Finance dept worried about rising liabilities, wants govt to reduce committed expenditure

By Admin

27 Jun, 2025

In light of mounting financial obligations, the Maharashtra Finance Department has raised red flags about the state’s rising liabilities and stressed the urgent need to curb revenue expenditure and streamline developmental schemes. With debt repayment responsibilities steadily climbing, the department has advised a major fiscal rethink to ensure sustainable economic growth without jeopardizing financial stability.

Mounting Debt and Fiscal Pressures

The gravity of the situation is underlined by the staggering ₹9.32 lakh crore debt the state is projected to carry by March 2026. Out of this, ₹1.54 lakh crore is earmarked just for debt servicing in the financial year 2025-26 ₹89,798 crore for principal repayment and ₹64,659 crore for interest. Alarmingly, the government is already spending 22% of its total generated revenue to meet its loan obligations.

In addition, the state has guaranteed ₹51.44 lakh crore against contingent liabilities till 2024-25. These figures represent a significant strain on Maharashtra’s fiscal capacity and call for decisive measures to prevent long-term fiscal slippage.

Cut Revenue Spending, Prioritize Infrastructure

In response to these fiscal concerns, the finance department has asked the Public Works Department (PWD) to focus its efforts on prioritizing infrastructure projects rather than dispersing financial resources too thinly across numerous schemes. The department emphasized that projects with higher economic returns should be pushed ahead while non-essential schemes are deferred or discontinued.

The recent approval of ₹20,878 crore for land acquisition for the 802-km Nagpur-Goa Shaktipeeth Expressway taken entirely as a loan from HUDCO has reignited this debate. The finance department expressed discomfort over the terms of the loan, which carries an interest rate of 8.85%, 2.1% higher than the prevailing market rate, and questioned why land acquisition was proceeding without all necessary environmental clearances.

Emphasis on PPP, BOT, and Alternative Financing

To lighten the burden on public finances, the department strongly recommends adopting the Build-Operate-Transfer (BOT) model for mega infrastructure projects. This model allows private entities to bear the upfront cost and operational responsibility, thereby shielding the public exchequer from immediate capital stress.

Furthermore, it urged the PWD to explore funding options outside the traditional budget framework such as Public-Private Partnerships (PPP), asset monetization, and innovative financial tools like Infrastructure Investment Trusts (InvITs). These measures are intended to unlock new revenue streams and reduce dependence on state borrowing.

Worries Over Fiscal Indicators

In budget preparations for the 16th Finance Commission, the finance department estimated that capital expenditure would rise at a CAGR of over 10%, while the fiscal deficit could surpass the 3% FRBM ceiling, reaching between 3.13% and 4.08%. In parallel, the debt-to-GSDP ratio could climb to 25% in the coming four to five years, with interest payments by the Account Aggregator projected to grow by nearly 14%.

These estimates further fuel the urgency to rationalize state spending and restructure large-scale projects for long-term fiscal health.

Chief Minister’s Defense

Addressing speculation about internal disagreements, Chief Minister Devendra Fadnavis clarified that the finance department’s observations were not objections but part of its responsibility to ensure prudent financial planning. He defended the government’s strategy of leveraging loans to fund infrastructure, calling it an investment in economic expansion. “Every new highway opened boosts economic capacity and creates more room for repayment,” Fadnavis emphasized. “Infrastructure loans are globally recognized as growth-positive.”

Conclusion

As Maharashtra balances development needs with financial prudence, the finance department’s appeal for reduced revenue expenditure and better financial planning serves as a timely wake-up call. While infrastructure remains key to unlocking future growth, a thoughtful and transparent approach to project execution and financing will be vital in ensuring the state’s economic resilience.