AP Is Heading To Financial Emergency?

The Comptroller and Auditor General of India (CAG) reportedly has issued a big warning to Andhra Pradesh that the state is heading towards a financial emergency. Apparently, CAG said that the streak of debts and the revenue deficit continues to increase. And if the situation prevails, the state would have to declare a financial emergency.

Pointing out the AP budget allocations, the audit body said the state government in the budget proposals tried to adjust the revenue deficit to a total of Rs 17,036.15 crores for the financial year 2022-23 but the revenue deficit for the entire year has been exceeded by the finance department in just two months.

AP government has submitted the financial accounts of April and May months of this financial year to the CAG. On auditing these accounts, the revenue expenditure will be Rs 17,036.15 crores than the revenue income for the whole year. The revenue deficit has reached Rs 21,924.85 crores in the above mentioned months and there is a revenue deficit of 128 percent compared to the estimates.

The CAG explained that in any state, the income should be high and debts should be limited to a small percentage. Ironically in AP, the situation is that the debts exceed revenues in the new financial year. The CAG report cited that the income from all the possible sources stood at Rs 17,975.28 crore while the state government had borrowed Rs 22,960.96 crore.

When the income and debts are combined, the total tunes up to Rs 39,900 crore. Simultaneously CAG has explained that the capital expenditure i.e. the expenditure incurred on creating assets is only Rs 996 crores which is very low. Based on these observations, the CAG warned that if the state takes steps towards incurring more debts, it will lead to a financial emergency.

These are clear danger bells from CAG on AP’s financial position. This is not the first time that AP’s financial matters hit the headlines but the state government continues to press that all is well. We are yet to hear the first reaction from the AP government on CAG’s latest report.