Telangana to assess note ban hit, plans to cut expenses as revenues dwindle

Hyderabad: After waiting for 50 days post-demonetisation, the Telangana state government has decided to assess the real impact of the note ban on the state economy.

The state has not felt the impact of the note ban as yet because the revenue realised in November and December were from the earnings of the previous months like September and October.

However, the government could feel the pinch in January as it could not realise estimated tax revenue due to lower sales in November and December.

Chief Minister K. Chandrasekhar Rao has asked finance officials to prepare a report on the sector-wise impact of demonetisation. This assessment is expected to help the government in ascertaining budgetary cuts required for the next three months of the current financial year so as to conserve cash.

In the ongoing Assembly session, Mr Rao said, “The impact of demonetisation was not felt so far since we could run the show with the revenue earnings from the months prior to demonetisation. But the real impact of demonetisation would be felt in January as the earnings fell in November and December, primarily due to a halt in commercial and realty transactions due to cash crunch.”

The state normally earns Rs 8,000 crore every month including the Centre’s share of taxes and mandatory expenditure on salaries, pensions for staff and loan repayments total Rs 5,500 crore. However, because of demonetisation, the government’s earnings could halve in January.

“We are fortunate that the revenue collection from real estate and excise sectors has recovered in December after a steep fall. However, the commercial taxes sector, which remains the major contributor for the state's revenue is yet to recover completely,” finance minister Etela Rajender said.

The business transactions came down due to cash shortage. But with introduction of cashless transactions, the sector is slowly recovering. We are assessing the loss caused to the commercial tax earnings,” he said.

The earning from the stamps and registrations department used to be Rs 15 crore per day, which fell to less than Rs 3 crore after the note ban. It has increased to Rs 11 crore recently.

The government could spend only half of the Rs 1.29 lakh crore Budget (2016-17) so far and wants to speed up expenditure in the next three months.

However, this seems to be a difficult task considering the slow down in economy, unless the Centre comes to its rescue by offering compensation for revenue loss.