Tamil Nadu government plans to borrow ₹24,000 crore in the second quarter of fiscal 2024-2025, as per the Indicative Calendar of Market borrowings by State governments/Union Territories, released by the Reserve Bank of India (RBI).
To bridge the fiscal deficit (the difference between total revenue receipts and total expenditure), the State government borrows from the market through the issue of bonds known as State Development Loans (SDLs).
The Centre fixes the borrowing ceiling for the State governments. For 2024-25, the net borrowing ceiling of the States is fixed at 3% of the Gross State Domestic Product (GSDP). An additional borrowing 0.5% is allowed on fulfilment of Power Sector reforms.
Tamil Nadu government plans to borrow a total amount of ₹1,55,584.48 crore during 2024-25 and make repayment of ₹49,638.82 crore, as per the State Budget. The outstanding debt as on March 31, 2025 is expected to be ₹8,33,361.80 crore, constituting 26.41% of GSDP in 2024-25, which is within the norms prescribed by the Finance Commission.
In 2023-24, Tamil Nadu’s gross market borrowing stood at ₹1,13,001 crore, as per data from the RBI and was the top borrowing State for the fourth successive fiscal.
In the first quarter of 2024-25, the Tamil Nadu government borrowed ₹20,000 crore.
At a consultative meeting for the upcoming Union Budget, Tamil Nadu Finance Minister Thangam Thenarasu pointed out that the GSDP calculated for Tamil Nadu for the purpose of fixing the borrowing ceiling is repeatedly being underestimated,resulting in a loss of borrowing space of around ₹8,500 crore in the last four years and called for suitable adjustments to made in the subsequent year.
He also pointed out that the Union government has mandated States to take over the losses of its power distribution companies in a prescribed percentage every year, as one of the conditions for availing the additional borrowing space of 0.5% of GSDP.
This condition has created a situation, where the Tamil Nadu government will receive close to ₹30,000 crore of additional borrowing space till 2024-25, but will have to pay about ₹52,000 crore to its distribution company (Tangedco), Mr. Thenarasu said.
As a result Tamil Nadu government has to incur additional expenditure of ₹22,000 crore and it has a significant drain on the resources of States and its ability to fund its development priorities, he added.
Mr. Thenarasu requested the Union Government to exclude the loans taken by State Governments for taking over losses of discoms from the calculation of Fiscal Deficit and Borrowing Ceilings of the State, similar to the UDAY scheme of 2015.
