The Telangana government is reevaluating its fiscal policies by identifying and scrapping schemes deemed ineffective. This strategic shift aims to redirect resources towards more impactful investments, providing lasting benefits for the state’s residents. This comprehensive review is part of the Fiscal Policy Strategy (FPS) for 2024-25, where the government has made clear its intention to retain only the most beneficial programs.
Rationalizing State Schemes for Better Allocation of Resources
The state government has conducted a thorough examination of all ongoing schemes, with an emphasis on retaining only those that offer substantial benefits. Several schemes that have outlived their usefulness have already been terminated, while others with similar objectives have been merged to streamline operations. This rationalization process aims to ensure that resources are allocated towards projects that align with the state’s current priorities.
In the FPS statement, it was noted that the focus would be on completing existing projects rather than initiating new ones. This approach underscores the commitment to maximizing the utility of available resources. One notable potential cut includes the flagship sheep distribution scheme, signaling a shift in focus towards more productive initiatives.
Exploring Non-Tax Revenue Opportunities
A significant aspect of the fiscal strategy involves enhancing non-tax revenue streams. Royalties and seigniorage fees from mines and minerals remain major sources of income. The government is also exploring other avenues to increase non-tax revenues, ensuring that these funds contribute to income-generating assets and capital expenditure.
Enhancing Tax Compliance through Digital Transactions
Improving tax compliance is another priority, with a focus on encouraging digital transactions. This move aims to streamline the tax collection process and reduce leakages. The state anticipates substantial revenue from excise, stamps and registration, transport, and mines sectors, targeting nearly Rs 60,000 crore to fund welfare schemes and key projects. However, achieving this without increasing taxes or borrowing heavily presents a significant challenge.
Revenue Projections and Financial Challenges
The budget presented by Finance Minister Mallu Bhatti Vikramarka includes ambitious revenue targets. The projected revenue for excise stands at Rs 25,618 crore, stamps and registration at Rs 18,229 crore, transport at Rs 8,478 crore, and mines at Rs 6,590 crore. These figures reflect a substantial increase from the previous fiscal year, indicating the government’s determination to boost revenue.
Despite assurances from Excise Minister Jupally Krishna Rao that liquor prices will not rise, the government aims to increase revenue by plugging leakages and possibly permitting elite bars. However, higher charges for property transactions could burden the public, as the administration considers revising government land values and stamps and registration charges.
Addressing Borrowing and Debt Servicing
The budget has projected borrowings at over Rs 62,000 crore, with approximately Rs 31,000 crore allocated to servicing existing loans. This allocation leaves limited funds for new initiatives, highlighting the need for efficient resource management. The government expects Rs 21,635 crore in central grants, Rs 35,200 crore from non-tax revenues, Rs 33,449 crore from VAT, and Rs 50,763 crore from GST. Nonetheless, financial experts caution that these funds may still fall short, necessitating additional borrowings or tax increases.
Strategies for Additional Revenue Generation
Financial expert and World Bank consultant GK Rao suggests that the government can explore long-term bonds, form corporations for open market borrowings, and consider mortgaging or auctioning state land to raise funds. The success of these strategies will depend significantly on Centre-state relations, especially regarding central funds and GST.
Importance of Central Government Support
The counter guarantee from the central government is crucial if Telangana seeks loans from international financial institutions like the World Bank. Although Chief Minister A Revanth Reddy has expressed dissent over the Union budget’s perceived injustice, financial experts believe that participating in forums like NITI Aayog could benefit the state financially.
Conclusion
Telangana’s fiscal strategy emphasizes the need for efficient resource allocation, improved tax compliance, and exploring new revenue streams. The government’s focus on rationalizing schemes and prudent financial management aims to ensure sustainable development and long-term benefits for its residents. As the state navigates these financial challenges, cooperation with the central government and innovative revenue generation methods will be pivotal in achieving its fiscal goals.