Fund-starved AP govt staring at fiscal crisis 

Post-bifurcation issues, especially huge financial deficits, continue to haunt the State of Andhra Pradesh. The AP government presented the 2015-16 budget with a huge deficit for the second time in a row. It projected a revenue deficit of Rs 7,300 crore (Rs14,252 crore in 2014-15). With its fiscal deficit of Rs17,584 crore ( Rs.20,320 crore in 2014-15) at -2.59% of the budgeted expenditure, AP figures among the top 10 States/UTs with highest level of fiscal deficits.

The united State was a revenue surplus State, but post bifurcation, the residuary State has accumulated a huge revenue deficit with no reasonable resources to build infrastructure and pave way for economic growth.

Through there is an increase in revenue from commercial taxes, land registrations, transport and liquor sale notwithstanding, the AP government could not do much to bring down the deficits. It seems it has done its best and it is now for the Centre to do handholding to enable the State to shed its revenue deficit status in the next three to four years.

The allocation of Rs 22,113 crore towards revenue-deficit grant by the 14th Finance Commission over next five years would be too meager and the State would be forced to set up its borrowings to meet its revenue expenditure. As a result, the Andhra Pradesh government is saddled with a huge deficit of Rs 12,000 crore, courtesy a massive surge in unproductive and unplanned expenditure of Rs 11,000 crore during the last nine months.

What is praiseworthy is that the AP Finance Minister could tame both the deficits by trimming non-plan expenditure. But he also expressed concern that the State would continue to be revenue deficit State even under the 15th Finance Commission, which is to be set up in 2020-2025.

There were several instances where the government overspent. For instance, the government had earmarked Rs 300 crore for the Pushkaram but ended up spending over Rs 1,600 crore. It reportedly spent about Rs 100 crore on renovation and relocation of the Chief Minister’s camp offices in Hyderabad and Vijayawada. The General Administration Department has also spent about Rs 30 crore on chartered aircraft services.

Interestingly, the total tour bill (shuttle between Vijayawada and Hyderabad) submitted by state government officials in the last one year has crossed Rs 40 crore. Add to these the massive 43 per cent hike in salaries of government staff, officials are baffled over a whopping Rs 10,700 crore expenditure over the budgetary provisions in the first six months alone.

The government also earmarked a major chunk of the money to irrigation projects, which have been pending for long. It is estimated that the gap between revenue and expenditure has already become unbridgeable.

While the total revenue expected during the last quarter of the financial year is Rs 27,748 crore, the total expenditure is estimated to be around Rs 37,171 crore. The State government has been banking heavily on the central funding and expected Special Status or Special Package announcement, but to no avail.

The Centre had to release Rs 8,085 crore under tax devolution and another Rs 500 crore for centrally sponsored schemes. Apart from the regular devolutions, the Centre has promised to bridge the revenue gap for the year 2014-5 which works out to Rs 14,243 crore. Of this, only Rs 2,300 crore was released during the last 18 months leaving the state government in the lurch.

As per estimates the total cost of the seed capital of Amaravati at Rs 70,000 crore and each the government should ensure to allot Rs 25,000 cr for next three years to complete the first phase of the Capital City in the next three years, according to management consultancy firm McKinsey Company. The government would have to suitably reward prospective investors to attract them.

The Union government has not yet made it clear as to what extent it would extend financial assistance to construction of buildings like High Court, Raj Bhavan, Assembly, Secretariat, Staff Housing and the like, as part of the Re-organisation Act. On its part, the state government has sought around Rs 23,000 crore.

Hence, the State government is desperate for abundant Central assistance to make good the revenue deficit. It is at present making last minute efforts to secure funds for Polavaram project, setting up of central institutions, viability gap funding and special assistance etc., to come out of the financial crisis.