Maharashtra: Debt mounting, off-budget borrowings to fund infrastructure projects

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While the past approach has been for the government to borrow the money and provide funds to nodal agencies, the budget documents state that the plan now is to borrow funds through the Mumbai Metropolitan Region Development Authority or special purpose vehicles.

Union Finance Minister Arun Jaitley had spelt out a similar route for infrastructure projects taken up by the ministries of railways and road transport in the Centre’s Budget, an approach that invited criticism from P Chidambaram.

The state’s debt burden has spiralled 124 percent in the past eight years — from Rs 1.42 lakh crore in 2007-08 to Rs 3.20 lakh crore in 15-16. The state’s budget for 2016-17, which was presented on Friday, has forecast that the debt stock will further rise to Rs 3.56 lakh crore in 16-17.

While the budget document concedes that off-budget borrowings for infrastructure projects would “result in a substantial increase in the contingent liabilities of the state”, it has defended the move. “It is hoped that the projects will be executed without time and cost overruns and will yield adequate revenue enabling the concerned SPV to service debt without creating financial liability for the government due to cost over-runs or inadequate revenue,” the budget document further states.

The government has also said all efforts will be made to ensure that such borrowings are under the non-recourse financing model, which can be secured through collateral from the borrower itself. “In cases where this is not possible, efforts will be made for accurate financial projections and prevention of project overruns,” the document says. It has made allocation of Rs 28,220 crore for debt-servicing in 2016-17.