Centre red-flags ‘disturbing tendencies’ in states’ funds

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The Centre has red-flagged ‘disturbing tendencies’ in a number of states’ funds and cautioned them citing the financial disaster in Sri Lanka and Pakistan. This was alerted at a high-level assembly of the Centre with all state chief secretaries in Dharamshala on June 16-17.

Excessive off-budget borrowings by a number of states, escrowing of future income, loans secured in opposition to public belongings like hospitals, courts and parks and burgeoning energy dues had been flagged off by the Centre on the assembly chaired by prime minister Modi, ET has learnt.A latest RBI paper had raised issues concerning the constructing fiscal stress throughout many debt-ridden states. A finance ministry overview introduced on the meet make clear the worrying monetary state of affairs throughout a number of states. Off stability sheet/ off price range borrowings had been red-flagged as a key ‘disturbing pattern’ on this overview, ET gathers.

Telangana leads with Rs 56,767 crore of off price range borrowings between 2019-20 and 2021-22, which is over 4.5% of its GDP. Sikkim and Andhra Pradesh’s off price range borrowings had been close to 2.5% of their GDP whereas Uttar Pradesh and Kerala have indulged in off price range borrowings of Rs 24,891 crore and Rs 10,130 crore respectively, information shared on the meet confirmed.

“Some states are taking loans secured in opposition to belongings like municipal parks, collector’s workplace, taluk workplace, courts, hospitals and many others. Entities which would not have income streams to service the loans are getting loans based mostly on state authorities ensures and/or safety of land or escrow of state income”, it was identified on the assembly, ET has learnt.

States which raised largest quantity of funds by way of escrowing of future income between 2019-20 and 2021-22 are Telangana, Uttar Pradesh, Punjab, Madhya Pradesh and Himachal Pradesh. Whereas AP’s fund mobilisation is as excessive as 1.88% of its projected GSDP of 2022-23, UP is at 0.87%, Punjab follows at 0.46% of its GSDP, Madhya Pradesh at 0.21% and Himachal Pradesh at 0.05% of its GSDP.

UNPAID POWER DUES

The second main ‘disturbing pattern’ flagged off by the Centre is the burgeoning unpaid energy dues. Complete overdues of states/UTs in the direction of era corporations, excluding state-owned ones, is Rs 1,01,442 crore — Rs 26,397 crore is because of Central Energy Sector Enterprises alone.

One other Rs 62,931 crore is because of distribution corporations. Discoms, in reality, await Rs 76,337 crore stability of subsidy from states, it was shared on the assembly. Observing that that is the prime reason for continued difficulties within the energy sector, the Centre warned that whereas not often invoked, tripartite agreements permit for CPSE dues to be deducted from tax devolution to the state involved. As on Could 31, 2022, Maharashtra led in overdue in the direction of Gencos at Rs 21,565 crore adopted by Tamil Nadu at Rs 20,990 crore, Andhra Pradesh at Rs 10,109 crore and UP at Rs 8,230 crore.Authorities departments’ excellent dues to distribution corporations (DISCOMS) are equally worrying with Telangana owing Rs 11,935 crore, Maharashtra at Rs 9,131 crore, Andhra Pradesh at Rs 9,116 crore and Karnataka at Rs 6,600 crore as on March 31.

The best stability subsidy on account of DISCOMS from states is recorded in Uttar Pradesh with Rs 18,940 crores due adopted by Madhya Pradesh, Rajasthan and Punjab.

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