Telangana tightens purse strings amidst fund crunch

Mid-day meal scheme in several districts have been hit even as KCR accused the Centre of delay in releasing funds, while the opposition blamed the TRS of mismanaging the state’s finances.
Telangana tightens purse strings amidst fund crunch
Telangana tightens purse strings amidst fund crunch
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Telangana Chief Minister K Chandrashekar Rao made an attempt to meet Prime Minister Narendra Modi in an unscheduled meeting on December 11. The purpose was to discuss pending GST returns and grants amounting to Rs 32,000 crore that the Centre owes the state. With the PM busy campaigning for the Jharkhand Assembly Election, KCR returned home unable to strike a deal.

A day later, on December 12, all six of the TRS MPs protested before the Gandhi statue outside Parliament demanding the pending dues. The party also went to vote against the Citizenship (Amendment) Bill in Parliament. 

For KCR, the lack of cash inflow from the Centre means paucity of funds for key infrastructure projects, and has resulted in budget cuts for government services and welfare schemes. After his failed attempts to meet the PM, KCR at a cabinet meeting on December 12 tasked the Finance Department to formulate guidelines for implementing austerity measures in all government departments. As part of the austerity measures, the Principal Secretary (Finance) has been asked to reduce funds for all departments in proportion to the funds pending from the Centre. The departments have also been asked to reduce spending.

The opposition including the BJP has, however, accused the TRS government of mishandling the state’s finances. The question is are the current austerity measures due to the Centre’s delay in releasing funds or because of the KCR government’s mismanagement of the state’s finances? 

 The pending dues

On December 8, the Telangana government issued a press statement saying that GST collections for Telangana fell short by 14%. It pointed out that while implementing the GST Act, the Centre had assured states that it would compensate them if GST revenue fell below the threshold. 

The Union government had in its budget announced Rs 19,719 crore as GST tax collections that would be redistributed to the states. But the Centre has so far disbursed only Rs 10,304 crore to all states, claims the Telangana government, just over half of what is due. 

Apart from the pending GST dues, the Centre also owes the state Rs 2,812 crore of Integrated GST (levied on interstate transfer of goods), another Rs 2,027 crore in the form of funds for implementing 13th Finance Commission recommendations, backward region grants to the tune of Rs 450 crore and another Rs 450 crore for NREGA, said the Telangana government.

For infrastructure projects in the state, NITI Aayog had recommended a grant of Rs 19,000 crore for Mission Bhagiratha, a drinking water project that aims to provide water to every household in Telangana. A grant of Rs 5,000 crore was also to be allotted for Mission Kakatiya,a restoration project for all minor irrigation tanks and lakes in the state. But the Telangana government says these funds were not released. 

As a result of these unpaid dues, the Telangana government expects the state budget to shrink by 10-15%. In its 2019-20 budget, the state had set Rs 1.82 lakh crore as expenditure but expects it shrink to Rs 1.46 lakh, reported TNIE. 

The state in an attempt to generate funds now plans to sell government land with the hope of generating at least Rs 10,000 crore but the process is yet to begin. If this fails to kick off within this financial year, the state budget would drop further to Rs 1.36 lakh, reported the paper.

The state has, however, assured that welfare schemes like Aasra pensions, Rythu Bandhu (the financial assistance scheme for farmers) and other welfare schemes will continue unaffected. A senior Finance Department official speaking to Telangana Today stated that KCR has no plans to cut down on welfare schemes such as Rythu Bandhu, farm loan waiver scheme, double-bedroom houses, Kalyana Lakshmi/Shaadi Mubarak, which are marriage assistance schemes. 

B Janardhanan Reddy, Principal Secretary for Education in Telangana, told TNM that the present austerity measures do not apply to the Education Department. “About 97% of the education budget goes into paying salaries and pensions of the staff. The Chief Minister had made it clear that there will be no cut in salaries and pensions, so in education, there are no budget cuts as such, it’s mostly in other departments," he said. 

To meet expenses for irrigation and other infrastructure projects the state will have to take loans raised outside the budget.

No eggs and milk

However, the fund crunch has hit the mid-day meal scheme. Since October, several districts stopped receiving eggs and milk for children at government-funded schools and anganwadis.

This month, several districts of Telangana have not received eggs nor milk in the menu for children at government schools and anganwadis. “The bills have been pending for a few months now,” said an official with the Woman and Child Welfare Department from Medchal district, “We wrote letters to higher-ups a lot of times but we hear the bills are pending in crores,” added the official.

Those from the supply side say Telangana is an egg surplus state but the government doesn’t have funds to pay for the eggs, especially for the past four months. “The farmers who supply the eggs have not been paid in the last four months. How long can they keep providing for free? the shortage is only due to unpaid bills” said Sanjeev Chintawar,President, Telangana Poultry Association.

Scrapping Aarogyasri?

As part of the cost-cutting measure, the state is even mulling pulling the plug on Arogyasri health scheme that provides 85.34 lakh families with health coverage in the state. The state has constituted a committee to explore the possibility of migrating to the Centre’s Ayushman Bharath scheme which is similar in service but covers fewer health ailments under it. 

In September this year during the budget session in the state, Assembly the Telangana Chief Minister had said, "Through Arogyasri, the state government is spending Rs 1,336 crore per year, benefitting 85.34 lakh families in the state. From the Centre’s Ayushman Bharat scheme, it is possible for the state to provide medical benefits only to the extent of Rs 250 crore per year, benefiting only 26 lakh families,".

T Hari Prasad, member of the Telangana Network Hospitals Association, is of the view that under Ayushman Bharath the private hospitals would earn less. “The private hospitals earn more from Aarogyasri rates for services paid by the state government are higher. The Ayushmann Bharath rates are 50% lower than that of the state, so private hospitals would earn less under Ayushman Bharath. If the state government is able to provide Ayushman Bharath scheme for the rates of Aarogyasri, we are willing to consider,” he added.

Those working in the healthcare sector say there is a shortage of even basic medical supplies at primary and secondary healthcare hospitals, with nurses allegedly being forced to resort to unsafe medical practices to shore up on supplies. Nagesh G with the Telangana Nursing and Paramedical Association alleged, “There are no IV cannula or syringes at government hospitals. We use one IV cannula in a patient for four or five days, the needle can be toxic if left inside a patient's body for such durations, but we are helpless. Same is the case with syringes too.” 

“There are no medicines in the stock rooms, even though people come to government hospitals they still have to source most things from private. The last time government hospitals got new ventilators was two years ago and they are not properly maintained. Whenever we ask for anything the higher-ups say there is no budget, in Telangana the health sector is totally being neglected,” he added.

Opposition accuses KCR of mishandling finances

The opposition in the state, however, have hit out at the TRS government for allegedly mishandling the state’s finances. 

Accusing KCR of not finishing existing projects, Congress leader in the Assembly Mallu Bhatti Vikramarka recently alleged, “Whenever, TRS requires money, the government announces new projects. The irrigation projects have been meant to benefit the contractors.” Alleging mishandling of the state’s finances, the Congress leader pointed out that the KCR government continues to borrow even as Telangana’s outstanding public debt was at Rs 3 lakh crore.

The BJP also slammed the TRS government for ‘mismanagement of public funds’. BJP spokesperson K Krishna Saagar Rao alleged, “Huge irregularities in budget management, massive scale of corruption, reckless spending, total lack of fiscal discipline are the primary reasons for the financial mess in the state.”

Claiming the Centre has zero dues pending to the state, Rao dismissed the TRS’ allegations. “Every rupee which rightfully belongs to Telangana state is being transferred on schedule to the state, in due process by the central government,” he claimed.

“Niti Ayog doesn't decide on fund allocation to projects, and it's informal recommendations doesn't mean a budgetary allocation. It certainly doesn't add up as a due by central government. This kind of manipulative, meaningless, crass demands will lead the state into more serious fiscal problems, as the state government loses credibility,” he added.

Professor Raja Ram of the Telangana University said, “Any government should not go for massive populous schemes for votes, in the long run, it will ruin the state’s economy. We have so many such schemes in Telangana such as Shadi Mubarak and Kalyana Lakshmi, the Bathukamma saree distribution, Rythu Bandhu, gifts during festivals. These schemes do not benefit society or the government.”

Observing that state departments often receive funds lower than what is allocated in the state budget, he said, “There is a huge gap between allocation and release because there is a huge gap between the expected revenue and the revenue actually generated.”

Raja Ram points out that despite experts asking the state to adopt smaller irrigation projects which are cheaper, the state instead chose to go with massive irrigation projects such as the Kaleshwaram lift irrigation project that costs the exchequer a whopping Rs 80,0000 crore. “Such massive projects have drained out our revenues,” he added.

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