This is a representational image MUMBAI: In its last meeting Sunday, the state cabinet cleared loan guarantees worth almost Rs 30,000 crore to the state power utility, MSEDCL , to repay its debts. In doing so, the cabinet went against the advice of the finance department which warned that cumulative outstanding guarantees were already about Rs 1.5 lakh crore.
This was Rs 69,596 crore (86%) higher than the limit on contingent liabilities according to the state’s budgetary management norms, it said. A contingent liability is a potential payout the state could have to make in future. When a loan is guaranteed, govt has to repay it if the utility fails to do so.
The state’s cumulative outstanding guarantees have trebled from Rs 51,263.3 crore in March 2022. Fin dept opposed loan guarantee for MSEDCL The state finance department opposed the energy department’s proposal for a guarantee for loans worth Rs 29,995 crore and said it should consider raising loans independently.
The finance department warned that cumulative outstanding guarantees by the state by 2024-25 were already Rs 1.5 lakh crore. Along with debt, contingent liabilities are part of the total financial burden on the state.
The cash-strapped state already faces a debt of Rs 7.8 lakh crore. By March 2022, the cumulative outstanding guarantees granted by the state were Rs 51,263.
3 crore. Since then, the state had approved guarantees worth Rs 93,014.3 crore.
The cumulative outstanding guarantees sanctioned by the state so far stood at Rs 1.5 lakh crore for 2024-25. Such a large sum is extremely worrying for the fiscal discipline of the state, the finance department pointed out.
The Maharashtra Fiscal Responsibility and Budgetary Management (FRBM) Act 2005 requires the state to chalk out its medium-term fiscal policy. Contingent liabilities exceed cap The Maharashtra Medium Term Fiscal Policy 2023, put a limit on contingent liabilities at 1.8% of the state’s GSDP for 2024-24.
With the GSDP at Rs 42.6 lakh crore, the limit on contingent liabilities was set at Rs 80,667 crore. However, outstanding liabilities sanctioned so far for 2024-25 stood at Rs 1,50,247 crore.
This was higher than the FRBM limit by Rs 69,596 crore, the finance department pointed out. The state finance department said providing guarantees beyond limits will affect the state’s ability to raise loans from the open market and it will be charged a high rate of interest. As a result, its interest payments will rise, the finance department said.
However, the finance department was overruled and the cabinet granted MSEDCL the loan guarantee. Already in this financial year, the state has also guaranteed loans worth Rs 27,750 crore to MSRDC to fund land acquisition for the Virar-Alibaug multimodal corridor and the Pune-ring road. It has also approved an earlier guarantee to MSEDCL worth Rs 7,619 crore.
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