With the Centre’s clampdown on states for restoring fiscal indiscipline, states off-budget borrowings are likely to fall 72 percent on year to INR 18,498 crore in the present financial year.

The off-budget borrowing declared by the states through their companies, special purpose vehicles (SPVs) and other equivalent instruments, was estimated at Rs 66,640 crore in FY22, minister of state for finance Pankaj Chaudhary told Rajya Sabha on Tuesday.

FE had reported earlier that the Centre had cut around Rs 41,000 crore from the states’ net borrowing ceiling for FY23 for resorting to off-balance sheet loans in FY22. The decision is part of a tightening of norms to discourage fiscal indiscipline by states, many of which resort to debt through parastatal bodies to fund government schemes and capex.

Telangana, Kerala, Andhra Pradesh, Uttar Pradesh and Karnataka were the major off-budget borrowers in FY22. Telangana, which had raised off-balance sheet resources to the tune of Rs 35,258 crore in FY22, would borrow only Rs 800 crore in FY23. Kerala, another major borrower of such funds, slashed fresh off-budget funding to Rs 2,770 crore in FY23 from Rs 14,313 crore in FY22. Andhra Pradesh also reduced such borrowings to just Rs 1,301 crore in FY23 compared with Rs 6,288 crore in FY22. The tightening of borrowing norms for states came after the Centre brought most of its off-budget liabilities into the balance sheet. 

The Centre which had off-budget liabilities close to Rs 4 trillion by end-FY20, has brought about Rs 3.7 trillion or 93% of such liabilities into the balance sheet by FY22. The remaining off-budget liabilities would likely be cleared soon subject to investors in such bonds coming on board as they had invested in such papers issued by entities like Nabard and Hudco for attractive returns.