Lok Sabha Question No. 3402 (UNSTARRED), answered on 2015-12-18
Subject: Debts of States
Ministry: FINANCE
Asked by: RAVNEET SINGH, PRAHLAD SINGH PATEL, NANABHAU FALGUNRAO PATOLE, C.R. CHAUDHARY, C.S. PUTTARAJU

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF EXPENDITURE PLAN FINANCE-I DIVISION

## LOK SABHA UNSTARRED QUESTION NO. 3402

TO BE ANSWERED ON FRIDAY THE 18 th  DECEMBER 2015/27 AGRAHAYANA, 1937 (SAKA)

## DEBTS OF STATE

3402.  SHRI RAVNEET SINGH:

SHRI PRAHLAD SINGH PATEL:

SHRI NANA PATOLE:

SHRI C.R. CHAUDHARY:

SHRI C.S. PUTTA RAJU:

Will the Minister of FINANCE be pleased to state:

- (a)  whether the Union Government is aware that many Indian States are in debt due to aggressive  borrowing  and  fund  development  without  any  financial  discipline/selfrestraint and if so, the details thereof;
- (b)  the ratio of aggregate liabilities of Gross Domestic Product (GDP) of various States along with the reasons for high ratio, State/UT-wise including Maharashtra, Punjab and Rajasthan;
- (c)  whether  the  Union  Government  has  taken  any  step  or  issued  a  regular/periodic cautionary guidelines to rectify or reduce the debt level of the States and constituted any committee to look into financial health of States and if so, the details thereof;
- (d)  whether any request from such States have been received for financial assistance to meet their expenditure and if so, the details thereof including Maharashtra, Rajasthan and Punjab; and
- (e)  the  number of  States which have stabilised their debt burden during the last three years and the current year?

## ANSWER

## MINISTER OF STATE IN MINISTRY OF FINANCE (SHRI JAYANT SINHA)

(a) to (c): As gleaned from the States' Finance Accounts and Budget/Revised Estimates, Debt to GSDP ratios of States including Maharashtra, Punjab and Rajasthan for the year 2012-13 (FA) to 2014-15 (RE) as against Thirteenth Finance Commission (FC-XIII) targets are shown at Annex .  It  may be seen that as per latest available States' Finance Accounts 2013-14,  all  States  except  J&K  and  Nagaland  have  achieved  the  annual  Debt  to  GSDP ratios prescribed by FC-XIII for each State.

The comprehensive debt restructuring exercise was undertaken under the award of the Twelfth Finance Commission (TFC). To ameliorate the debt position of the States, TFC had recommended a Debt Consolidation and Relief Facility (DCRF) to be extended to the States during its award period of 2005-10. This involved (i) consolidation of central loans from Ministry of Finance for a fresh tenure of 20 years at an interest rate of 7.5% p.a. and (ii) waiver of repayment due against consolidated debt based on fiscal performance of States each year. Similarly, FC-XIII had recommended write-off of central loans extended to States by Ministries other than Ministry of Finance (MoF), interest reset on the loan from National Small Savings Fund (NSSF) extended to the States and consolidation of loans extended through MoF to the two States (West Bengal and Sikkim) that had not enacted their Fiscal Responsibility  and  Budget  Management  Act  (FRBMAs)  during  TFC  award  period.  All  the States have FRBMAs in place and the Debt and Interest relief benefits, as recommended by TFC and FC-XIII, have been extended to the eligible States.

Further,  the  FFC  for  its  award  period  2015-20  has  made  observations  about  the limited scope for rescheduling of debt. However, it has taken into account interest payments of States in full for the purpose of determining the fiscal needs of the States and making its recommendations on devolution of taxes and revenue deficit grants to the States. FFC has prescribed fiscal roadmap for the States and inter-alia recommended that borrowing ceiling be anchored to 3% of respective State's GSDP. Accordingly, the Net Borrowing Ceiling for 2015-16 has been fixed by Ministry of Finance.  The States' borrowings are regulated under Article 293 of the Constitution of India and so far during 2015-16 no State has breached its borrowing space.

(d): Post  FFC,  Some  of  the  State  Governments  requested  for  providing  financial assistance to meet their expenditure. Such requests received from States are normally dealt within the ambit of recommendations of the Finance Commissions and within the available Gross Budgetary Support.

(e): As gleaned from  the revised  budget  estimates  of  the States for 2014-15, the  debt/ GSDP ratio  of  respective  States  are  within  the  Debt/GSDP  targets  prescribed  by  FC-XIII except Kerala, Himachal Pradesh, J&K and Nagaland, which have marginally exceeded the prescribed  Debt/GSDP  targets,  as  shown  in  the Annex .  However,  the  combined  Debt/ GSDP ratio for all the State has been estimated to be 24.9% in 2014-15 as against the FCXIII Debt/GSDP target of 30.3%.

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## Annex referred to in reply to part (a) to (c) & (e) of Lok Sabha Unstarred Question No. 3402 for answer on 18.12.2015

| Debt to GSDP ratio of States   | Debt to GSDP ratio of States   | Debt to GSDP ratio of States   | Debt to GSDP ratio of States   | Debt to GSDP ratio of States   | Debt to GSDP ratio of States                     | Debt to GSDP ratio of States                     | Debt to GSDP ratio of States                     |
|--------------------------------|--------------------------------|--------------------------------|--------------------------------|--------------------------------|--------------------------------------------------|--------------------------------------------------|--------------------------------------------------|
| S. No.                         | State                          | FC-XIII Target                 | FC-XIII Target                 | FC-XIII Target                 | As per State Finance Accounts/ Revised Estimates | As per State Finance Accounts/ Revised Estimates | As per State Finance Accounts/ Revised Estimates |
|                                |                                | 2012-13                        | 2013-14                        | 2014-15                        | 2012-13 FA                                       | 2013-14 FA                                       | 2014-15 RE                                       |
| 1                              | Andhra Pradesh*                | 28.9                           | 28.2                           | 27.6                           | 22.8                                             | 21.4                                             | 20.2                                             |
| 2                              | Arunachal Pradesh              | 55.2                           | 52.5                           | 50.1                           | 43.6                                             | 40.1                                             | NA                                               |
| 3                              | Assam                          | 28.4                           | 28.4                           | 28.5                           | 25.4                                             | 24.0                                             | 21.6                                             |
| 4                              | Bihar                          | 44.4                           | 43.0                           | 41.6                           | 29.0                                             | 27.7                                             | 25.6                                             |
| 5                              | Chhattisgarh                   | 23.0                           | 23.5                           | 23.9                           | 11.7                                             | 14.5                                             | 15.1                                             |
| 6                              | Goa                            | 30.8                           | 29.9                           | 29.1                           | 24.8                                             | 26.3                                             | NA                                               |
| 7                              | Gujarat                        | 28.1                           | 27.6                           | 27.1                           | 24.8                                             | 23.6                                             | 22.2                                             |
| 8                              | Haryana                        | 22.7                           | 22.8                           | 22.9                           | 19.2                                             | 18.8                                             | 19.6                                             |
| 9                              | Himachal Pradesh               | 44.4                           | 42.1                           | 40.1                           | 45.2                                             | 41.5                                             | 40.2                                             |
| 10                             | Jammu & Kashmir                | 53.6                           | 51.6                           | 49.3                           | 68.0                                             | 56.5                                             | 51.3                                             |
| 11                             | Jharkhand                      | 27.8                           | 27.3                           | 26.9                           | 25.0                                             | 22.0                                             | 20.0                                             |
| 12                             | Karnataka                      | 25.7                           | 25.4                           | 25.2                           | 22.4                                             | 22.5                                             | 22.6                                             |
| 13                             | Kerala                         | 31.7                           | 30.7                           | 29.8                           | 30.0                                             | 30.0                                             | 30.7                                             |
| 14                             | Madhya Pradesh                 | 36.8                           | 36.0                           | 35.3                           | 26.8                                             | 24.7                                             | 23.4                                             |
| 15                             | Maharashtra                    | 25.8                           | 25.5                           | 25.3                           | 20.0                                             | 18.0                                             | NA                                               |
| 16                             | Manipur                        | 60.1                           | 57.0                           | 54.3                           | 60.0                                             | 53.8                                             | 48.4                                             |
| 17                             | Meghalaya                      | 32.3                           | 32.0                           | 31.7                           | 27.3                                             | 31.7                                             | 31.0                                             |
| 18                             | Mizoram                        | 82.9                           | 79.2                           | 74.8                           | 69.5                                             | 65.9                                             | 59.1                                             |
| 19                             | Nagaland                       | 54.9                           | 53.5                           | 52.3                           | 56.9                                             | 58.4                                             | 52.7                                             |
| 20                             | Odisha                         | 30.2                           | 29.8                           | 29.5                           | 18.4                                             | 15.6                                             | 16.8                                             |
| 21                             | Punjab                         | 41.0                           | 39.8                           | 38.7                           | 33.7                                             | 33.1                                             | 30.8                                             |
| 22                             | Rajasthan                      | 38.3                           | 37.3                           | 36.5                           | 31.3                                             | 28.4                                             | 25.8                                             |
| 23                             | Sikkim                         | 62.1                           | 58.8                           | 55.9                           | 39.5                                             | 29.5                                             | 27.4                                             |
| 24                             | Tamil Nadu                     | 24.8                           | 25.0                           | 25.2                           | 21.3                                             | 20.6                                             | 20.4                                             |
| 25                             | Telangana                      |                                |                                |                                |                                                  |                                                  | 23.6                                             |
| 26                             | Tripura                        | 44.6                           | 44.2                           | 43.8                           | 37.8                                             | 37.5                                             | 33.4                                             |
| 27                             | Uttar Pradesh                  | 45.1                           | 43.4                           | 41.9                           | 35.6                                             | 32.9                                             | 27.8                                             |
| 28                             | Uttarakhand                    | 40.0                           | 38.5                           | 37.2                           | 26.0                                             | 23.8                                             | 23.7                                             |
| 29                             | West Bengal                    | 37.7                           | 35.9                           | 34.3                           | 38.3                                             | 35.9                                             | 33.5                                             |