Financial Crisis in Telangana; Govt to spend judiciously in June

Hyderabad: The surplus and financial strong at the time of formation of Telangana state in 2014, now it has come under financial crisis and brought the state under debt by over Rs. 4 lakh crore.

Now the situation has come to such a level that the State government has stopped the release of funds to the non-focal wings in the month of June to fulfill the commitments like the release of pending pensions to the beneficiaries, Rythu Bandhu, Kalyana Lakshmi and other schemes.

The TRS government headed by the Chief Minister K. Chandrasekhar Rao is yet to take a decision on releasing money to the farmers under Rythu Bandhu (the flagship scheme of KCR) for the ensuing Kharif season. 

Increased financial commitments and the delay in borrowing money from the financial institutions mainly RBI has put heavy burden on the state during June, said a senior official of the Finance department.

As no financial institution coming forward to give the loan, the Reserve Bank of India (RBI have not permitted the state to borrow during the last two months on the pretext that the state government have crossed the FRBM limit and brought the state financial position in crisis.

The only option before the government was to manage with the available resources. However, the RBI which has given permission for the month of June to borrow upto Rs. 4,000 crore on stock, it takes two to three days for financial crisis to ease somewhat. 

Now the State finance department is worried that if the RBI raised objections on borrowings in July, the state would face a deeper crisis in July. As a pre-emptive measure, the government is stopping the release of funds mainly to clear the bills of the contractors who had taken up roads development, panchayat and municipal development works and the construction of various state owned institutions in the districts.

The government will release funds to the priority sectors like education, medical and health and for the implementation of important welfare schemes, an official said.

“It required Rs. 10,000 crore to meet Rythu Bandhu, pensions and other welfare schemes in June. The finance wing is scouting for Rs. 4,000 crore in addition to Rs. 4,000 crore already mobilised through borrowings”, he said.

Officials said that the only option before the government to overcome the financial burden was to stop releasing funds liberally and utilize the available finances in a disciplined manner.