Fund-starved Andhra govt eyes lottery route to raise resources

The Y.S. Jaganmohan Reddy-led Andhra Pradesh government is exploring the feasibility of raising resources for the cash-strapped state through the lottery business, said two people aware of the development.

This comes amid dwindling fund transfers from the Centre against the backdrop of the economic derailment caused by the coronavirus pandemic and limited avenues for states to raise taxes after the introduction of the goods and services tax (GST) in 2017.

At present, 13 states, including Goa, Sikkim and Arunachal Pradesh, run lotteries.

“The state needs revenue and this (running lotteries) is being explored,” said one of the people mentioned above.

The tax collections of states took a hit during the prolonged lockdown and the Centre’s GST revenues too collapsed, resulting in a double whammy for the states.

“There is a genuine need to raise resources,” said the second person mentioned above, who also did not want to be named.

With the cash-strapped state unable to meet its outstanding liabilities, the YSR government is looking at options beyond raising taxes on fuel and liquor. Andhra Pradesh raised alcohol prices by around 75% during the lockdown, to offset drastic revenue shortfalls because of the coronavirus lockdown.

Queries emailed to the Andhra Pradesh chief minister’s office on Sunday remained unanswered till press time.

The Andhra Pradesh government has been exploring financial solutions to shore up revenues. A case in point is a plan to transfer the assets of state power generation companies (gencos) and distribution companies (discoms) to the Andhra Pradesh Power Finance Corp. Ltd to raise funds at competitive rates, which may also help clear its power sector dues, Mint reported on 16 January.

In July last year, the Andhra Pradesh government released a white paper accusing the previous state government of mis-governance, financial mismanagement, and neglect of investment in human and physical capital. The revenue surplus, which was nearly 1% of gross state domestic product in 2006-07, declined to 0.24 % in the subsequent years, the white paper pointed out.

States have relied heavily on borrowing money from the markets to combat the covid-19 health crisis, but they have hit the borrowing ceiling. As part of the announcement made for the ₹20 trillion stimulus package, the borrowing limit for states under the Fiscal Responsibility and Budget Management Act (FRBM) has been increased to 5% of gross state domestic product (GSDP) from 3% at present for FY21, subject to them carrying out specific reforms.

“Financial guidelines need to be rewritten given the present scenario. Like the FRBM Act, or limitations on borrowing by states. The government should not be worried about inflation and new rules need to be looked at,” the state’s information technology and industries minister Mekapati Goutham Reddy said in an earlier interview.

The Andhra Pradesh government also plans to decentralize the capital between Amaravati, Visakhapatnam and Kurnool.

State governments across India are desperately looking to boost revenues and have implemented a range of measures, including raising taxes on fuel and bumping up liquor cess.

Utility of goods has been a key criteria guiding indirect tax policies of governments.