Delhi sets up sinking fund to repay debt, other outstanding liabilities

The Delhi government has established a Consolidated Sinking Fund (CSF) to create a dedicated financial reserve for meeting its debt repayments and other outstanding liabilities, officials said on Friday. The fund will become operational from the current financial year and its corpus will be used exclusively for redeeming government liabilities. The move is intended to strengthen Delhi’s long-term debt management by setting aside resources in advance instead of depending solely on future revenues when repayments fall due. According to Delhi’s economic survey, the government’s outstanding debt stood at Rs 30,556.54 crore at the end of March 2025.

Corpus target set at 5%

The government intends to gradually build the CSF to a level equivalent to 5 per cent of its outstanding liabilities within five years, according to a recent Finance Department gazette notification. There will be no restriction on how many times the government can contribute to the fund during a financial year.

Money can be transferred from general revenues whenever considered appropriate. The government can also use other receipts, including proceeds from disinvestment, to augment the corpus. However, contributions to the fund cannot be financed through borrowings from the Reserve Bank of India. Both government contributions and the investment income generated by the CSF will remain outside Delhi’s general revenue pool.

RBI to manage fund

The RBI’s Central Accounts Section in Nagpur will administer the CSF.

Money accumulated in the fund will be invested in permitted instruments, including Central government securities, treasury bills and securities issued by other state governments.

The arrangement also gives Delhi access to the RBI’s short-term special drawing facility against investments held in the CSF. Such a facility can be used to manage temporary mismatches between government receipts and expenditure, subject to conditions prescribed by the central bank.

Debt remains low relative to economy

Delhi’s outstanding debt includes older obligations inherited from earlier financial arrangements.

The Rs 30,556.54-crore debt recorded in March 2025 included Rs 3,326.39 crore relating to a non-plan loan received from the Centre in 2013-14 for liabilities associated with the erstwhile Delhi Vidyut Board and Delhi Electricity Supply Undertaking.

Another Rs 447 crore was associated with the Chandrawal Water Treatment Plant.

Outstanding liabilities encompass both the government’s internal debt and liabilities maintained under its public accounts.

Debt around 2.3% of GSDP

Delhi’s outstanding debt during 2025-26 was estimated at around 2.30 per cent of the capital’s Gross State Domestic Product.

The ratio remains relatively modest compared with Delhi’s historical debt and liability levels, which have generally remained around 4-5 per cent of GSDP.

By establishing the CSF, the government is seeking to create a more systematic mechanism for servicing long-term obligations while maintaining a dedicated financial buffer for future repayments.