Tamil Nadu’s actual outstanding debt stands at ₹13.18 lakh crore, including the combined debt of public sector undertakings (PSUs), says a White Paper released by Finance Minister N. Marie Wilson on Tuesday (June 16, 2026).

He released the White Paper on the Fiscal Management of Tamil Nadu-An Examination of Public Finances 2021-22 to 2025-26 at the Secretariat. Chief Minister C. Joseph Vijay said after assuming office last month that his government would release a White Paper on the State’s finances.

According to the report, the headline debt figure of ₹10 lakh crore in 2025-26 captures only the State’s direct borrowings through market loans, institutional debt, and public account liabilities. It does not capture the borrowings of the PSUs, statutory boards, and special purpose vehicles that the State guarantees or implicitly supports.

The largest source of debt

The power sector remains the single largest source of debt among the PSUs, accounting for ₹2.47 lakh crore. Among its entities, the Tamil Nadu Power Distribution Corporation (TNPDCL) (the erstwhile  TANGEDCO/TNEB) has an outstanding debt of ₹1.07 lakh crore, while the Tamil Nadu Power Generation Corporation (TNPGCL) has a debt of ₹1.03 lakh crore. The Tamil Nadu Transmission Corporation (TANTRANSCO) has a debt of ₹30,965 crore, and the Tamil Nadu Green Energy Corporation has a debt of ₹5,672 crore.

The outstanding debt of eight government transport undertakings stands at ₹43,865 crore, while that of the Tamil Nadu Civil Supplies Corporation is ₹27,181 crore, the report said. Together the outstanding debt of these PSUs stands at 3.18 lakh crore.

The report also compared Tamil Nadu’s key fiscal indicators with those of the peer States such as Karnataka, Maharashtra, and Gujarat, which broadly share comparable per capita income levels, diversified industrial structures, significant urban populations, and historically similar fiscal starting positions.

The report said the State’s outstanding debt had almost doubled in the five years since April 1, 2021, rising from ₹5.13 lakh crore to nearly ₹10  lakh crore as of March 31, 2026. “The debt-to-GSDP ratio has remained elevated throughout the post-COVID period and stood at 28.3% in 2025-26, with no material fiscal consolidation from the COVID-era peak that the other peer States have achieved,” it said.

Interest bill exceeds capital expenditure

Interest payments consume approximately 23% of the total revenue receipts and nearly 35% of the State’s Own Tax Revenue (SOTR). At ₹67,050 crore in 2025-26, the annual interest bill exceeds the annual capital expenditure by approximately one-third, the report said.

The report pointed out that the revenue deficit had become structural. The 2025-26 Pre-Actuals projects a revenue deficit of ₹78,324 crore, equivalent to 2.2% of the GSDP, the highest recorded in absolute terms and exceeding even the COVID year level. The State is borrowing to fund current consumption rather than investment, the report said.

The SOTR-to-GSDP ratio has declined from 5.93% in 2021-22 to 5.45% in 2025-26, the lowest level in the past two decades and the steepest decline among the peer States during the post-COVID period.

Committed expenditure, including salaries, pensions, and interest payments, is among the highest, compared with the peer States. It rose from ₹1.25 lakh crore to ₹1.89 lakh crore, increasing its share of revenue receipts from about 60% to 64%, well above the sub-50% levels maintained by the other peer States. This has eroded the fiscal space available for capital expenditure and investment. At 11.8%, the capital expenditure-to-total expenditure ratio is the lowest among the peer States, the report pointed out.

The Minister pointed out that the Tamil Nadu Fiscal Responsibility Act, 2003, had been amended eight times so far to defer achieving a zero revenue deficit and limiting the fiscal deficit to 3%.

Growing elderly population

The report also highlighted the growing elderly population, which is projected to account for 18.2% of the State’s total population by 2031. According to the Union Ministry of Health and Family Welfare’s population projections, Tamil Nadu will have the highest proportion of elderly people among the major States by 2031.

It also highlighted the declining working-age population, the rising dependency ratio, and their implications, including a shrinking tax base and rising social security obligations. The report noted that while the peer States either improved or stabilised their fiscal positions during the analysis period, Tamil Nadu’s fiscal position worsened on every major indicator, and the year ahead offered little immediate relief.

The Minister said correcting this situation would require sustained efforts in revenue mobilisation, expenditure management, PSU reforms, and debt management extending beyond a single Budget cycle.

Systemic leakages

Mr. Wilson said the new government would focus on fixing revenue losses due to systemic leakages and administrative deterioration in commercial taxes, stamps and registration, excise, and mining. He said that by plugging leakages in these areas, the government could mobilise nearly ₹20,000 crore in additional revenue this financial year. He said the government would initiate structural reforms in the PSUs to improve their efficiency.