Discom losses to have adverse impact on state government finances: RBI

The Reserve Bank has warned about the risks to debt sustainability of state governments that could arise from losses of Distribution Companies -DISCOMs and from potential invocation of guarantees. Outstanding debt of states have risen over the last five years to 25 per cent of GDP, posing medium term challenges to its sustainability, the central bank in its latest report on state government finances.

Revenue generation holds the key to prudent debt management – improving tax buoyancy by capitalising on technology enabled efficiency gains under the GST architecture, and raising user charges, wherever possible, should bolster revenue raising capacity.