CAG Exposes Telangana’s Shaky Financial Health Under BRS Rule

Hyderabad: The Comptroller and Auditor General (CAG) of India has exposed a grim picture of the state’ financial health during the 10 years of the previous BRS government and flagged heavy dependence on land sales to sustain the economy.

In its latest report, 'State Finances 2023-24: Decadal Analysis', the country’s top auditor indicated that the current fiscal crisis was a result of a sustained financial mismanagement during the BRS regime. The report highlights how mounting debt, excessive borrowings and dependence on sale of lands pushed the state into a severe financial crisis.

According to the CAG, Telangana emerged as one of the most fiscally-stressed states in the country, topping several adverse indices. The state recorded near-continuous dependence on ways and means advances (WMA); and overdrafts from the Reserve Bank of India to manage routine cash flow mismatches. In 2023-24 alone, Telangana availed WMA and overdrafts of ₹98,097 crore and relied on this facility for 349 days in the year, the highest in the country, underscoring persistent liquidity stress despite being in revenue surplus.

The report noted a sharp increase in Telangana’s fiscal deficit over the years, particularly in 2020-21, 2022-23 and 2023-24, reflecting rising expenditure unsupported by commensurate revenue growth. In 2023-24, the fiscal deficit stood at 3.42 per cent of the Gross State Domestic Product, breaching the 3 per cent limit prescribed by the Fiscal Responsibility and Budget Management (FRBM) Act and indicating weakening fiscal discipline.

A major concern flagged by the auditor was the state’s growing dependence on non-tax revenue from sale of land and property to bridge budgetary gaps.

In 2023-24, Telangana received ₹16,478 crore from sale of land, property and miscellaneous receipts, accounting for nearly 69 per cent of its state non-tax revenue. Mineral royalties contributed ₹12,795 crore, or 23 per cent of SNTR, reflecting limited diversification of sustainable revenue sources.

Similarly, debt indicators revealed an alarming trend. Telangana’s public account liabilities rose by an extraordinary 1,987 per cent between 2014-15 and 2023-24, while its total combined liabilities increased by 405 per cent over the decade, one of the steepest rises recorded. Internal debt, the largest component of state borrowings, surged by 376 per cent during the same period, significantly increasing the burden of debt servicing.

Committed expenditure further strained finances, with interest payments consistently emerging as the second-largest component after salaries. In 2023-24, Telangana spent more than 10 per cent of its total expenditure on interest payments, indicating heavy debt servicing obligations that crowd out developmental spending.

The report also drew attention to the high level of guarantees extended by the state. Outstanding guarantees at the end of 2023-24 stood at ₹2.2 lakh crore, exceeding 10 per cent of Telangana’s GSDP, exposing the exchequer to substantial contingent liabilities.

On the revenue side, while Telangana ranked among the leading states in own tax revenue mobilisation, the CAG observed that growth in State Own Tax Revenue slowed in the post-GST period. Excise collections, though rising sharply from ₹3,809 crore in 2015-16 to ₹20,299 crore in 2023-24, masked deeper structural weaknesses in fiscal management.