Debt of companies not to be considered for determining upper limit
BHOPAL: The Madhya Pradesh government, already groaning under the debt burden of more than Rs 1.50 lakh crore, can now breathe easy. With the Government of India amending the Fiscal Responsibility and Budget Management (FRBM) Act, the loans taken by the companies floated by the state government will no longer be counted towards the debt burden of the government.
These companies can now take loans directly from the Asian Development Bank (ADB) provided they are able to show how they propose to repay the loans. The companies will have to share their revenue model with ADM, which will take a decision after scrutinising it.
The biggest chunk of loans taken by the state government is meant for electricity companies. These companies are under the administrative control of the energy department and are engaged in generation, transmission and distribution of power. Besides the Smart City Corporation, Road Development Corporation and others also take big loans. These companies will now be able to take loans on their own based on the strength of their balance sheets. The government will only stand guarantee to their loans.
Till now, as per the provisions of the FRBM Act, any government institution could take loan from the ADB only through the state government and it was taken into account while determining the upper limit of the loan that the government can take. Now, the loans taken by the companies will not be added to the government’s debt and that will effectively push the upper limit higher. Now, only the loans taken by departments will be included in the government debt.
