Intellectuals in AP are worried over the YSRCP government having incurred a debt of Rs 1,30,000 crore in just one and a half year since it assumed power. Letters written by former Union Minister and Rajya Sabha member Suresh Prabhu to Prime Minister Modi and Union Finance Minister Nirmala Sitharaman have turned sensational. AP Chamber of Commerce Director Naresh Kumar has also written a letter to former Union Minister Suresh Prabhu urging him to look into the issue of money being diverted from Andhra Pradesh Corporation by the YSRCP government for welfare schemes, adding that FRBM regulations need to be strictly enforced.
In the case of other loans, Naresh Kumar requested in the letter that the value of the mortgaged land should be doubled. It is suggested that all these loans need to be combined in order to ensure that it doesn’t cross the CIBIL limits. In a letter to Rajya Sabha member Suresh Prabhu, Prime Minister Narendra Modi and Union Finance Minister Nirmala Sitharaman, Naresh Kumar said the state government schemes are only to get votes and that the Centre should act before the situation goes out of hand.
What is FRBM?
FRBM is Fiscal Responsibility and Budget Management. FRBM is a provision imposed by the Centre to prevent state governments from taking loans. The Centre does not allow any state government to borrow more than 3 percent of GSDP annually. Recently the Centre raised the limit to 3.5 percent. It has imposed another four regulations. If all these are implemented, another 1.5 percent, or 5 percent of the total loans can be borrowed.
What are the other four rules?
Under the latest rules, any state government can borrow 3.5 percent. In addition, the central government has made some reforms mandatory to obtain an additional 1.5 percent. These are – One Nation One Ration Card, Ease of Doing Business, Electricity Reforms and Urban Municipal Reforms. If the state governments implement the above, the FRBM limit will be increased by another one and a half percent. That means the overall FRBM limit will increase to 5 percent.
Is AP ready for all reforms?
The AP government has jumped on the bandwagon of four reforms suggested by the Centre to increase its FRBM limits by 1.5 per cent. The government is already implementing the One Nation One Ration Card. The ration was distributed in AP to 271 people belonging to Telangana. This led to the implementation of the One Nation One Ration Reforms. AP ranks first in Ease of Doing Business. This means that the second reform has also been implemented. On the reforms in the power sector, the AP government is ready to install meters for agricultural pump sets.
Motors have already been installed for pump sets in Srikakulam district. The state government has also paid Rs 4 crore as part of agricultural electricity bills on behalf of the farmers. This means that the third reform has also begun. The fourth is urban and municipal reforms. As part of this, towns and corporations are required to increase tax revenue by a maximum of 15 percent annually. Though a bill was tabled in the AP Assembly regarding this reform, it was not passed by the Council.
The government is trying hard to bring the bill in the form of law during these meetings. This means that if the four reforms are implemented, the AP government will reach the FRBM limit of 5 percent. This means that the AP government is likely to borrow an additional loan of Rs 30,000 crore this year. From next year, the AP government will be able to borrow Rs 1 lakh crore annually.