This story is part of
The Hindu Explains: From Kharif sowing to why U.S. wants India to import more

Telangana, where cost populism is met through borrowing

September 15, 2018 08:22 pm | Updated 08:22 pm IST

This week Election Commission officials assessed the poll preparedness of Telangana after Chief Minister K. Chandrasekhar Rao dissolved the Assembly and sought a fresh election months ahead of schedule. Riding on populist measures — the government has announced more than 450 schemes in four years — Mr. Rao decided to go early to the people to seek a second term.

What are the key schemes?

Populist schemes have been the order of the day in the State ever since Mr. Rao and his Telangana Rashtra Samithi took over the reins in 2014. Starting with a loan waiver to farmers in instalments spread over the last four years entailing ₹16,124 crore, the government announced sops for different sections periodically. Two of the latest schemes are Rythu Bandhu (farmers’ investment support scheme), involving an upfront payment of ₹8,000 an acre for two crop seasons a year, with a recurring cost of ₹12,000 crore every year, and Rythu Bima, for which the government will spend ₹976 crore annually on payment of premium for more than 30 lakh farmers. The government had already initiated other schemes like distribution of cattle to eligible members of the shepherds’ community and other backward classes with a huge subsidy of 50% to 75%. Add to this the promise of providing free power supply to the farm sector round the clock, with the government resolving to reimburse the cost incurred by the power utilities, estimated at over ₹5,000 crore. Coupled with the expenditure on the subsidies is the debt servicing burden, which in the Chief Minister’s own words was in excess of ₹2,000 crore every month, amounting to more than ₹20,000 crore a year.

Where will funds come from?

These schemes have been launched at a time when the State’s tax revenue for the financial year 2018-19 is pegged at ₹82,000 crore. Given the quantum of allocations for subsidies to different sections and the capital investment incurred through the construction of a series of major, medium and minor irrigation projects, which received an allocation of ₹25,000 crore, the State has kept the option of going for open market loans to the tune of ₹31,500 crore. The State, according to the Statistical Year Book 2017, had estimated expenditure on account of interest payment and debt servicing components to be around ₹11,338.6 crore, higher than the 10% limit fixed by the XIV Finance Commission on the total revenue receipts for availing relaxations under the Fiscal Responsibility and Budget Management Act. The government chose to borrow ₹3,750 crore as State Development Loan from the Reserve Bank of India in three tranches during the last one month alone, ostensibly to keep cash reserves ready for the second instalment of Rythu Bandhu due in October/November. It had already borrowed ₹6,000 crore for payment of the first instalment of ₹4,000 an acre to 52 lakh farmers.

What is the govt. saying?

Finance Minister Eatala Rajender, however, defended the huge allocations for subsidies, claiming that investment was being made on infrastructure development, quality education and health sectors. “These schemes are launched with due assessment of their feasibility. Spending on these schemes will ensure that money is in circulation and at least a part of it will come back to the government,” he said. The Mission Bhagiratha scheme for ensuring supply of safe drinking water to all households has been launched at a cost of ₹40,000 crore in view of the prevalence of water-borne diseases every season. “Consumption of safe drinking water will bring down the expenditure made through the Health Department,” he said. The health and hygiene kits being provided to girl students and making fine rice mandatory in mid-day meals entail some cost, but effective implementation of these schemes will bring about the transformation in the State that suffered for want of government support over the years. “These measures will ensure that there is no dependence on the government in the longer term,” he said.

Top News Today

Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in


Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.