CAG on Telangana State Finances Audit Report 2024 Key Findings, The financial health of Telangana has come under scrutiny following a recent report by the Comptroller and Auditor General of India (CAG). The report highlights alarming trends in the state’s financial management, including a significant rise in total liabilities, unsustainable debt repayments, and a growing debt service burden. These factors collectively paint a concerning picture of Telangana’s fiscal stability for the financial year 2022-23.
Escalating Liabilities and Debt Concerns
The CAG report, presented in the state legislative assembly by Finance Minister Mallu Bhatti Vikramarka, reveals that Telangana’s total outstanding liabilities reached ₹4.68 lakh crore by the end of 2022-23. This figure includes ₹3.49 lakh crore in budget-accounted liabilities and an additional ₹1.18 lakh crore in off-budget borrowings. The outstanding loans represent 35.64% of the state’s Gross State Domestic Product (GSDP), exceeding the 15th Finance Commission’s recommended limit of 29.70%.
In the coming decade, Telangana faces the daunting task of repaying ₹2.67 lakh crore as principal and interest on market borrowings. Notably, this amount excludes ₹19,210 crore in principal repayments due to other financial institutions. Additionally, the state facilitated ₹17,829 crore in further loans to various entities, raising questions about fiscal responsibility and sustainability.
Off-Budget Borrowings: A Double-Edged Sword
A significant portion of Telangana’s market borrowings has been used to provide loans and advances to Public Sector Undertakings (PSUs), Special Purpose Vehicles (SPVs), and Autonomous Bodies (ABs) for servicing off-budget borrowings. This practice raises serious concerns about the state’s long-term debt sustainability. The CAG report warns that net public debt available to the government may become negative after accounting for off-budget borrowing servicing, exerting considerable pressure on state finances.
Budgetary Management: A Flawed Approach
The CAG report highlights critical lapses in Telangana’s budgetary management, emphasizing the state’s increasing reliance on off-budget borrowings and the allocation of market borrowings for debt servicing. Such practices cast doubt on the long-term sustainability of Telangana’s financial strategies.
Unapproved Expenditures and Budgetary Integrity
One of the most glaring issues identified by the CAG is the incurring of substantial expenditures without obtaining budgetary approvals. The report lists five significant instances, including the takeover of state power distribution utility losses under the Ujwal DISCOM Assurance Yojana (UDAY), where expenditures were made without proper budgetary provisions. The state government incurred ₹8,985 crore across 48 different sub-heads without budgetary approval, undermining legislative authority and financial discipline.
The Finance Department’s failure to obtain necessary approvals for expenditures, despite being aware of the commitments, reflects a disregard for proper budgetary procedures. This pattern of unauthorized spending undermines the system of budgetary control, leading to financial indiscipline in managing public resources.
The Impact of Unrealistic Revenue Projections
The CAG report also criticizes Telangana’s unrealistic revenue projections, particularly in non-tax revenue and grants-in-aid from the Central Government. The state estimated a non-tax revenue of ₹25,422 crore for 2022-23, but the actual receipts amounted to only ₹19,554 crore. A significant portion of this shortfall resulted from optimistic projections of land and property sales, which fell far short of expectations.
Grants-in-Aid: Overestimation and Reality
Similarly, the state government projected ₹41,002 crore in grants-in-aid from the Centre but received only ₹13,179 crore. Unrealistic projections, including a special package and additional Central assistance, were not realized, contributing to a persistent overestimation of revenue sources in the budget.
Unspent Allocations and Flagship Schemes
Despite substantial allocations for various schemes, significant portions remained unspent, further exacerbating Telangana’s financial challenges. For instance, ₹11,000 crore earmarked for constructing two-bedroom houses and ₹1,000 crore each for sheep and goat development and oil palm cultivation remained unused. Notably, flagship schemes like Telangana Dalit Bandhu and debt relief for farmers also experienced significant unspent provisions, amounting to ₹15,700 crore and ₹3,964 crore, respectively.
Misjudged Receipts and Inter-State Settlements
The revised budget estimates for 2022-23 included a projection of ₹7,500 crore as inter-state settlement receipts, which were not realized. This amount pertained to electricity dues owed by Andhra Pradesh power companies to Telangana power companies, not to the state government itself. This misjudgment highlights the need for more accurate financial forecasting.
Conclusion: Navigating Financial Challenges
The CAG report underscores the urgent need for Telangana to address its financial management practices and prioritize fiscal discipline. The state’s growing debt, coupled with unauthorized expenditures and unrealistic revenue projections, threatens its financial stability. To ensure long-term fiscal sustainability, Telangana must adopt more prudent budgetary practices, improve financial forecasting, and reduce reliance on off-budget borrowings.
In conclusion, while Telangana’s financial challenges are significant, they are not insurmountable. By implementing sound fiscal policies and strengthening budgetary oversight, the state can pave the way for a more sustainable financial future.
