Date:11/03/2008 URL: http://www.thehindubusinessline.com/2008/03/11/stories/2008031150832100.htm

Back Karnataka’s interest costs poised to escalate

Our Bureau

Bangalore, March 10

Karnataka’s interest costs are estimated to escalate to Rs 5,278 crore for the next financial year in the vote-on-account presented by the Union Finance Minister, Mr P. Chidambaram.

The 12 per cent increase in interest costs over the revised estimates for the current year stem from the internal debt accretions, estimated by the State Government for the next financial year.

Internal debt is estimated at Rs 7432.18 crore. In the revised estimates, the borrowings for the current, internal debt accretion were just Rs 2550 crore.

But the accretions were mostly on account of borrowings from financial institutions such as Nabard, LIC and the General Insurance Corporation of India. Borrowings from the institutions estimated for the next financial year is Rs 1575 crore.

As a result, the debt stock of the state is estimated to increase to Rs 49583.13 crore as against Rs 43736.84 crore in the revised estimates for the current year.

However the debt is exclusive of off budget borrowings, mainly resources raised by special purpose companies’ borrowings of the past. Such borrowings were stopped about two years ago. However, the debt servicing burden on these borrowings is estimated at Rs 949.12 crore. For the current financial year, the debt servicing on the off budget borrowings was Rs 1157 crore.

Without the off budget debt servicing costs, the revenue surplus estimated is 1.19 per cent for the next financial year. After including the borrowings the consolidated revenue surplus, comes down 1.08 of the gross state domestic product.

The fiscal deficit estimated for the next financial year is about Rs 6926.30 crore or 2.84 per cent almost at the same level as the revised estimates figure. But this year the revenue surpluses and fiscal compliance has been achieved by revenue expenditure both plan and Non plan. Plan revenue expenditure was Rs 834.92 crore.

Among the sectors that have faced the axe included food, power and the transport sectors. The revised estimates indicate a reduction of close over Rs 540 crore in these sectors. Power took the largest cut where the subsidy was reduced by Rs 420 crore.