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JAGAN GOVERNMENT TURNS ANDHRA INTO ‘ANDHERA’ PRADESH

The state is in a debt trap sans any future revenue-generating productive assets and funds are being diverted to appease a few sections of people to convert them into a vote-bank.

The present situation in Andhra Pradesh is precarious and worrying due to the unhealthy financial practices indulged in by the Y.S. Jaganmohan Reddy-led YSRCP government in the state for the last two years. The present situation is that the state is in a debt trap without any future revenue generating productive assets and funds are simply being diverted for unproductive schemes to appease a few sections of people to convert them into a vote-bank without considering the financial health of the state. If the state government continues with the same approach and we remain silent, it will become like Venezuela in the near future. Already, employees of the state government are under tremendous pressure as there is no specific time to transfer their salaries by the government on time for the last few months. On some occasions, salaries had been paid from the debts due to negative net operating cash flows.

We need to analyse sensibly the current financial crisis in terms of two parameters: One is the Covid-19 pandemic uncertainty across the globe, which may not be avoidable, and the second is the unscrupulous approach in governance. There was a debt balance of Rs 2.5 lakh crore by 31 March 2014 in Andhra Pradesh just before Jaganmohan Reddy took charge as Chief Minister with debt to GSDP ratio around 28%. But the debt rose to more than Rs 4 lakh crore and will become Rs 5 lakh crore in the coming days in a situation where Prime Minister Narendra Modi intends India’s economy to achieve the $5 trillion mark. At present, debt to GSDP ratio has risen to 35.20% by 31 March 2021 and it may go up to even 40%, where the ideal ratio is 25%. Partly, this situation can be avoided with conscious estimation of revenue and expenditure by the Finance Minister of the state when the government knows the global challenge during the period of the pandemic and thereafter for a certain period. But the Jaganmohan Reddy-led YSRCP government has spent thousands of crores as unproductive expenditure by diverting funds from one department to other and one segment to other outside the purview of legitimate rules in a system replete with irregular practices. The most dangerous issue is that funds have been diverted for unproductive Navaratnalu schemes. These schemes are nothing but transferring the cash directly into the bank accounts of beneficiaries by diverting funds of all other departments, corporations and Union government schemes like funds to the local bodies, MNREGA, building and other construction workers fund and so on. In addition to this, off-budget debts are procured through various state government corporations for these unproductive schemes and there is no real productive capital expenditure for future revenue generating assets for the state or new infrastructure for better living conditions of the poor in the slums.

The financial health of the state has deteriorated and it will be in coma due to all the above reasons if things continue like at present. As per the budget of Andhra Pradesh for the current financial year 2021-22, estimated debt was projected as Rs 37,029.79 crore. But, as per the Monthly CAG Report, the state government had raised new debt for Rs 19,714.04 crores in the first month (April) of the current financial year itself; it is 53% of the total estimated debt for the total year. This resembles the pathetic situation in the state as no other state in the country appears in such a lien and weak financial condition. Further, we need to analyse the facts pertaining to the financial year 2021 to understand the real picture on the approach of the Jaganmohan Reddy-led YSRCP government. As per the Budget, Fiscal Deficit for the financial year 2020-21 was Rs 54,369.18 crore; as per FRBM norms, allowed debt was Rs 30,305 crore and additionally allowed is Rs 19,192 crore due to Covid-19 financial crisis, subject to certain conditions. Hence, the total allowed debt for the year would be Rs 49,497 crore only. But the state government had raised Rs 54,369.18 crore as debt, more than Rs 4,000 crore had been raised beyond the eligibility without any approvals.

Most unethical and illegitimate financial practices have been adopted by the Jaganmohan Reddy-led YSRCP government with “Single Source-Double Debt” through corporations incorporated under Companies Act to raise off-budget borrowings, though Revenue Sources are already mentioned in the Budget. As per poll promise by Jaganmohan Reddy, prohibition of liquor would be continued in the state. But revenue from excise and VAT has been rising leaps and bounds and it has reached more than Rs 20,000 crore in this financial year. This income already shows as Revenue Receipts in the Budget and it seems to be part of the repayment of debts shown in the Budget. But our state government intends to raise debt to repay in 20 years through the corporations with the source of the same liquor revenue which is shown in the Budget. In addition to this, the AP State Development Corporation was incorporated to build AP by the state government to transfer the government assets into this corporation to raise debt by mortgaging these assets as and when the funds are needed.

Last year, the state government had tried to raise debt for Rs 25,000 crore through International Private Trusts against rules and the state government tried to mortgage the gold balances of TTD to raise borrowings and it was stopped after the local media pointed to the real facts.

But, there was some speculation that TTD gold and assets are going to be used again for borrowings or other means by the state government, though devotees are worried as these operations are against their sentiments, and the government needs to clarify.

Whenever anyone questions about the financial performance and abnormal rise in debts in the present Jaganmohan Reddy-led YSRCP government in the state, State Finance Minister Buggana Rajendranath Reddy and Adviser to the state government Sajjala Ramakrishna Reddy attacks them by asking whether the Union government and other states are not borrowing funds. Definitely, it is a fair question to ask that needs to be answered. They question whether the Union government or any other state government practices illegitimate and unethical practices outside procedure, rules and systems as is followed by the present Andhra Pradesh government. Everyone knows that debt is inevitable and funds have to be raised as per the limits of the FRBM Act subject to certain conditions as we have seen relaxation in the peak stage of pandemic during the lockdown and unlock phases. The question is whether the Andhra Pradesh government adhered to those legitimate practices as per the system; it is very easy to say “No”.

State Finance Minister Buggana Rajendranath Reddy has become a Minister for Searching Debts and identifying new avenues for New Debts. He should prepare a White Paper on the exact financial condition of the state and measures required to undo the illegitimate financial practices immediately to safeguard the future generations of Andhra Pradesh from the present iron clutches of bad governance. We also would like to bring it to the notice of the Union Finance Minister to alert the state government of Andhra Pradesh, as otherwise, similar practices may be adopted by other states also that may lead to financial disaster for the nation.

The writer holds a degree in commerce and works as an FCA. The views expressed are personal.

The financial health of the state has deteriorated and it will be in coma if things continue like at present. As per the budget of Andhra Pradesh for the current financial year 2021-22, estimated debt was projected as Rs 37,029.79 crore. But, as per the Monthly CAG Report, the state government had raised new debt for Rs 19,714.04 crores in the first month (April) of the current financial year itself; it is 53% of the total estimated debt for the total year. This resembles the pathetic situation in the state as no other state in the country appears in such a lien and weak financial condition.

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