Telangana grapples with revenue shortfall, faces fiscal deficit concerns

The fiscal year 2023-24 concluded with tax revenue falling short of the targets outlined in the budget.

Hyderabad: The State government is confronted with a substantial revenue shortfall during the financial year of 2023-24. In a bid to mitigate the financial strain, the authorities have directed all departments to ramp up revenue collection efforts significantly in the new financial year.

The fiscal year 2023-24 concluded with tax revenue falling short of the targets outlined in the budget. According to Finance department sources, Telangana secured Rs 2.12 lakh crore against budget estimates of Rs 2.59 lakh crore, realising only 80 per cent of its total receipts for the financial year of 2023-24. Through tax receipts estimated at Rs 1.52 lakh crore, the officials could mop up Rs 1.3 lakh crore at the end of the fiscal. The final statistics are expected to be released after auditing in May-June.

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Despite increased usage of vehicles and alcohol consumption in the months leading up to the elections, tax revenue from fuel and alcohol sales failed to surge as expected. The government projected a VAT collection of Rs 39,500 crore for the fiscal year of 2023-24, but only Rs 29,985 crore was realised, leaving a substantial deficit of Rs 9,515 crore.

Further, revenue targets for GST and registrations were not met, with the government attributing the shortfall to over estimation by the previous administration. There has been a marginal increase in GST collections and revenue through Stamps and Registrations over the previous financial year, but did not meet the budget estimates for the 2023-24 fiscal. Against budget estimates of Rs 50,942 crore, the State realised Rs 40,650 crore in GST collections for 2023-24. During the previous financial year of 2022-23, the GST collections were Rs 37,026 crore. Through the Stamp and Registrations, the government realised revenue of Rs 14,483 crore against target of Rs 18,500 crore.

While the State’s share in Central taxes met the set target, grants from the Central government witnessed a significant reduction, resulting in financial strain. Against budget estimate of Rs 14,528 crore, the State’s share in Central taxes achieved a little over Rs 15,000 crore. However, the Central grants caused a huge dent with nearly Rs 8,000 of an estimated Rs 41,259 crore released by the end of March.

As a result, Telangana’s fiscal deficit has ballooned to Rs 42,000 crore, necessitating additional borrowing to sustain welfare schemes and meet salary obligations. To address immediate funding gaps, the government has resorted to borrowing. With a recent loan acquisition of Rs 1,000 crore, Telangana’s market borrowings have shot up to around Rs 42,852 crore against the estimated Rs 38234 crore during the 2023-24 fiscal.