Ajit's dept red-flagged financial liability before Rs 20,787-cr approval for Shaktipeeth project

Indian Express

5 days ago

The Rs 20,787 crore loan guarantee extended by the Maharashtra cabinet for the land acquisition of the proposed Nagpur-Goa Shaktipeeth Expressway 'will put a financial burden on the state and the off-budget loan will impact the state's capability to seek loan', said a note submitted by the Finance department on Tuesday, ahead of the cabinet approval for land acquisition for one of the largest road infrastructure projects in the country.
Raising questions over borrowing at a higher rate for the project, the note also pointed to the financial status of the state and also advised the government to rethink the state government's Build Operate and Transfer (BOT) policy for mega projects and prioritise projects by appropriate use of available financial resources.
The Finance department in its note submitted to the state cabinet said that as per the budget estimate for 2025-26, the state government will be burdened with a loan of Rs 9.32 lakh crore by March 2026.
'In the financial year 2025-26, the state will pay Rs 1.54 lakh crore in repayment of loan only. By the end 2024-25, loans worth Rs 24,190 crore raised by the Maharashtra State Road Development Corporation (MSRDC) are being guaranteed by the state government and the budget provision has been made for the repayment of principal and interest amount. The mentioned loan (for Shaktipeeth) is not part of it. Around 22% of the government's money meant to pay for obligations is currently being used to repay loan and interest,' said the Finance department note.
The Maharashtra cabinet on Tuesday cleared the decision to give administrative approval of Rs 20,787 crore (Rs 12,000 crore principal amount and Rs 8,787 crore interest) for the land acquisition of 802-kilometre Shaktipeeth expressway. As per the initial estimate, the project is likely to cost Rs 86,358.90 crore to the state exchequer and may turn out to be one of the costliest road projects in the country.
The Finance and Planning department headed by deputy Chief Minister Ajit Pawar further raised several critical points regarding the state's economy as well as the 'financial structure' of the MSRDC, headed by deputy CM Eknath Shinde.
The Finance department has also questioned the 8.85 per cent interest rate for the loan that it said is being taken from The Housing and Urban Development Corporation Limited especially when the state government has been raising funds through issuance of bonds, from open market at 6.75 per cent in April 2025.
'The difference is 2.1 percentage points and it is expected from the government to repay the off-budget loan. It is not financially viable to repay a loan at 8.85 per cent at a time when the state was raising loan through bonds at 6.75 per cent,' the note said.
'While preparing the future budget estimates for 16th Finance Commission, it has been found that capital expenditure will grow at a compounded annual growth rate (CAGR) of over 10 per cent, Fiscal deficit rise from 3.13% to 4.08%, which is more than 3% limit of FRBM and loan to GSDP ratio will reach 25%,' said the note.
It also warned that in case of increase of capital expenditure by more than 9 per cent for mega infra projects, the revenue expenditure will have to be reduced for which committed expenditure will need to be cut down and rationalisation of schemes need to be undertaken.
The department also pointed out that the project funding is likely to put pressure on the state budget as the MSRDC has demanded funds from the budgeted amount for debt servicing costs of existing loans and for construction of ongoing projects such as Pune Ring Road, Nanded-Jalna Highway. 'The loan for the proposed project will increase the demand for funds from the budgeted amount and the state faces a financial burden to repay the principal and interest amount of the loan,' said the note.