Hyderabad, June 14: As finance minister during Y S Rajasekhara Reddy’s regime, Konijeti Rosaiah often racked his brains on how to fund the chief minister’s numerous welfare programmes while at the same time raising capital funds for irrigation and other projects.
Today, at the helm himself, Rosaiah has to do more than that: answer critics’ questions as the state faces a financial crisis while labouring under the obligation to continue the programmes.
What has gone wrong? Is there is a way by which the state could come out of the current fiscal crisis? Can all the programmes be sustained in their current form? These are some of the questions bothering the government and economists.
The fact of the matter is that the crisis has not erupted suddenly. It began in 2008-09 itself, thanks to the global recession which impacted the taxes raised within the state and also flows received from Centre. The drop in revenues without a commensurate reduction in commitments has led to a backlog from 2009- 10. It has now reached a stage where the government is grappling with two things simultaneously: clear the outstanding bills and at the same time provide funds for the current year. A mess that’s not easy to clean up.
But then, when these very schemes were managed for four years, why not now? YSR was lucky. Even in 2004-05, budgetary provisions were not sufficient for all his programmes. But he was helped by the fact that revenue collections were far higher than expected thanks to a buoyant economy. The average growth rate in collections during 2004-08 was 19.32 per cent. That has dropped to single digits in the next two years, though not going into negative zone.
Former bureaucrat and finance expert, V K Srinivasan says actual receipts in 2008-09 were nowhere near the estimates. The government initially expected receipts (state taxes, AP’s share of central taxes, etc) to be in the range of Rs 1.05 lakh crore. As the downtrend began, the figure was revised to Rs 90,000 crore. And in the end, much less – Rs 80,387 crore — accrued.
It started to pinch then. There was no option but to delay releases without appearing to have tinkered with the schemes. The result: a pile-up of dues. For example, as of April 1, 2010, the power utilities were owed a staggering Rs 7,300 crore by the government.
Pending payments in irrigation were of the order of Rs 3,000 crore. The overall outstanding payments under different heads stood at a staggering Rs 20,000 crore.
Is the fiscal situation slipping out of control? “As of now, NO,” says a senior government official, emphasizing at the same time the need for remedies. What are they? One, cut down non-plan expenditure (other than capital investment) and rationalize welfare schemes. “On the one hand, we claim AP is the most favoured IT destination.
On the other, we have white ration card holders (BPL families) almost equal to the total population. Unless we ensure that the benefits reach only those for whom they are meant, everyone will suffer,” he argues.
The joke in Secretariat is that barring government and bank employees, almost every other family in the state has a white card, which is a sort of passport to multiple benefits – housing, cheap loans, fee reimbursement, etc. No wonder, the number of students currently entitled to fee reimbursement is 22 lakh and the annual burden close to Rs 3,000 crore, up from Rs 400 crore in 2004 when it was limited to SCs /STs and EBCs.
The fee reimbursement in particular betrays a crony capitalist nexus. “More than the students, it is the colleges which are making a killing. Most of them don’t have infrastructure or faculty but they have nothing to lose because it is the government which is coughing up the money while the students are no wiser after coming out these institutions,” says an official who did not want to be quoted.
What is the way out? Srinivasan feels that though there is no need for a financial emergency the government should ensure that more numbers are not added to schemes meant for the poor. Social scientist Parakala Prabhakar is more caustic. “Unless the government reviews the expensive populist schemes scrupulously, the situation is going to get worse,” he says, pointing to the massive borrowings that successive governments have indulged in. Borrowings (open market, externally-aided and from the Centre) last year were of the order of Rs 14,000 crore.
But most experts seem to be feel that none of the schemes needs t o be scrapped but certainly rationalized.
Well-known academic Prof D Narasimha Reddy points out that Rajasekhara Reddy had set an agenda from which it would be difficult for Rosaiah to deviate. He also feels that the various programmes launched by YSR are sustainable in the relatively medium perspective, considering the growth in tax revenues barring the last two years.
“It is wrong to say that the schemes are unsustainable. But at the same time, there is no justification for 1.8 lakh crore white ration cards or 22 lakh students getting fee reimbursement. There is a need to target the schemes and the chief minister should be able to boldly tell that to the people. I am sure people will see reason just as they saw merit in seats being slashed in the IIITs,” Reddy says.
——–Agencies