Five months into 2024-25 FY, Telangana’s finances take a massive hit

According to the CAG’s monthly key indicators on Telangana accounts for the month of August 2024, the total receipts of the State worked out to Rs.91,085.54 crore and the total expenditure was Rs 85,467.75 crore for the five-month period (April-August 2024).

Hyderabad: In the first five months of the current financial year 2024-25, the Telangana‘s finances have gone for a toss, with massive revenue and fiscal deficits, stagnant revenues and expenditure.

According to the CAG’s monthly key indicators on Telangana accounts for the month of August 2024, the total receipts of the State worked out to Rs.91,085.54 crore and the total expenditure was Rs 85,467.75 crore for the five-month period (April-August 2024).

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The revenue receipts aggregated to Rs 61,618.60 crore and the capital receipts amounted to Rs 29,466.94 crore whereas the revenue expenditure totaled Rs 77,140.22 crore and the capital expenditure was pegged at Rs 8,327.53 crore. The revenue deficit at the end of August 2024 mounted to Rs 15,521.62 crore and the fiscal deficit escalated to Rs 29,449.94 crore.

The CAG figures show that the total receipts and expenditure for the five-month period was only 33.24 % and 33.59% of the annual target (budget estimates) spelt out in the State Budget for 2024-25 presented by Deputy Chief Minister Mallu Bhatti Vikramarka in July 2024. The actual revenue receipts amounted to only 27.85% of the annual target while the revenue expenditure was higher at 34.91%.

Similarly, the capital receipts jumped to 55.79% of the target while the capital expenditure was lower at 24.87%.

The tax revenues, including GST, Stamps Duty and Registration Fees, VAT, State Excise Duties and other taxes and duties, were lower at 35.11% of the annual target and the non-tax revenues were only 4.12 % of the annual target (Rs 1,449.54 crore as against Rs 35,208.44 crore).

The State’s share of union taxes amounted to Rs 3,316.35 crore, or 33.83% of the annual target (Rs 18,834.19 crore) and the grants-in-aid and contributions from the Central Government were only 11.31% of the target (Rs 2,447.03 crore against the annual target of Rs 21,636.15 crore).

The “committed” expenditure of the State government on account of interest payments, salaries, wages and pensions of employees and expenditure on subsidy has shown a sharp increase vis-à-vis the annual estimates. Interest payments rose to Rs 10,497.52 crore (59.21% of the annual estimates), salaries and wages mounted to Rs 18,152.28 crore (45.33%), pensions soared to Rs 7,165.65 crore (61.55%) but subsidy was pegged at Rs 5,398.86 crore (33.24% of the annual estimate).

The State’s net borrowings and other liabilities rose to Rs 29,466.94 crore (that is, 59.79% of the annual estimates), thereby contributing sharply to the State’s mounting public debt.

If the State’s net borrowings of Rs 11,438.04 crore in the last four months (December 2023-March 2024) of the last financial year (2024-25) are added to the net borrowings of Rs 29,499.94 crore in the first five months of the current financial year 2024-25, the public debt of Telangana rose by Rs 40,887.98 crore in the first months of the Congress government which assumed office in December 2023.

It is doubtful whether the State would be able to meet the targets of receipts and expenditure in the remaining six months of the financial year (as the half-year will be over in the next few days with no significant change during September from the trends of the previous five months of the financial year).

The Finance Minister’s efforts to mobilise additional resources from the State’s own tax and non-tax revenue sources are unlikely to yield any results since the VAT on petroleum products and liquor, Motor Vehicle Tax, Stamps Duty and Registration Fees and State Excise Duties cannot be raised any further since they have already reached peak levels.

Adding to the State’s financial woes, HYDRAA’s adverse impact is likely to cause huge shortfall in tax revenues from Stamps and Registration on the one hand and non-tax revenues from the auctions and sales of Government lands and plots on the other.

There are, thus, bound to be huge shortfalls in achieving the targets of non-tax revenues and grants-in-aid and other contributions, which will bring down the State’s expenditure correspondingly. The government, which is struggling to implement the six guarantees as well as scores of other promises of the Congress manifesto so far, is staring at a serious situation as it has far less resources on hand to incur on the ongoing schemes as well as the guarantees and the myriad promises.

The State cannot go for higher quantum of borrowings than what has been budgeted as per the FRMB Act stipulations, as the pleas of the State government to the Central Government to relax the norms and facilitate higher borrowings by Telangana are unlikely to be heeded.

Just a few days ago, Chief Minister A Revanth Reddy boasted that the Government would make efforts to increase the State’s annual budget from Rs 3 lakh crore currently to Rs 7 lakh crore in the next four years with the ambition of making Telangana a one-trillion dollar economy.