KCR's Big Spend On Poll Promises Burns Hole In Telangana's Fiscal Health

Telangana Chief Minister K Chandrasekhar Rao, it would appear, is 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, Telangana State Road Transport Corporation (TSRTC), with the government, regularisation of contract employees who lost jobs, big hike promises to employees, 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 BRS 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 August 3, the KCR government has said Rs 19,000 crore would be disbursed and the process would be completed by mid-September in a phased manner.

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

Chief Minister KCR blamed the delay on the Centre. He said there was economic slowdown due to the Centre's demonetisation move, which incidentally the then TRS (now BRS) had supported. He also said the Centre had been vindictive in not allowing state to raise loans citing Fiscal Responsibility and Budget Management Act (FRBM) rules.

The Centre had been indifferent towards Telangana in the release of funds, he added. That is why there was a delay in implementation of farm loan waiver scheme, he said.

Agriculture minister Niranjan Reddy has said already 5.6 lakh people with loans upto 35,000 have benefitted. Earlier, he said, under the crop loan waiver scheme of 2014, Rs 16,144.10 crore was waived off for 35,31,913 eligible farmers in the state.

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 big program of starting food processing units. ''The idea is to empower farmers and financially uplift them,'' KCR said.

All this, of course, comes at a big cost.

Telangana had a revenue surplus upto 2018-19 and by 2021-22, it is facing a revenue deficit of Rs 9,335 crore, a report by the Comptroller and Auditor General (CAG) has said.

The fiscal deficit at Rs 46,639 crore constituted nearly 27 per cent of the total receipts of Rs 1,74,155 crore.

The CAG report was placed in the assembly on Sunday said Telangana's total liabilities including public debt stood at Rs 3,21,611 crore. The public accounts watchdog expressed concern over the state's fiscal health pointing out that the government had utilised borrowings for repayment of public debt.

Other big concerns: That public debt at 27.4 per cent of GSDP was above the prescribed limit of 25 per cent of GSDP. Fiscal deficit (of Rs 46,639 crores) was at 4.06 per cent of GSDP for 2021-22, whereas it shall not exceed 3 per cent during a financial year.

The CAG report blamed huge loans from financial institutions to execute many projects and for welfare schemes, and dip in revenue due to pandemic, for the increased state debt burden and fiscal deficit.

The CAG said capital expenditure during 2021-22 at Rs 28,874 crore (2.51 per cent of GSDP) had not kept pace with the steady growth of GSDP.

Around 50 per cent of the revenue receipts, 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 the same day as the tabling of the CAG report, 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 per cent and they were the highest paid in the country, even more than Central government employees.

Just before the three-day assembly session began on August 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 that crippled public transport services but the Chief Minister had then categorically ruled it out, saying dozens of other corporations would make similar demands and it was impossible to fulfil.

Now, the Chief Minister 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. Seems unlikely that political compulsions will allow the once-revenue surplus state government to reverse this trend.