A precipitous slide in revenues combined with the burden of the costs associated with the COVID-19 pandemic have left Andhra Pradesh facing a ‘grave financial crisis’. Add to it the distress in industry, exacerbated by the mass migration of workers, and the State government finds itself with little option but to look at the Centre for liberal financial help, a stimulus package and statutory measures to help the industry.
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Chief Minister Y.S. Jagan Mohan Reddy had apprised Prime Minister Narendra Modi of the dire situation in the State, during a videoconference in April, and made a pitch for liberal financial aid. The State’s revenue had reportedly dipped to a mere ₹2 crore a day. “We could not pay full salaries for the month of March to our staff due to the grave financial crisis,” Mr. Reddy said during his interaction with the PM.
The revenue shortfall in A.P. in the wake of the lockdown was about ₹5,000 crore a month, informed Finance Minister Buggana Rajendranath Reddy. The slump in receipts include deep deficits in excise collections, sales tax, motor vehicles tax and revenue from stamp duty and registration. And the deficit is expected to continue in the month of May too, according to the minister.
While the actual calculations of the State’s finances and revenue deficit are yet to be confirmed, sources in the government said revenue receipts in the financial year 2019-20 were likely to be about ₹1.04 lakh crore as against the revenue of almost ₹1.15 lakh crore in the previous fiscal.
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COVID-19 burden
Despite the challenges, the government has spent about ₹1,330 crore on COVID-19 assistance to 1.33 crore white ration card holders in the State. In addition, it spent ₹1,400 crore on interest waiver to women’s self-help groups. The government has also made elaborate arrangements, including food and accommodation during the lockdown, for about 70,000 migrant workers across the 13 districts.
As a measure of support to industry during the current crisis, the State has paid ₹905 crore of industrial incentives, which were pending since 2014, to the MSME sector. Besides, it has waived ₹188 crore in power demand charges and decided to provide ₹200 crore in low-interest working capital.
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The A.P. government is estimated to have so far spent more than ₹10,000 crore on COVID-19 related activities, financial assistance and relief measures, the government sources, speaking on the condition of anonymity, revealed.
There was also no official statement by the State government on the extent of assistance given by the Centre to address the COVID-19 pandemic so far.
Central assistance
The Centre has extended financial assistance amounting to ₹10,947 crore to A.P. through various schemes to mitigate the impact of COVID-19, BJP State Secretary V. Jaya Prakash Narayana said in a statement.
To tide over the crisis, the State government wants the Centre to take a slew of measures to boost industry. In a letter to Mr. Modi on April 30, the chief minister listed A.P.’s contributions to the country’s economy including ₹98,983 crore worth of exports during 2018-19.
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Given the distress across the globe, the CM wanted the Centre to facilitate a fund to support MSMEs for liquidity needed to meet wage liabilities during the lockdown, allow a moratorium on payment of PF, ESI and gratuity for six months, provide for a 12-month moratorium on all repayments for MSMEs, release of delayed payments and waiver of minimum power charges among others.
On the GST front, Mr. Reddy suggested an increase in the threshold limit of GST compliance eligibility to an annual turnover of ₹100 lakh. He also sought several supportive measures for the textiles, auto components, pharma, metals and mining and food processing sectors. And besides a stimulus package, he also urged GST rate cuts.
