HYDERABAD: After nearly two months of hectic parleys, Telangana finally got some leverage from the Union finance ministry, which on Friday gave ad hoc permission to the state to raise market borrowings in the form of bonds at an auction to be conducted by the Reserve Bank of India.
The state government will be able to raise Rs 4,000 crore on June 7 during the auction, which will be more than the initial figure of Rs 1,000 crore. “A final permission will be granted next week,” state government sources said.
The ad hoc permission was obtained after the state impressed upon from the Union finance ministry how the fund shortage was affecting even salary payments to government employees and pension to retired staff, the sources added.
T may lose part of loan this fiscal
It is also learnt that due to the finance ministry’s new notification on the off-budget borrowings’ limit for states, Telangana may lose some of the proposed loan of Rs 53,700 crore in this fiscal year. It should be said that Kerala was previously granted the ad hoc permission to raise bonds.
Setting the motion in process, the Telangana government has already informed the RBI. The state will raise the bonds with a 13-year repayment schedule along with neighbouring Andhra Pradesh (two bonds of Rs 1,000 crore each with a tenure of 13 and 14 years), Tamil Nadu (Rs 20,00 crore with a tenure of 20 years) and Maharashtra (two bonds of Rs 2,000 crore each with an eight-year tenure) on Tuesday.
In all, these four states will raise bonds to the tune of Rs 12,000 crore. Importantly, the states, including Telangana, will issue them in a regular format instead of using the facility of additional borrowing or the green shoe option.
Green shoe option allows states to take more than the amount notified for the RBI auction.
Choosing the green shoe option indicates that investors are interested in these securities, a financial expert explained.
Interestingly, following the pandemic in 2020, the Telangana government used the green shoe option in December and increased the value of state development loans (SDLs) in order to cover payments for the Rythu Bandhu scheme.
