Telangana set to go for overdraft to tide over present financial crisis
Hyderabad: The revenue-surplus state is set to go for an overdraft for the first time to tide over the present financial crisis. The state’s revenues have been dwindling every day since November 8, when high-value notes were demonetised.
Though the state can avail ways and means advances from the RBI to mobilise funds, the finance department has stated this would not be enough to meet the financial commitments and the government needs to seek an OD facility from the RBI to pay salaries of employees and meet day-to-day expenses.
60 per cent drop in tax revenue feared
Ways and Means Advances are intended to provide a cushion to the states to carry on with their essential activities and normal financial operations.
The RBI, as the banker to the state governments, provides financial accommodation to states to tide over temporary mismatches in the cash flow of their receipts and payments. When advances to the state governments exceed WMA limits, an OD facility is provided.
The RBI charges 7.5 per cent interest for WMA and 2 per cent more for OD. “Telangana state government earns Rs 4,500 crore per month on an average through its own tax revenues. It gets another Rs 1,000 crore per month on an average from the Centre towards tax devolution. This month the state's tax revenue is expected to fall by 50 per cent due to demonetisation as there’s hardly been any business activity since November 8 due to the currency crisis. There is no clarity how much money the Centre would give under tax devolution this month since it imposed a Rs 450-crore cut last month without any intimation,” said sources in Finance department.
The immediate priority of the state government is to pay salaries for staff, which account for Rs 2,500 crore. Another Rs 1,100 crore is needed to pay interest on loans.
"The income from all sources is not expected to touch even Rs 3,000 crore this month. Besides, there are other financial commitments – to adjust funds for subsidy rice, social security pensions, purchase of power etc., which cannot be deferred. To meet all these financial commitments, going for OD is a must in the wake of reports that it would take at least four months to recover from the impact of demonetisation," sources added.
Chief Minister K. Chandrasekhar Rao will be in New Delhi on Saturday to meet Prime Minister Narendra Modi and Union finance minister Arun Jaitley on Saturday to discuss the issue. Finance minister Etela Rajender said, “The CM will take up all these issues with the Centre and seek adequate financial assistance to make up for the loss.”
