Center red flags ‘disturbing trend’ in state finances

The Center has red-flagged “disturbing trends” in the finances of several states and cautioned them, citing the economic crisis in Sri Lanka and Pakistan. The alert was raised at a high-level meeting of the Center with all state chief secretaries in Dharamsala on June 16-17.

Higher budget borrowings by several states, increased future revenue, loans secured against public properties like hospitals, courts and parks and rising electricity arrears were flagged by the Center in a meeting chaired by Prime Minister Modi, ET reported. has learned. reserve Bank of India The paper had raised concerns about the build-up of fiscal tensions in several debt-ridden states. The Finance Ministry’s overview presented in the meeting highlights the worrying financial situation in several states. Off balance sheet/off budget borrowings were red flagged as a major ‘disturbing trend’ in this overview, collects ET.

Telangana leads the way with an off-budget borrowing of Rs 56,767 crore between 2019-20 and 2021-22, which is over 4.5% of its GDP. Sikkim and Andhra Pradesh’s off-budget borrowings were close to 2.5% of their GDP, while Uttar Pradesh and Kerala have taken budget borrowings of Rs 24,891 crore and Rs 10,130 crore respectively, data shared in the meeting showed.

“Some state municipalities are taking secured loans against properties such as parks, collector offices, taluk offices, courts, hospitals, etc. Entities which do not have revenue streams to service the loan, may seek state government guarantees and/or land guarantees. are availing loans on the basis of security or escrow of state revenue”, it was told in the meeting, ET has learned.

The states which have raised the maximum funds through escrow of future revenue between 2019-20 and 2021-22 are Telangana, Uttar Pradesh, Punjab, Madhya Pradesh and Himachal Pradesh. While AP’s fund raising is equal to 1.88% of the projected GSDP for 2022-23, UP stands at 0.87%, Punjab It has 0.46% of its GSDP, Madhya Pradesh at 0.21% and Himachal Pradesh at 0.05% of its GSDP.

unpaid electricity dues

The second major ‘troubling trend’ flagged off by the Center is the outstanding power dues. Excluding state-owned companies, the total dues of states/UTs to generation companies is Rs 1,01,442 crore – Rs 26,397 crore due to central power sector enterprises alone.

Another Rs 62,931 crore belongs to distribution companies. The discoms are, in fact, awaiting a subsidy of Rs 76,337 crore from the states, it was shared in the meeting. Noting that this is the major cause of continuing difficulties in the power sector, the Center cautioned that seldom implemented, tripartite agreements allow CPSE dues to be deducted from tax transfers to the state concerned. Till 31st May, 2022, Maharashtra Gencos of Rs 21,565 crore were followed by Tamil Nadu with overdues of Rs 20,990 crore, Andhra Pradesh at Rs 10,109 crore and UP with Rs 8,230 crore. The dues of government departments to distribution companies (DISCOMS) are equally due with Telangana at Rs 11,935. crore, Maharashtra Rs 9,131 crore, Andhra Pradesh Rs 9,116 crore and Karnataka 6,600 crore as on March 31.

The highest balance subsidy on account of DISCOMS from states has been recorded in Uttar Pradesh, which has an outstanding of Rs 18,940 crore, followed by Madhya Pradesh, Rajasthan and Punjab.