Higher royalty receipts from the mining sector may allow Odisha to avoid market borrowings via state development loans (SDLs) for the second year in a row in FY23, a senior state government official told FE.
Even as many states struggle to raise funds at high interest rate, fiscally surplus Odisha made a net debt repayment of Rs 19,102 crore in FY22.
Though a target was set to borrow Rs 20,465 crore, including through SDL issuances of Rs 18,000 crore, it did not raise any funds from the market in the year.
While rise in the global commodity prices, especially of iron ore, fetched the mining-rich state about Rs 48,000 crore in premium for mineral extracts as against a budget target of about `15,000 crore, it is hopeful of garnering revenue of Rs 50,000 crore via this route this year.
So, it has factored in about Rs 2,000 crore market borrowing in FY23 in its overall debt and liabilities of Rs 21,000 crore in the budget. “Probably we will not raise even these funds from market this year,” the official said, adding that the government plans to draw down on Rs 10,000 crore cash balance and soft loans of about Rs 12,000 crore from Odisha Mineral Bearing Areas Development Corporation (OMBADC), a state government undertaking.
“Our total expenditure rose by 20% on year in FY22 while revenues increased by 43% in FY22,” the official said. The state could not accelerate spending due to three months lost on account of prevailing model code of conduct for urban and local bodies elections in the state. Yet, it achieved robust capex of Rs 23,211 crore or 90% of FY22 target. The total expenditure was also 92% of the full year target of Rs 1.45 trillion.With revenue position much stronger, the state budget capex will almost double on year to Rs 42,000 crore in FY23 while total expenditure is projected to grow nearly 50% to Rs 2 trillion in FY23.
Odisha government gets a premium, a percentage of the price of the iron ore set by the Indian Bureau of Mines each month. Many companies had won the mining auction with more than 100% premium, i.e, a company has to pay 100% of the monthly value of the IBM-set price of iron ore to the state government as premium on ore despatches. Annually, Odisha collects 75-80% of mining revenues from iron ore and the balance from ores such as coal.
Any sharp correction in iron-ore prices globally could hit Odisha revenues. Global iron ore prices have come down by about 10% recently on fears of lower Chinese demand due to rise in Covid cases.
Icra has estimated the net SDL issuance by states at Rs 6 trillion in FY23, an increase of 21.9% from Rs 4.9 trillion in FY22.