HYDERABAD: Alarm bells are ringing. The State’s financial situation is uncertain due to the Central government’s faulty policies, Chief Minister K Chandrasekhar Rao said on Saturday, and decided to send an SOS to Prime Minister Narendra Modi.
Following a huge cut in Central taxes and grants to the State this year, the Telangana government has decided to prune its budget proportionately. The budgets for all State departments will be reduced, and expenditure will be slashed in the next four months.
As the Centre’s financial situation was not known, the State government in February presented a vote-on-account of Rs 1.82 lakh crore. Due to the economic slowdown, this was slashed by 20 per cent, and a full Budget of Rs 1.46 lakh crore was presented in September. Now, with a further reduction in Central taxes and grants, the size of the State’ budget will shrink further in the last quarter of this financial year.
When the State Budget was presented in September, officials had told TNIE the size of the Budget would be altered in December once the situation was assessed.
On Saturday, after a review of the financial situation, Rao decided to go to Delhi in five or six days to meet Modi and Union Finance Minister Nirmala Sitharaman and highlight the “injustice” done in the release of Central grants to the state. He will head to the capital with a battery of officials.
Rao directed officials to prepare a detailed note on the state’s financial situation, to be discussed in the Cabinet meet on December 11. He is of the view that though the Centre claims the economic slowdown has had no impact, this is far from reality.
In the 2019-20 Union Budget, Rs 19,719 crore of Central taxes were earmarked for the state. This was 6.2 per cent more than the Rs 18,560 crore earmarked for the same in 2018-19 Budget.
However, Telangana got just Rs 10,304 crore under Central taxes in the first eight months this year, while it got Rs 10,528 crore in the first eight months of 2018-19, a reduction of Rs 224 crore, the chief minister observed.
An increase of 6.2 per cent was expected, but the State’s share fell by 2.13 per cent. “The State had to get Rs 700 crore more than the previous year, but there is a cut of Rs 224 crore. Thus, the State has lost Rs 924 crore so far this year,” the CM noted.
It may be recalled that Principal Secretary (Finance) K Ramakrishna Rao recently met officials of the Finance Ministry and explained that the State might end up receiving a shortfall of Central taxes and grants to the tune of 15 per cent this year, which would adversely impact various schemes in the state. Finance department officials estimated that in all, the drop in Central taxes and grants to the State this year would be Rs 2,957 crore.
“Statements made by ministers in Parliament don’t match the actual situation. If this behaviour of the Centre continues, the State could face serious financial problems,” Rao said. “The situation is such that if we go for Anna Vastralu to the Centre, Unna Vastralu Poyinatlu vundi (if we seek new clothes from them, they will even take what we are wearing). The State’s financial situation is uncertain now.”
The Comptroller and Auditor General observed that for 2017-18, the Centre did not release Rs 2,812 crore to Telangana under the IGST component. The State had to get Rs 1,719 crore in GST compensation as its revenues fall below 14 per cent due to the economic slowdown.
CM to meet Modi, Nirmala in Delhi soon
Chief Minister K Chandrasekhar Rao will travel to Delhi with a battery of officials and meet Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman and highlight the “injustice” done in the release of Central grants to the state. They are likely to visit within five or six days
Departments told to reduce expenditure
Due to the huge drop in Central taxes, and further cuts anticipated in the coming months, the CM directed officials to reduce the funds allocated to various departments in the State Budget in proportion to the reduction of taxes from the Centre. He directed all departments to reduce spending. There is no option but to maintain “self-control” in spending, he said