Pre-Poll Sops, CAG Concerns: How Robust Are Telangana's Finances?

Telangana Chief Minister K Chandrasekhar Rao appears to be in a more than generous mood. From announcing a timeline for a complete crop loan waiver promised in 2018, to merger of the state-run TSRTC with the government, regularisation of contract employees who lost jobs, big hike promises to employees and schemes for the socially vulnerable sections, there is something big for every electorally significant segment this pre-election season.

After an almost four-year moratorium, the Bharat Rashtra Samithi government in Telangana has restarted its loan waiver for farmers. Elections in Telangana are due before the year-end, and farm loan waiver was a promise made before the 2018 assembly elections.

Starting Aug. 3, the state government has said Rs 19,000 crore will be disbursed and the process will be completed by mid-September in a phased manner.

Opposition parties have criticised the move, calling KCR an ​"opportunist" for allegedly remembering farmers only on the eve of elections. They had been targeting the state government for non-implementation of the loan waiver even during the recent floods and rains that hit standing crops.

Chief Minister KCR blamed the delay on the central government. He said there was economic slowdown due to the central government's demonetisation move, which incidentally the then TRS (now BRS) government had supported. He also said the central government had been vindictive in not allowing the state to raise loans citing the Fiscal Responsibility and Budget Management rules. The central government had been indifferent towards Telangana in the release of funds and that is why there was a delay in implementation of the farm loan waiver scheme, KCR said.

Already 5.6 lakh people with loans of up to Rs 35,000 have benefited, said state Agriculture Minister Niranjan Reddy. Earlier, under the crop loan waiver scheme of 2014, Rs 16,144 crore were waived for 35,31,913 eligible farmers in the state, he said.

The state is already implementing Rythu Bandhu (direct investment benefit transfer) and Rythu Bima (farmer insurance scheme), other than free electricity and irrigation. The chief minister has also announced a programme of starting food processing units. "The idea is to empower farmers and financially uplift them,'' KCR said.

All this, of course, comes at a cost. Telangana had a revenue surplus up to FY19. However, it faced a revenue deficit of Rs 9,335 crore in FY22, according to a report by the Comptroller and Auditor General. The fiscal deficit, at Rs 46,639 crore, constituted nearly 27% of the total receipts of Rs 1,74,155 crore.

Telangana's total liabilities, including public debt, stood at Rs 3,21,611 crore, according to the report which was tabled on Sunday. The public accounts watchdog expressed concern over the state's fiscal health, highlighting that the government had utilised borrowings for repayment of public debt.

Other Concerns

• Public debt, at 27.4% of GSDP, was above the prescribed limit of 25% of GSDP.

• Fiscal deficit (of Rs 46,639 crore) was at 4.06% of GSDP for FY22, when it is not supposed to exceed 3% during a financial year.

The CAG report blamed this on huge loans from financial institutions to execute many projects and for welfare schemes, and dip in revenue due to the pandemic. Capital expenditure during FY22 at Rs 28,874 crore (2.51% of GSDP) had not kept pace with the steady growth of GSDP, the CAG said.

Around 50% of the revenue receipts, or Rs 1,27,469 crore, was spent on committed expenditure like salaries (Rs 30,375 crore), on payment of interest (Rs 19,161 crore) and pensions (Rs 14,025 crore).

These figures did not deter the chief minister from announcing that the employees would get an ​"unbelievable" hike under the next pay revision committee. KCR said in the last nine years of BRS rule and Telangana formation, the salaries of government employees had risen by 70% and they were the highest paid in the country, even more than central government employees.

Just before the three-day assembly session began on Aug. 3, the chief minister announced that the state-run road transport corporation, with over 43,000 employees, would be merged with the government. This was a long-pending demand of the unions that went on a 52-day strike in 2019, which crippled public transport services in the state. But the CM had then categorically ruled it out, and said dozens of other corporations would make similar demands and it was impossible to fulfill.

Now, the CM has won over the 43,000 employees and their families, with his unexpected announcement, that will cost the government an additional Rs 3,000 crore.

What is worrying is that, according to data shared by the Union Finance Minister in Parliament, Telangana's debt has gone up from Rs 1.9 lakh crore in 2019 to 3.66 lakh crore in 2023.