Debt doesn’t seem to be the flavour of the season for State-level corporations — especially after a series of defaults by them in the last one year.A major decline in debt mobilisation came courtesy the State-level undertakings (SLUs) which recorded a 32 per cent fall to Rs 3,153 crore in the nine-month period ended December 2002 compared to Rs 4,650 crore in the corresponding period of the previous year. With several corporations in Maharashtra and other States defaulting on repayment commitments, investors were also not enthused to put money in bonds floated by them.Overall, a 14 per cent decline in mobilisation of debt (bonds) through private placement was witnessed with Rs 28,146 crore being mobilised by 141 institutions and corporates as compared to Rs 32,751 crore by 167 issuers in the corresponding period of the previous fiscal, says Prithvi Haldea of Prime Database.The directives of RBI to banks to become more diligent with investments in debt private placements, especially those made by State corporations, as well as the rising incidence of defaults on interest payments by SLUs, was the major reason for the decline. Most of the funds raised by SLUs continued to be for the infrastructure sector. Meanwhile, State governments which are already in a financial mess are set to find the going tough with massive devolvements of Rs 5,400 crore likely to fall on them in the current year. Rating agency Crisil estimates that States may end up shelling out Rs 44,200 crore in the next five years as many corporations, which floated bonds, are likely to default on their repayment obligations, thus making it mandatory on the part of States to step in and pay up under the guarantee terms.
