Bengaluru: The outbreak of coronavirus and the lockdown have hit relatively prosperous and industrialised southern states hard. Except Kerala, Karnataka, undivided Andhra Pradesh (now Telangana and AP) and Tamil Nadu have been growth engines of India for a long time. After demonetisation and GST implementation, these states have been facing a serious revenue crunch.
The sudden outbreak of covid-19 has worsened the situation across the southern states, even forcing some to cut the salary of public representatives and government employees.
Since all commercial activities are completely shut, revenues from GST, registration, stamp duties, transport and excise have dried up, putting the state’s economy in grave danger.
With limited resources, all five states have been fighting coronavirus. The Centre had last week released some money from the State Disaster Relief Fund (SDRF) to all asking them to use the same for covid-19 related expenses. But, the money is so small and the states are scrambling for funds in the absence of any economic activities. Nonpayment GST share to states have added to the worsening financial situation.
According to rough estimates, each state requires a minimum of Rs 10,000 crore to fight the deadly virus, if there is no massive community spread.
The state is yet to get over Rs 5,000 crore from the Centre as its GST collection share for January–March quarter. Even the October-December quarter share has also been partially paid to the state. It is also waiting for several other grants or share from the Centre, which have complicated the economic situation further.
Karnataka had witnessed two successive flood years in 2018 and 2019. The estimated loss is over Rs 50,000 crore and the state has not got any substantial help from the Centre.
The worried chief minister BS Yediyurappa, who also holds the Finance portfolio, has hinted at slashing the salaries of government employees to raise some money. The main opposition Congress claims that the Centre owes Karnataka over Rs 20,000 crore under various schemes.
The situation is no different in TN. After the lockdown, CM Edappady Palanisamy announced several welfare measures to help the people such as Rs 1,000 for every family card holders, free supply of rations, including rice, sugar, cooking oil, pulses, rations for un-organised sector workers from others states, transgender people.
The measures also include provision of subsidized food at Amma Canteens and Arrangements to provide food to the homeless across the state. The farmers and daily wagers are the worst affected. Farmers who cultivated vegetables, fruits, flowers have not been able to sell their produces. Daily wagers are struggling to make both ends meet.
The CM has demanded an immediate release of Rs 10,000 crore from the Centre to fight coronavirus. He is yet to decide on slashing the salaries of public representatives and government employees. The current outstanding amount from the Centre to TN is Rs 12,263 crore.
Telangana CM KCR was the first to go for a drastic measure of slashing the salaries of public representatives and government employees.
The state is yet to get an outstanding amount of Rs 3,731 crore under devolution. The pending bills to various contractors is alone over Rs 20,000 crore.
So far, the state government has allocated Rs 500 crore to fight covid-19. The Centre is yet to pay the assured Rs 500 crore for this purpose.
The much touted Raitu Bandhu scheme is yet to pay about Rs 2,000 crore to farmers. Agriculture loan waiver is also still pending.
Among the all five states, AP is facing the worst financial crisis since the bifurcation of state in 2014. The Centre is yet to pay about Rs 3,500 crore under devolution package. AP has allocated Rs 408 crore fund to tackle covid-19 from its own meagre resources. The state owes over Rs 18,000 crore to contractors for various works.
Like its northern neighbour Karnataka, the state has witnessed two devastating floods of the century in both 2018 and 2019, causing a huge financial crunch. Unlike other states in the South, Kerala does not have any major industries.
According to high level sources in the finance department, Kerala should get Rs 7,500 crore from the Union government. This is under three heads: 1. GST compensation 2. Funds to MGNRES and 3. Paddy Procurement. However, this is not accurate as the GST compensation is decided by the Union government. So this can be treated as a projection from Kerala’s side, they claim.
If the coronavirus spread does not stop and the lockdown continues, the growth engine states will face a never seen before kind of situation, the experts warn.
(With inputs from Ramana in Hyderabad, Chandrakanth in Thiruvananthapuram and Yuvaraj in Chennai)
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