Two weeks of ago, official sources predicted that given the precarious financial position of the State post bifurcation, it will be bankruptcy if Andhra Pradesh government decides to give a fitment beyond the Pay Revision Commission recommended 29 per cent.
But even without implementing the PRC, the State finances are already in the red with a negative cash balance of Rs.490 crore forcing the government to go in for ‘ways and means’ advances. Utilised for day-to-day cash management these advances come at nominal interest if repaid in stipulated time.
There is more bad news. If the situation does not improve and the cash deficit climbs up to Rs.720 crore, then the State will have no option but to go for overdraft facility with a higher interest rate of 14 per cent and more for short term credit.
Sources said the State could have averted the negative cash balance by reining in non emergency expenditure such as the recently given ‘Sankranti gift’ to poor to the tune of Rs. 325 crore and release of Rs.1,500 crore pending industrial incentives of last five years at one go though only Rs.300 crore was budgeted for the year.
The recent releases were in addition to Rs.5,000 crore for debt relief of farmers, apart from pensions and scholarships. In other words, State expenditure is overshooting its revenues by about 30 per cent reflecting bad economics. State had been banking on Centre’s assurance to help it tide over the revenue deficit of Rs.16,000 crore. Even after seven months as no funds were released by the Centre, some say that State cleared the pending dues at the risk of going for overdraft only to make the Centre empathise with State’s plight and release funds to A.P.
Generating own revenue for a State like Andhra Pradesh with a healthy resource base is not difficult but equally important is how it deployed its resources to enhance growth and productivity. But with political leadership going on a spending spree, prospects appear bleak. Another negative impact of going for overdraft facility is it will bring down credit rating of State adversely impacting investor sentiment.
