For the second time, the Telangana state government has met with success with raising funds through bonds, as it has managed to raise Rs. 2000 crore. The state government in total has raised Rs. 4000 crores through bond in this month alone.
The securities were auctioned by the state government by raising Rs. 1000 crore for a six-year period and another Rs. 1000 crore for an eight-year period. Each bond was issued at Rs. 10000 for both competitive and non-competitive bids for the auction, which were successful.
For the bond, a total number of 85 bidders bid that has to be repaid in six years by the state government, while the state government will have to repay 153 bidders for the bond in eight years. Based on a 3% GSDP ratio, a value of Rs. 15,051 crores have been allowed to the State government that is to be raised between April to December.
Rs. 24,600 crores in the financial year 2017-18 and Rs. 26,740 crores in the financial year 2018-19 were borrowed by the state government. But during 2019-20, the government only borrowed Rs. 4000 crore, which is equivalent to the money raised in this month. The government is expecting relief from the money raised through the auction of the bonds due to the crisis fueled by the lockdown. The bond has been auctioned at the interest rate of 6.5%. Owing to the high ratings, the bonds issued by the state government got a good response even though the current securities market is weak.
It is a regular process in which the state government auctions the state development loan. The state government prefers to issue state development loans of preferred maturities as the market’s preference for the maturities of ten years and below. On 12th April, the State issued bonds with an eight-year repayment schedule. Including tax devolution from the Centre, the state government gets an income of about Rs. 14,000 crores and another Rs. 10,000 crores through taxes.
The state government received only Rs.4 crore in the first 10 days of April month. The borrowing limit of the State needs to be increased from 3.5% to 6% under the Fiscal Responsibility Budget Management Act, which is being pressurized by the State on the Centre.