Sameera Ahmed & Nitin B | The News Minute | January 28, 2015 | 5:00 pm IST
Andhra Pradesh Chief Minister N Chandrababu Naidu on Tuesday, has stopped all development works in the state stating that it was difficult to pay government staff their salaries in the face of deep financial problems it faced.
The deficit in the budget which just last X month was Rs. 15,500 crore reached RS. 20,000 crore, said finance minister Yanamala Ramakrishnudu.
What are the reasons for the AP’s current financial situation?
Though it did better than expected in the revenue front post bifurcation, the state was seriously banking on Central allocation of funds to make up for over Rs.15,000 crore revenue deficit to meet its expenditure needs.
During the budget session, estimates for revenue and expenditure for 2014-15 were prepared inclusive of the promised allocation from the Centre.
The state’s revenue generation recently, was over Rs.32,000 crore including a VAT of Rs.20,800 crore.
The biggest disadvantage for the state was the Hudhud cyclone which resulted in heavy financial losses.
The state government told the Legislative Assembly earlier in a statement that the Hudhud cyclone that had hit Visakhapatnam in October caused a loss of Rs 21,908 crore, including damage to the tune of Rs 6,136 crore to private industries in the port city.
A memorandum on the losses and damages was also submitted to the Government of India.
Prime Minister Narendra Modi, had visited the cyclone-ravaged area on October 14 and announced Rs 1,000 crore as advance for relief and restoration works, which was insignificant next to the total losses incurred by the state.
This resulted in the state government shelling heavy money from their pockets to the tune of several thousand crores.
With no sign of any allocation so far and unexpected additional expenditure in the wake of the cyclone, the government is worried that it would be difficult for the State even to meet the salary and pension bill in the last quarter from January to March.
The state government has also written a letter to the Union finance ministry requesting an immediate release of Rs 2,500 crore so as to pay the salaries for the 5.67 lakh employees on its payroll.
The recent decision of the TDP regime to increase the age of retirement of its employees from 58 to 60 also adds to the degrading situation. The state also promised increments to some employees though this has been put on hold.
Before the split
In 2013, the scene was in complete contrast as the then united Andhra state presented a revenue-surplus budge for 2013-14 with an overall expenditure of over 1.6 lakh crore.
Estimating the revenue surplus would be Rs. 1023 crore with a Finance Minsiter Ramanarayana Reddy with an estimated fiscal deficit of Rs 24,487 crore.
Post the split, after all the accounts were bifurcated between them, Telangana had a surplus revenue of Rs. 3,555 crore for the fiscal 2014-15 while the diminished Andhra had a revenue deficit of Rs. 15,691 crore.
When the new Andhra had to rebuild its entire infrastructure including a new capital city , the resource plan outlay provided to it was Rs. 5791 crore
However, in August 2014, in Andhra’s maiden budget post the split, a budget of RS. 1.11 lakh crore was presented which exposed the state’s deep financial crunch regarding its fiscal debt.
A situation which was attributed to the UPA government’s ‘irrational and unscientific’ bifurcation of the state, financial difficulties regarding the budget were determined by the fiscal deficit projected at RS. 12, 064 crore for the remaining finical year.
The current scenario is grim and the opposition parties are expected to come down heavily on the TDP for the situation.
The state government which has already taken a loan from the Reserve bank can only hope that the centre clears its funds and it can squeeze out of the current financial crisis it is in.