The 13th Finance Commission today pointed out the "worsening of the fiscal management" in Andhra Pradesh even as Chief Minister Y S Rajasekhara Reddy detailed the achievements of the state.
The Commission has raised concerns at the cost overruns on irrigation projects, mounting losses of public sector undertakings and also the swelling subsidies bill, which could "potentially jeopardise Andhra Pradesh’s recent impressive fiscal achievements".
"The cost overruns on irrigation projects amount to a staggering Rs 6,127 crore as of March 2008 while the aggregate losses made by the public sector exceeded Rs 2,770 crore.
The fiscal burden on the state on account of subsidised rice supply is Rs 1,900 crore in 2008-09 and the subsidised power to agriculture ate up another Rs 2,385 crore," 13th Finance Commission Chairman Vijay L Kelkar has noted.
Speaking after Reddy listed his government’s achievements before the visiting Finance Commission team today, Kelkar referred to the reports of the state accountant general and said that apart from the cost overruns, many multi-purpose projects with a significant irrigation component, taken up as early as the 1960s and 1970s, remained incomplete.
"In addition, the disbursal of funds to the water users’ associations for maintenance of irrigation projects is consistently lower than the budgetary allocation. This calls for reflection," Kelkar noted and wanted the state government to establish a water regulatory authority on the lines of the state Electricity Regulatory Commission.
Observing that the state was the biggest consumer of central food subsidy, he said: "No one would deny the importance of ensuring food security to the poorest of the poor."
"However, both from a national perspective and with an eye to the prudential health of the public finances of the state, this aim is best secured in the medium term through improvements in the income and human capabilities..."
"Subsidies detract scarce resources towards the development of these capabilities and their prudent control and management is therefore essential."
Referring to the fiscal projections presented by the state for the 2010-15 period, the Finance Commission chairman said they prima facie indicate a "worsening of the state’s fiscal management".
"The trend growth rate (TGR) of revenue expenditure for 2010-15 is 14.7 (per cent) as against 12.4 per cent for the period 1999-2008. The difference is (that the) TGR for non-plan revenue expenditure is even higher, which is indicative of a worsening scenario," Kelkar said.
Kelkar said the central government was closely monitoring the evolving macro-economic situation and the "immediate challenges have been successfully addressed".
"India’s financial sector is prudentially sound. Inflation is under control; the balance of payments position also continues to be sound. The government has shown its willingness to enact significant monetary, fiscal and sectoral policy measures to minimise the negative impact on the real economy," Kelkar added.
