Irrigation gets top priority in Andhra budget

Total expenditure pegged at Rs 63,527 crore; no new taxes proposed

The Andhra Pradesh government, in its annual budget for the year 2006-07 presented today in the Assembly, pegged the estimated plan and non-plan expenditure at Rs 63,527 crore, a steep increase of 28 per cent as compared with the revised estimates of Rs 49,624 crore for the current year.

Though, the government in its balance sheet for the new financial year managed to project a reduced revenue deficit along with a minuscule decrease in fiscal deficit apparently to comply with the State Fiscal Responsibility Act, its growing dependence on borrowings is evident from the fact that the percentage of increase in the estimated total revenue receipts for the new fiscal stood at only 22 per cent as compared with the much higher growth in estimated expenditure.

According to the budget estimates, the non-plan expenditure for the year 2006-07 rose to Rs 40,624 crore as compared with Rs 33,976 crore (revised estimates) for the 2005-06 fiscal, and the plan expenditure has been proposed to be hiked to Rs 19,551 crore from the Rs 13,530 crore for 2005-06 representing a steep increase.

While the plan outlay for 2006-07 is 30.78 per cent of the total expenditure, it is higher by 24.93 per cent of the annual plan of the current year.

The total expenditure has resulted in a reduced revenue deficit of Rs 995.84 crore as compared with Rs 1,117.95 crore in the present year, accounting for 0.4 per cent of the GSDP, while there is a marginal decrease in fiscal deficit at Rs 8,147 crore for the new fiscal as compared with the revised estimate of Rs 8,190 crore this year. This would be 3.25 per cent of GSDP, according to state finance minister K Rosaiah.

Undeterred by the heavy increase in the budget spending, the state government, led by Y S Rajasekhara Reddy, once again showed its commitment to the irrigation sector by raising the plan allocation to Rs 10,000 crore from Rs 6,507 crore (revised estimates), representing 51 per cent of the total annual plan outlay.

The social sector has been given the second most importance by allocating 28.83 per cent of the total budget. A marginal increase for education and health sectors has also been proposed.

While proposing a steep hike in the irrigation sector outlay, the budget made no new tax proposals or other means of raising resources.

While delivering the budget speech in the Assembly, Rosaiah expressed the hope that revenue from VAT and sales tax would increase by 19 per cent (Rs 23,867 crore) as against the actual projection of 18 per cent. The revenue collection from VAT and sales tax for 2005-06 fiscal is Rs 20,233 crore.

By the minister's own admission, the revenue receipts projection was only an optimism as by the end of January, the state had registered a growth rate of 14 per cent in VAT collections.

Though the minister painted a rosy picture of the state's financial position in his budget, despite heavy increase in spending, the situation can be salvaged if there is a substantial growth in Central receipts in the form of its share, grants-in-aids and other things.

The budget has projected an increase of Rs 8,038 crore in its share of Central taxes as compared to the Rs 6,990 crore for 2005-06 fiscal. Similarly, grants-in-aid from the Centre was pegged at Rs 7,184 crore during 2006-07 as compared with Rs4,476 crore for 2005-06.

Apart from these, the state would stand to benefit to the tune of Rs 2,683.74 crore in the form of interest relief on account of consolidation of central loans and reduction in the rate of interest to 7.5 per cent following the recommendations of the Tenth Finance Commission (TFC), Rosaiah said.

Further, based on the fiscal performance of the government in terms of reduction of revenue deficit, an incentive for the total debt relief amounting to Rs 3834.29 crore during the TFC award period of 2005-10 is also available and this incentive can be utilised at the rate of Rs 766.86 crore a year. This benefit will be available if the government reduces revenue deficit in each successive year and reaches revenue surplus by 2008-09.

Among the other interesting features, the state government at last stopped the legacy of showing power subsidies as part of the plan outlay as was done by the previous governments on account of new fiscal norms prescribed by the Tenth Finance Commission.

Accordingly, the government also reduced the plan outlay on power sector in the revised estimates for the current year by transferring Rs 1,689 crore power subsidy to non-plan expenditure. The government proposed Rs 1,507 crore subsidy to power sector during the new financial year.

Debt burden to rise to Rs 82,719 cr in 2006-07

The total public debt burden of the state is going to nearly double to touch Rs 82,719 crore in 2006-07 as per the budget estimates presented in the state legislative Assembly today. The total debt of the state in the year 2001-02 stood at Rs 42,492 crore.

The overall budgetary spending has been proposed to be increased by 28 per cent during the year 2006-07. The total outstanding loans of the state towards the fag end of N Chandrababu Naidu's tenure in 2003-04 spiralled to Rs 58,770 crore from Rs 19,969 crore in 1997-98.

State finance minister K Rosaiah, however, did not announce any initiatives to alleviate the growing debt burden of the state. In fact, the 2006-07 budget follows the reverse trend, say observers. The budget estimates proposed an increase in the total debts of the state to Rs 82,719 crore from Rs 74,533 crore in the current year, an increase of over 8,000 crore in one year.

It is interesting to note that Rs 7,983 crore from the government's proposed non-plan expenditure for the year 2006-07 is expected to go towards interest payments alone.