UP public debt set to rise with higher borrowings to fund mega projects

Higher borrowings by the Yogi Adityanath government to fund mega infrastructure projects are likely to push aggregate Uttar Pradesh public debt to about Rs 4.55 trillion in the current fiscal. 

This would be almost 3% higher than the estimates for the current year in 2018-19 UP Budget tabled in February 2018, which had pegged public debt at Rs 4.43 trillion. However, facing resources crunch, the state has now decided to fund the proposed Purvanchal Expressway through bank loan as against the earlier plan to finance it through budgetary allocation. 

Meanwhile, the state's total borrowings from financial institutions would also rise by over 85% from the estimated Rs 139 billion to Rs 259 billion. Besides, there are other mega projects underway in the state, including Lucknow Metro Rail, for which the government is also mandated to provide funds as per the equity share vis-à-vis the Centre. 

In 2017-18, public debt (revised budgetary estimates) was pegged at Rs 4.06 trillion. However, UP public debt, which stood at almost 40% during 2008-09, has been witnessing a gradual slide over the successive financial years. It fell within 30% for the first time in the last decade in 2013-14 during the previous regime of Akhilesh Yadav (2012-17), when it settled at 28.3% of the GSDP. During the current fiscal, it was pegged at 29.8%, although the Adityanath government would need meticulous budgeting to tame it below the mandated 30% with higher borrowings than earlier estimated. 

The Adityanath cabinet earlier this week had approved the proposal of seeking Rs 120 billion in bank loan to fund the mega infra project, estimated to cost nearly Rs 180 billion, including land cost. The government said the loan would allow it to invest its own resources in other public works, while also ensuring the flagship project is not impeded owing to funds crunch once civil works get underway, especially in run up to the crucial 2019 Lok Sahba election, when the dispensation would like to keep the electorate in good humour. 

According to UP additional chief secretary (information) Awanish Awasthi, in first phase, Rs 78 billion would be sourced as loan from bank at the rate of 8.30% interest for 15 years, repayable in 48 installments with 3 year moratorium. The government has proposed to repay the loan through the toll collection at the Expressway. 

The previous Yadav government had funded the Agra-Lucknow Expressway out of its own resources without taking recourse to bank loans to fund the Rs 150 billion project that links the state capital directly with the Taj City. 

Meanwhile, the bidding process of the proposed 340 km Purvanchal Expressway is still underway after the preliminary bidding was cancelled by the state claiming the cost was higher compared to the National Highways Authority of India (NHAI) standards.