Interest mounts, TN eyes debt swapping
Taking note of the estimated outstanding liability of more than Rs 8.33 lakh crore, the government has been in talks with financing institutions to bring down the interest payment.
CHENNAI: Heaving under the heavy burden of debt, the State government is exploring options to swap them to put breaks on the growth of interest, which is eating into a major portion of the State revenue.
Taking note of the estimated outstanding liability of more than Rs 8.33 lakh crore, the government has been in talks with financing institutions to bring down the interest payment. Sources said the focus is particularly on the high-cost loans of Tamil Nadu Generation and Distribution Corporation (Tangedco). The calculation is rather simple, but disconcerting: The interest outgo is estimated to account for Rs 63,722 crore in 2024-25. That is, as much as 14.1 per cent of the estimated state revenue expenditure of Rs 3,48,289 crore for the fiscal year is spent on serving loans.
This is only set to rise, to Rs 70,876 crore in 2025-26 and Rs 76,598 crore in the year 2026-27. As Finance Minister Thangam Thennarasu said in his budget speech, “The interest payments for the public debt raised in the previous years are a committed liability of the government and continue to increase every year.” Interest payment was the third higher chunk of revenue expenditure after the subsidies and grants (Rs 1.46 lakh crore), and pension and retirement benefits (Rs 84,932 crore).
Sensing the need for an effective intervention to bring it down, the government is envisaging transferring the high-cost loans to financial institutions that could absorb them loans for lesser interest. It would reduce the stress on the exchequer and help the government divert the funds towards capital investments and welfare schemes, said officials.
“We are looking at the options like holding talks with scheduled financial institutions to transfer the loans for lesser interest rates,” a senior official told DT Next, adding that the focus was mainly on discomm loans. In the post-budget meeting, Finance Secretary T Udhayachandran pointed out that transfer of loans that have high interest rates was one of the government’s key focus.
“We are burning the midnight oil and looking at multiple options (to tackle the debt and interest payments). Debt swapping is a critical one. We have high-cost Tangedco loans... We are looking at the financial institutions to swap debts,” he said.
