Financial crunch may impact welfare sector

Telangana government is facing a severe financial crunch and this situation may persist for the next four financial years. The resource gap is likely to impact adversely the state’s grandiose plans to implement Mission Kakatiya, State Water Grid, mega irrigation projects on rivers Krishna and Godavari, new power projects across the coal belt, 2BHK housing scheme for poor as well as education and medicare sectors and the welfare of scheduled castes, scheduled tribes, backward classes, minorities and women.
The newborn state witnessed financial crisis during the very first year (2014-15), resulting a huge shortfall in the budgeted expenditure on account of sharp reduction in actual resource transfers from the central government, lower realisation of targeted state revenues and the enormous increase in the revenue expenditure mainly on account of salaries and pensions. The scenario is poised to take a turn for the worse from the current financial year 2015-16, which coincides with the five-year time-frame of the 14th Finance Commission’s recommendations.
It looks as if the state has erred in making its projections before the 14th Finance Commission, especially with regard to own tax revenues (OTR) and own non-tax revenue (ONTR) and interest payments and pensions. For the 5-year period (2015-20), Telangana government projected own tax receipts of 3,91,256 crore and revenue expenditure on interest payments and pensions amounting to Rs 3,69,284 crore, with pre-devolution revenue surplus of Rs 21,972 crore. The Gross State Domestic Product (GSDP) during the same period would aggregate to Rs 33,77,744 crore.
On the other hand, residuary Andhra Pradesh projected own revenue receipts of Rs 3,94,076 crore and revenue expenditure on interest payments and pensions amounting to Rs 5,86,874 crore, resulting in anticipated pre-devolution revenue deficit of Rs 1,92,798 crore. Based on these estimates, the 14th FC included AP among the 11 revenue-deficit states for whom grants-in-aid to cover revenue deficit has been suggested. AP stands to get grants-in-aid of Rs 22,113 crore on this account. However, no grants-in-aid for Telangana has been suggested since the state has claimed to be revenue-surplus during all the five years (2015-16 to 2019-20).
Furthermore, the 14th FC has reduced Telangana State’s share of central tax divisible pool (CTDP) from 2.91 per cent to 2.48 per cent while raising residuary AP’s share to 4.30 per cent. Thus, Telangana’s share in the CTDP works out to Rs 97,915 crore as against Rs 1,69,969 crore recommended for AP. Similarly, Telangana gets Rs 8,764 crore towards basic and performance grants for rural and urban local bodies as against AP’s share of Rs 12,290 crore.
The central share of State Disaster Response Fund is only Rs 1,363 crore for Telangana as against Rs 2,186 crore for AP. Special grants for judiciary work out to Rs 209 crore for Telangana and Rs 261 crore for AP. While Telangana sought Rs 20,951 crore towards grants-in-aid for 2015-20, AP made a demand for a whopping Rs 1,41,467 crore. In the current year (2015-16), Telangana gets Rs 12,823 crore towards its share of Union taxes and duties as against AP’s share of Rs 22,638 crore. Moreover, the total transfers from the central government are going to be far less for Telangana compared to AP. Due to higher devolution of taxes to the states, the normal central assistance (NCA), special plan assistance (SPA), special central assistance (SCA) and additional central assistance (ACA) are included in the 14th FC award itself.
As a result, eight central schemes have been scrapped and other centrally sponsored schemes (CSS) are implemented with a changed pattern of sharing of resources with the state required to contribute higher share. The central government shares only capital expenditure in respect of 24 central schemes and the remaining expenditure has to be borne by the state. Consequently, the burden on the state for implementing all the central schemes is much higher now. Telangana government has no option but to downsize the modified central schemes and to find its own resources to implement the central schemes like backward regions grant fund and model school scheme etc which are scrapped now.
Mission Kakatiya, State Water Grid, 2BHK Housing, new irrigation and power projects and urban development projects for Hyderabad and other cities require massive outlays running into tens of thousands of crores annually over the five-year period (2015-20). However, the salary and pension bill of the government employees, numbering 5,54,168 at present, has mounted enormously due to 43 per cent hike on account of 10th Pay Revision Commission recommendations. This would mean a drastic cut on the promised outlays for welfare schemes for SCs, STs, BCs, minorities and women year after year. Like Narendra Modi’s ‘Achhe Din’, Bangaru Telangana may also remain a distant dream!
(The writer is a journalist and an MLC)