Orissa cannot borrow from the market for the second year in a row

Receiving higher royalties from the mining sector could allow Odisha to avoid market borrowing through state development loans (SDLs) for the second year in a row in FY23, a senior state government official told FE.

Even as many states are struggling to raise funds at high interest rates, the financially surplus Odisha has repaid a net loan of Rs 19,102 crore on FY22.

Although it had set a target of borrowing Rs 20,465 crore with an SDL issue of Rs 18,000 crore, it did not raise any funds from the market during the year.

As a result of rising global commodity prices, especially iron ore, the mining-rich state has received a premium of around Rs 48,000 crore for mineral extraction, which is expected to generate revenue of Rs 50,000 crore, against a budget target of around Rs 15,000 crore. This year this route.

Thus, it has factored a market share of about Rs 2,000 crore in FY23 between the overall debt and liabilities of Rs 21,000 crore in the budget. “We may not even raise these funds from the market this year,” the official said, adding that the government was planning to reduce the cash balance from Odisha Mineral Bearing Areas Development Corporation (OMBADC) to Rs 10,000 crore and soft loans of about Rs 12,000 crore. ), An initiative of the state government.

“Our total spending grew 20% year-over-year in FY22 while revenue grew 43% in FY22,” the official said. The state has not been able to accelerate spending due to the loss of three months due to the prevailing model code of conduct for the selection of urban and local bodies in the state. Nevertheless, it has achieved a strong capitalization of Rs 23,211 crore or 90% of the FY22 target. Total expenditure was also 92% of the full year target of Rs 1.45 trillion. As the revenue position gets stronger, the state budget capex will almost double to Rs 42,000 crore in FY23 while total expenditure is projected to increase by almost 50% to Rs 2 trillion in FY23.

The Government of Orissa receives a premium of one per cent of the price of iron ore fixed by the Bureau of Mines of India every month. Many companies won mining auctions with a premium of more than 100%, meaning that a company would have to pay 100% of the monthly price of the IBM-set price of iron ore to the state government as the ore remittance premium. Annually, Orissa collects 75-80% of mining revenue from iron ore and the balance from ore like coal.

Any sharp rise in global iron ore prices could hurt Orissa’s revenue. Global iron ore prices have recently fallen by about 10% on fears that Chinese demand will decline due to an increase in covid cases.

Icra estimates that the net SDL issued by the states in FY23 is Rs 6 trillion, an increase of 21.9% from Rs 4.9 trillion in FY22.