Fiscally challenged Telangana looks to land, liquor for revenues

Hyderabad: The Telangana state government is banking on land and liquor to mop up its revenues while drafting its upcoming budget 2021-22. This dependence became direr in the wake of the recent Union budget, which dealt a deadly blow to Telangana by imposing cuts in tax devolution, besides levying an agricultural cess on fuel.

The state government is estimated to lose Rs 5,000 crore due to a cut in share of its tax devolution and an additional Rs 300 crore on account of the Agri cess.

Taking into account the twin losses, the state government is now seriously considering selling off government lands and increasing liquor sales, as it is left with no other option to make up for the losses incurred, according to official sources in the finance department.

With realty booming across Telangana, especially after the launch of Dharani portal in November 2020, the state government wants to encash it by putting some prime government land parcels, especially on the city’s outskirts and neighbouring districts, for auction in 2021-22 to mobilise funds for the next fiscal year, the sources added.

After realty, liquor was identified as the next significant source of notching up additional revenues for the state. Though all sectors in the state were battered due to the Coronavirus pandemic, lockdown and subsequent slowdown, realty and liquor sectors led the recovery of the state economy and earned huge revenues for the state government.

The state government is currently netting over Rs 25 crore per day, on an average, through registration of properties, indicating a realty boom in the state. Despite the lockdown and slowdown in 2020, property registrations fetched Rs 2,806 crore for the state government till date in 2020-21.

Liquor has consistently come to the rescue of the state government, since the formation of Telangana in June 2014. The government earned an excise revenue of Rs 10,813 crore in the very first year of state formation, an increase of Rs 1,000 crore compared to Rs 9,800 crore earned in 2013-14, a year before the formation of a separate state. Excise revenues from alcohol further increased to Rs 20,000 crore in 2018 and Rs 25,000 crore in 2019.

The figures for 2020 are yet to be released, but it is estimated that excise revenues will cross Rs 30,000 crore by the end of the remaining two months of this fiscal.

The government had recently issued a notification to permit 159 news bars across the state from next week. Of these, 55 will be permitted in the GHMC limits, while 19 will be located in GHMC periphery and the remaining in districts. Telangana already has 800 bars and 27 clubs that serve liquor, besides 2,144 liquor shops.

The government would earn nearly Rs 50 crore through licence fees itself to set up bars at the average licence fee of Rs 30 lakh per bar.

The state government waited for the Union budget to kickstart its budgetary preparation exercise, with a fervent hope that the Centre would increase tax devolution to states, increase the FRMB limit to five per cent so that it could augment its financial resources to combat the Corona-induced financial crisis. However, all these hopes were dashed after the budget was unveiled.

The tax devolution, Telangana’s share in Central taxes, came down to 2.102 per cent for 2021-22 from 2.133 in 2020-21 as per the recommendations of the Fifteenth Finance Commission. In fact, it was on a higher side at 2.437 per cent in 2019-20, when the recommendations of Fourteenth Finance Commission were in force.

The state government was hoping to garner Rs 18,000 crore towards tax devolution in 2021-22. A thorough analysis done by the finance department on the Union budget concluded that Telangana would not get more than Rs 13,390 crore.

Rubbing further salt to wounds, the Centre has imposed an agri cess on petrol and diesel, and to ensure the additional cess does not burden motorists, the Centre reduced excise duty on fuel correspondingly.

Excise duty comes under Centre’s tax, which it shares with states as part of tax devolution. But the entire amount accrued through cesses go directly to the Centre and there is no need for the Centre to share a portion of cesses with the states.

This proved to be a double whammy for Telangana, which is now looking at sale of lands and liquor to cover up these losses.