 crore mark to reach 25,573 crore at the end of the first half of the current fiscal year between April and September. The state had raised an additional 3,500 crore in the third quarter of the fiscal year compared to the total borrowing of 6,295 crore during the quarter (October to December) projected in the provisional borrowing schedule released by the RBI.

Considering the impact of the COVID-19 pandemic on finances, the government had estimated that borrowing and debts could be in the range of 45,509 crore for the current fiscal year and the same was listed to the budget under capital revenue.

Sources said, however, that there would not be a large cash outflow due to debt servicing, as much of the interest would be offset through accounting adjustments.

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