Debt-ridden Maharashtra eyes foreign loans at 4%

Reeling under debt of over Rs3 lakh crore, the Maharashtra government is contemplating taking loans at 4 per cent interest from foreign nations for development purposes, state finance minister Sudhir Mungantiwar said on Tuesday.

The state's total debt increased to Rs3.18 lakh crore in March 2015, from Rs1.24 lakh crore in March 2005. The amoumt of salary that the state government pays to its employees has risen to Rs65,000 crore in 2015 from Rs19,000 crore in 2005.

The debt burden has made Maharashtra one of the highest interest paying states in the country, with interest totalling around Rs27,000 crore annually in 2015 from Rs10,000 crore paid in 2005.

"We are looking for loans at interest rates as low as 4 per cent. Countries like China, Japan and Singapore are ready to provide us with low interest loans, but we want to repay them in our currency and not theirs," Mungantiwar said.

He said the state government has had discussions with the Singapore government over the issue, but a final decision is yet to be taken.

"If we manage to get loans at 4 per cent interest per annum, we will be able to save around Rs30,000-35,000 crore over the next four years that can be utilised for infrastructure projects," he said.

The government is in the process of restructuring Rs35,000 crore loan of state undertakings like MahaVitaran, Maharashtra State Power Generation Company (MahaGenco) and Maharashtra State Electricity Transmission Company (MahaTransco), the minister said.

"The previous government had taken loans totalling to around Rs.45,000 crore at an interest rate of 12 per cent. The Life Insurance Corp of India is ready to give us Rs35,000 crore at an interest rate of 8 per cent. Even if we agree to this, we will save 4 per cent on interest that will amount to Rs1,800 crore a year," he said.

He cautioned that the government needs to increase revenue and cut down on expenses or else the financial condition will worsen.

"The government has already spent Rs4,500 crore for drought relief areas, Rs9,500 crore to distribute subsidised rate food (wheat and rice) in 14 districts of Vidarbha and Marathwada and other schemes. Against the expenditure, we will earn around Rs1,600 crore as taxes on liquor, cigarettes, gold and diamond ornaments," Mungantiwar said.