Telangana too now needs GST compensation

Chief Minister K. Chandrasekhar Rao having a word with Finance Minister T. Harish Rao in Hyderabad on Monday.  

The severe financial crisis that the country has been witnessing impacted Telangana State’s economy and it had to be compensated for below par revenue growth during the months of April , May, June and July of the financial year 2019-20.

Disclosing this in his Budget Speech in the State Assembly here on Monday, Chief Minister K. Chandrasekhar Rao said ₹175 crore for April and May and ₹700 crore for June and July was received as GST compensation.

In the first year of GST implementation, in the absence of any proper calculations, Telangana got compensation as was done in the case of all other States. After that, there was no necessity for Telangana to take this compensation again till April this year.

The compensation taken during June and July was four times more than the compensation given in April and May and this alone reflected the steep decline in the financial situation, he said. That was why the budget proposals for 2019-20 were prepared with a practical approach. There is a lot of difference between the estimates presented in the Vote-on-Account budget of the Centre and that of the State and the proposals presented on Monday. Based on the provisional figures published by the Controller General of Accounts (CGA), it was estimated that there would be 22.69% growth in the tax revenue of the Centre during 2019-20 but in the first quarter, only 1.36% growth was realised. In Telangana too, against the anticipated 15% growth, only 5.46% could be realised.

The Commercial Tax revenue which clocked an average of 13.6% growth in the last five financial years, fell to 6.61% in the first four months of the current fiscal. The motor vehicle tax grew at 19% in the last five financial years but now declined to minus 2.06% in the first four months of this fiscal.

Non-tax revenue

There is steep decline in the non-tax revenue too. Till last year, the growth rate was 14.9% on an average and during the first four months of this financial year, it fell to minus 14.16%. In all the non-tax revenue declined by 29% due to economic slowdown. The Centre also reduced its funds by 4.19% for 2019-20 in the State’s share in devolution of Central taxes.

Yet the Chief Minister said Telangana was slightly better placed than several other States and could raise funds from other financial institutions within the limits of FRBM.

The extra-budgetary funds would be used for the construction of major irrigation projects. All the welfare programmes for the poor and farmers would continue despite the existing financial crisis. But the allocations to various schemes and sectors have been reduced than what was proposed in the Vote-on-Account budget in view of the economic slowdown. For instance, though ₹12,067 crore was proposed in vote-on-account budget for social welfare pensions, the amount was revised to ₹9,402 crore in the full fledged budget for 2019-20 as four months already lapsed. There was no change in the Rythu Bandhu allocations at ₹12,000 crore, farmer’s debt waiver at ₹6,000 crore while Rythu Bima premium was actually increased to ₹1,137 crore from ₹650 crore proposed in vote-on-account.

Irrigation sector

The major reduction in the allocation came from the Irrigation sector. It was reduced from ₹22,500 crore in Vote-on-Account to ₹8,490 crore and the Special Development Fund was downsized to ₹10,000 crore from ₹15,000 crore. The government proposed to sell government lands to make up for the shortfall in resources. But will it be prudent to utilise the sale proceeds of lands, a finite resource for contingency expenditure rather than utilising for capital expenditure as that will in turn contribute to growth of economy.

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Printable version | Feb 25, 2021 5:09:48 PM | https://www.thehindu.com/news/cities/Hyderabad/telangana-too-now-needs-gst-compensation/article29377008.ece

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