Andhra Pradesh stood at the top of ‘Ease of Doing Business’ 2019 rankings for the fourth time in a row. Credit must be given to former Chief Minister N Chandrababu Naidu because the Business Reform Action Plan – 2019 were submitted before 31st March 2019. Yet, the mounting State debt is making it tough to raise funds for implementation of flagship welfare schemes and to run the government.
Analysts say the State is yet to come out of the fiscal deficit and other economic impacts following the bifurcation of Andhra Pradesh. Given the current precarious scenario, the State needs to do a balancing act between its economic and human development fronts. However, the cash strapped State is more inclined to raise fresh loans, and if need be, slap fresh taxes to generate funds.
According to government sources, Andhra Pradesh has raised around Rs 39,946 crore loans in the first four months of the current financial year 2020-21, as against the meagre revenue receipts of Rs. 19,000 crores during the same period. The Fiscal Responsibility and Budget Management (FRBM) allows the State government to raise funds to the tune of Rs 35,000 for the financial year 2020-21. However, following the COVID-19 impact on the economic situation, the Centre had raised the FRBM limit to another 5 per cent of the GSDP. This helped Andhra Pradesh to avail an additional Rs 5,000 crore during the current financial year. Out of the enhanced limits, the State has reportedly availed Rs 3,000 crore to pay salaries and pensions for August 2020.
ASRA in doldrums?
When there is only a couple of thousand crores loan that it can avail under the FRBM limitations, it will be difficult to release Rs. 6,000 crore to fulfill its commitment of loan waiver for self-help groups scheduled for September 10. Following these developments, the State government has issued fresh guidelines for the scheme. It says there are no restrictions for the utilisation of the funds which will be deposited into the accounts of the SHGs. However, SHGs identified as Non-Performing Assets (NPAs) by the banks as on April 11, 2019, cannot avail the benefits of the scheme.
Power reforms and the FRBM link
Agreeing to repeated requests made by the Andhra Pradesh and Telangana, the Centre has raised the FRBM limits to 5 per cent of the Gross State Domestic Product (GSDP). However, for this one-time, enhanced borrowing ceiling is applicable only for the current FY 2020-21 and comes with a rider of reforms that the States have to rollout.
With the State coffers going dry, revenue inflows bleak, AP has now agreed to unleash the power sector reforms. It will embark on a giant exercise to fix meters for around 18 lakh free agriculture power connections in the State. To avail additional borrowings to the tune of Rs 15,000 crore, it is imperative for the government to implement this power reform where usage accountability will be fixed.
A mountain of Debt. And growing…
The State raised around Rs 1.15 lakh crore in the last 15 months. The lion’s share of it will go to achieve the lofty goal of strengthening Jagan’s pro-welfare image. Through ‘Navaratnalu’ which is a bouquet of welfare schemes, Rs 70,000 crore has been deposited into the bank accounts of people thus far. Overall, the State is reportedly footing a whopping Rs 1.20 lakh crore bill per annum to implement its Navaratnalu, ASARA and other social security pension schemes.
Corporate loans and fresh taxes on the cards?
Sources say, Chief Minister, YS Jagan Mohan Reddy agreed to raise additional funds by raising loans through government corporations. The reason being loans raised by government-owned corporations would not attract the FRBM limit. Earlier, the government had increased the land and property registration charges and tweaked the charge of electricity slabs. Also, it is seriously considering earning an additional Rs. 400 crore by increasing the life tax on vehicles.
It is learnt that the government is exploring every possible avenue to slap fresh taxes and is on a drive to achieve additional 15 per cent revenue ramp-up.
