Jagan may have won the battle but a real war waits ahead

The YSR Congress President Y S Jagan Mohan Reddy may have won the electoral battle but the real war is ahead of him. A near-empty coffers, an unresponsive Centre, mounting debt burden, unfinished projects and the capital city mess are the key challenges before the new government. The state’s finances are in a mess while the people’s expectations are sky high.

After leading his party to a landslide victory, bagging 151 seats in the 175-member Assembly and 22 out of 25 Lok Sabha seats, Jagan now has an unenviable task of not only putting the economy on track but also fulfilling a string of populist promises he has made to the people that involve huge cash dole-outs.

Mounting debt

After bifurcation in 2014, the residuary Andhra Pradesh started its journey with a revenue deficit of ₹16,000 crore and its debt burden has been mounting at an alarming pace since then.

When Chandrababu Naidu took over the reins in 2014, the state’s debt burden stood at ₹97,000 crore. Now, it has touched ₹2.58 lakh crore. The interest payment alone comes to ₹20,000 crore per year.

The Centre has provided a deficit grant of about ₹30,000 crore from 2014-15 to 2019-20 to balance the deficit budget. But, no conscious effort was made by the previous Telugu Desam Party (TDP) government to reduce the revenue expenditure and adopt prudent practices. There were also questions raised over the way the special grants from the Centre were spent. The ₹2,500-crore central grant for construction of the new capital city has yielded only a temporary Assembly building and a High Court building while other major components of the capital project are yet to take off.

Overdrafts, loans exceeding the FRBM (Fiscal Responsibility and Budget Management) norms, loans in the name of corporations, special purpose vehicles and government loan bonds were taken at will. The payment is pending to contractors for bills worth ₹25,000 crore and this includes works already executed and supplies provided.

In the first month of this financial year, the state government had taken an overdraft of ₹8000 crore and faced a snub from the Reserve Bank of India and the Union Finance ministry for its “financial indiscipline”.

As if the precarious finances were not enough, Jagan Mohan Reddy announced hike in old age pensions from ₹2,000 to ₹3,000 per month, soon after taking the oath on May 30.

Along with drawing up plans to strike a balance between the revenues and expenditure, the new government needs to mobilise additional funds for implementing the populist schemes announced by the YSRCP to beat the TDP at its own game.

Harsh reality

Jagan needs to reconcile to the harsh reality of an unresponsive central government as far as his demand for Special category Status (SCS) is concerned. The Centre has made it amply clear that no state would be accorded special status in future as such a categorisation has become infructuous in the light of the report of the 14th Finance Commission.

Since the NDA has a comfortable majority and doesn’t need the support of regional parties, Jagan cannot expect to mount pressure on the Union government to concede the demand.

Though the emotive issue of special status was one of the key campaign themes in Andhra elections, the new government needs to look beyond the rhetoric and get down to the business of clearing up the economic mess through effective governance and prudent financial management.

“We are aware of the reality. The NDA doesn’t need our support or anybody’s support for that matter. We can only keep on requesting it to grant special status because it was a promise made by both the national parties on the floor of the Parliament. And, we need it to stabilise ourselves and attract industrial investments,” Jagan said.

The YSRCP supremo is aware of his political compulsions and has adopted a conciliatory tone with regard to his equation with the Centre. “Though Modi doesn’t need our support, I have requested him to be magnanimous and help our state to tide over the difficult situation. He is already in a position of strength. And, if someone in that position displays magnanimity, it will be remembered,” the Chief Minister said.

Confrontation with the Centre is certainly not an option for Jagan as he has inherited messy finances and needs generous help from the Union government to fund the ongoing projects as mentioned in the AP Reorganisation Act.

“If the NDA government’s actions are good for people, we will support even though they don’t require our numbers,” he said, indicating the nature of his future engagement with the Centre.

Moreover, he cannot afford to antagonise the BJP leadership with the illegal assets case still hanging over his head. Jagan’s political survival will largely depend on how deftly he manages his equation with the Centre in the days ahead.

Question mark over mega projects

While shifting the location of the state capital Amaravati from the Vijayawada-Guntur region may be impractical and can lead to a bigger mess, the Chief Minister hinted at constituting a judicial commission to review all major projects and opting for fresh tenders for all the projects that are yet to be grounded.

Sources close to Jagan said that his government would soon approach the High Court chief justice to spare a sitting judge to head the proposed judicial commission.

“We will go for fresh tenders in a transparent and open manner only after the judicial commission clears the projects. We will clean up the whole system and usher in corrupt-free and transparent governance. It will become a role model for the country,” Jagan said.

Resolving the financial burden that the capital project has imposed will be one of the biggest challenges of the new government.

The multi-crore Polavaram project on river Godavari is another contentious project with the YSRCP leaders alleging massive corruption in awarding the contracts.

Nearly, ₹16,000 crore has already been spent on the project and 65 percent of the works on the dam have been completed. Since it was listed as a national project under the AP Reorganisation Act, the Centre agreed to bear the cost but there is dispute over the realistic cost estimate. The original cost of the project, according to 2010-11 rates, was ₹16,000 crores but got subsequently escalated to ₹55,548 crore. The previous TDP government claimed that it was because a major component of the revised estimate – ₹33,000 crore – was towards relief and rehabilitation.

In February 2019, the Technical Advisory Committee of the Central Water Commission cleared the revised estimate but now the Union Finance ministry and the Cabinet has to approve it.