HYDERABAD: In the run-up to the Assembly elections, the Congress and BRS are engaged in a battle of promises in their respective manifestos while the BJP made modest promises to the people of Telangana. While the Congress appears to be one step ahead of its close contender BRS, the implementation of these ambitious promises raises concerns over the financial burden on the state exchequer.
The major promise that would have a significant impact on the state finances is replacing the Contributory Pension Scheme (CPS) with the Old Pension Scheme (OPS), which is promised by the Congress, while claiming it has been doing the same in the states where it is in power.
“Unfunded, wage index-linked Old Pension System (OPS) will be an unmitigated fiscal disaster. The impact will be felt from 2035 when those recruited after 2004 will start retiring from service. With OPS, the committed spend on wages, pensions and interest will be about 300% of states’ own resources by 2050. OPS is the greatest danger, threatening the credit of India, financial stability and economic growth. Will parties come to their senses?” asked former IAS officer and Lok Satta founder-president Jayaprakash Narayan on X platform, while stating that the painstaking consensus on funded, contributory National Pension System (NPS) built by former Prime Ministers AB Vajpayee and Manmohan Singh’s government is now unraveling.
The Congress made this promise even as the economists have been expressing apprehensions, highlighting the potential detrimental impact of OPS on the state exchequer, estimating an additional burden of approximately 50% on pension payments. Not only that, but the Congress has announced around 70 promises that require more funds to implement.
Increase in Aasara pension, Rythu Bandhu amounts
Similarly, the BRS has promised to gradually increase pensions from Rs 2,016 to Rs 5,016 over the next five years. In the 2023-2024 budget, the BRS government had allocated Rs 12,000 crore for Aasara pensions, with a promise to increase pensions by 150%, which requires Rs 30,000 crore for pensions alone in the next five years.
Incidentally, the BRS has |also promised to increase Rythu Bandhu, farmers input subsidy, by 50% from Rs 10,000 to Rs 15,000. In the light of the State government allocating Rs 15,075 crore for Rythu Bandhu in its previous budget estimates, it will be increased to around Rs 22,612 crore.
In addition to pension commitments, both parties have vowed to provide direct cash benefits to eligible women heads of households. This would at least cost anywhere between Rs 10,000 crore to Rs 20,000 crore given the number of households that have food security cards, an indicator to measure the low-income families.
The promise to raise farmers’ input subsidy from Rs 10,000 to Rs 15,000, extend benefits to agricultural labour, and offering 200 units of free power add further dimensions to the financial implications. The Congress has also committed itself to providing two lakh jobs within a year of coming to power and offering free travel to all women in the Telangana State Road Transport Corporation (TSRTC) services.
The economists argue that the payments of salaries of the State government employees and OPS alone would require 60% of state revenue receipts. However, the pivotal question remains unanswered — how will these promises be financed? This question assumes more significance in the light of State debt of Rs 3,57,059 crore (FRBM debts shown in budget estimates 2023-24) and outstanding guarantees of Rs 1,29,243.60 crore in 2022-23.
In 2023-24, the State government passed the budget estimates to the tune of Rs 2.90 lakh crores. Conspicuously, the existing budget would not suffice to fulfil the promises made by these political parties. According to an estimation, it requires anywhere between an additional Rs 50,000 crore to implement BRS promises and an additional Rs 80,000 crore to Rs 1 lakh crore to fulfil Congress promises. The question remains from where these funds would be mobilised?
‘Promises made after comprehensive study’
Speaking to TNIE, Telangana State Planning Board vice-chairman and senior BRS leader B Vinod Kumar said that they have made the promises after a thorough study on the potential growth of state finances. He said that he would not quantify the welfare schemes as freebies, but investments for the progress of underdeveloped classes.
He also highlighted that the Telangana government hasn’t taken debts to implement welfare schemes.
“We have obtained debts for irrigation, Mission Bhagiratha and power generation. We have not given Aasara pensions by obtaining loans,” he said.
Meanwhile, during an interaction with reporters, TPCC chief A Revanth Reddy said that Chief Minister K Chandrasekhar Rao has endorsed the “policy document” of Congress by making similar promises. He also said that the Congress policy is to grow the income and distribute it among the poor. In spite of it, the financial feasibility of these pledges will undoubtedly be a key focus as voters evaluate the election promises made by both the political parties.
