Kaleshwaram project debt poses a huge financial burden for Telangana: CAG

Telangana Grapples with Enormous Financial Strain from Kaleshwaram Project Debt: CAG Report The Telangana government is facing a daunting financial challenge over the next 14 years as it grapples with servicing the debt incurred for the construction of the Kaleshwaram project. This multi-stage irrigation initiative aims to harness water from the lower Godavari and distribute it to various projects across the state.

According to a report submitted to the Telangana Assembly by the Comptroller and Auditor General (CAG), the future financial burden for debt servicing related to the Kaleshwaram Project is estimated to be a staggering ₹1.41 lakh crore over the next 14 years.

Due to a revenue deficit, the state has had to rely on market borrowings to finance its operations. The government is now facing the daunting task of repaying ₹2.52 lakh crore in principal and interest on these market borrowings by 2032-33, significantly straining its finances.

In addition to its total liabilities of ₹3.14 lakh crore, the state is also responsible for paying principal and interest on other borrowings amounting to ₹1.19 lakh crore. When factoring in these obligations along with other liabilities serviced from the state budget, the Debt to Gross State Domestic Product (GSDP) ratio is projected to reach 37.77%, surpassing the target of 25% set by the Telangana State Fiscal Responsibility and Budget Management (TSFRBM) Act by 12.77%. This also exceeds the norms of 29.30% prescribed by the 15th Finance Commission by 8.47%.

The report highlights that the state heavily borrowed off-budget for the Kaleshwaram project, with a significant portion of off-budget borrowings attributed to the Kaleshwaram Project Corporation Ltd (KIPCL). As the Detailed Project Report of the Kaleshwaram Project did not anticipate any revenue streams, the state government bears the burden of these substantial liabilities.

The CAG report underscores the severe strain on state finances, limiting its capacity to pursue developmental plans in the near future. Despite registering a higher growth rate in Gross State Domestic Product (GSDP) and a 26% increase in revenue receipts, the state has failed to achieve a revenue surplus for the third consecutive year.

Furthermore, the report reveals that the revenue deficit was understated by ₹1,157 crore due to non-payment of interest liabilities, misclassifications between revenue and capital expenditure, and the transfer of lapsed deposit amounts to the Revenue head. This non-payment of interest liabilities also contributed to an understatement of the fiscal deficit by ₹182 crore.

Overall, the CAG report underscores the significant financial challenges facing the Telangana government as it grapples with the financial ramifications of the Kaleshwaram project debt.

HBL