REPORT OF 10th PAY REVISION COMMISSION Andhra Pradesh 2014

Volume – I

P.K. AGARWAL, I.A.S., (Retd.)

Pay Revision Commissioner

CHAPTER – I

 INTRODUCTION

01.01              In  response  to  the  representations  received  from  several Associations  representing  Government  employees  for a review  in pay scales, the Government of Andhra Pradesh constituted the Tenth Pay Revision Commission Vide G.O.Ms.No.95, G.A. (Spl.A)Department,dated: 28.2.2013. The Government also appointed Sri Pradip Kumar Agarwal, IAS (Retd) as Pay Revision Commissioner and notified the following terms of reference for the Commission:

(i)          To evolve the principles which may govern the structure of emoluments and the conditions of service of various categories of employees of the State Government, Local Bodies and Aided Institutions, Non‐teaching staff of the Universities  including  Acharya  N.G.  Ranga  Agricultural  University, Jawaharlal Nehru Technological University, Work charged employees and full‐time contingent employees, which have a financial bearing taking into account the total packet of benefits available to them and suggest changes therein  which  may  be  desirable  and  feasible;  The  Commission  however shall,  not  deal  with  the teaching  staff  in Government  Colleges  and Government  Aided  Private  Colleges  drawing  UGC/AICTE  and  ICAR  scales. The  Commission  shall  also  not  deal  with  the  officers  of A.P.  State  Higher Judicial Service and A.P. State Judicial Service who are drawing Pay Scales as recommended by the First National Judicial Pay Commission.

(ii)         To examine as to what extent the existing DA may be merged in pay and, to evolve consequent new set of pay scales merging DA therein and to suggest the mode of fixation of pay in the Revised Pay Scales.

(iii)      To study the Automatic Advancement Scheme as modified from time to time keeping in view the anomalies that have arisen during the implementation  of the said scheme and also to examine whether the said scheme should continue in its present form and to make the recommendations in this regard.

(iv)        To  examine  the  need  for  various  Special  Pays,  Compensatory  and various other Allowances and other perquisites in cash or kind now allowed and to make recommendations  regarding  their continuance or otherwise and if continuance is recommended what modifications, if any  are  deemed,  desirable  with  regard  to  their  rates,  terms  and other conditions which should govern them in future.

(v)       To examine and review the existing pension structure for pensioners, and make recommendations which may be desirable and feasible.

(vi)        To   examine   the   recommendations   of   the   OMC   constituted   vide

G.O.Ms.No.142, G.A. (Spl.A) Department, dated: 07.03.2012.

 (vii)             Review  of the existing  human  resources  of all departments  in tune with the contemporary requirements including contract/ outsourcing personnel.

(viii)    To give its recommendations on any other matter referred to it by the State Government during the tenure of its office.

(ix)        In formulating  its recommendations,  the Commission  shall take into account the overall financial position of the State.

01.02. The Pay Revision Commission commenced its work on 13.3.2013 and issued a Press note requesting the Service Associations/ Individuals/ Pensioners’  Associations  and  employees  local  bodies,  including  Zilla Grandhalaya  Samsthas,  Aided  Institutions,  Universities  including  Jawaharlal Nehru Technological and Acharya N.G. Ranga Agriculture University of the State Government employees, to put forth grievances before the Commission by 30th April,  2013.  Later,  on  the  request  of  several  associations,   the  period  for submission of grievances was extended to 31st  May, 2013 and again to 29‐06‐2013.   The Commission  also sent a Questionnaire  covering various aspects of the ‘Terms of Reference’ to various associations, Unions, Secretaries to Government and all Heads of the Departments.  The Commission requested all the respondents to send replies to the questionnaire by 31st May 2013. The Pay Revision Commission followed a flexible approach with regard to receipt of representations and allowed considerable time and freedom to the individuals and  associations  to  present  their  memorandum  and  make  presentations  in person.  The Commission also addressed all the Heads of the Departments to furnish information in Proforma   I, II, III and IV with a brief right up on the Department. The Heads of the Departments were also requested to appoint a liaison officer to deal with the Commission and to furnish a copy of the latest service rules, special pays and special allowances, by 30th April, 2013.   The working of the Commission was greatly strengthened after the Government appointed  Sri  M.Purushotham  Reddy,  I.A.S(Rtd)  as  Secretary  to  the  PRC  on19.9.2013.

01.03.               The Commission  in all received 849written  representations  and it organized     761 meetings with the Service Associations, Unions and even individuals who had given representations in writing. These meetings were commenced on 5.7.2013 and continued till the middle of December, 2013. The contents of written representations  were analyzed and clarifications sought in respect of about 800 categories of services. These meetings were found to be extremely useful and a number of issues got clarified. Many of these meetings were attended by the concerned Special Chief Secretaries/ Secretaries and the Heads of Departments and by the Office Bearers of Employees’ Unions/Associations  who  all  made  very  valuable  contribution  to  the Proceedings of the Commission.

CHAPTER­II  Pay Revision Commissions – An Overview 

02.01                Since the formation of Andhra Pradesh Government have, so far, set  up  ten  Pay  Commissions  while  in  Government  of  India  constitution  of Seventh Pay Commission has recently been announced.  While the Government of India has constituted  the Commission  once in 10 years the practice in the State  since  1974  has  been  to  have  a Commission  once  in  5‐6  years.  A brief history  of  the  Pay  Commissions  constituted  by  the  State  Government  is  as follows:      After  the  formation  of  Andhra  Pradesh  the  1st   Pay  Revision  was initiated  in  1958  under  the  Chairmanship  of  Sri  K.Brahmananda  Reddy,  the then Finance  Minister.   The 2nd  Pay Revision  Commission  was constituted  in

1965 as a One Man Commission under Justice N.D.Krishna Rao. The 3rd Pay Revision Commission was headed by Sri R.Prasad, I.C.S., (Retd)., the 4th Pay Revision  Commission  by  Sri  A.  Krishna  Swamy,  I.A.S.,  (Retd)..,  the  5th   Pay Revision Commission by Sri K.Subrahmanyam, IAS.,  the 6th Pay Revision  by Sri D.Shankaraguruswamy, IAS.,. (Retd)., the 7th Pay Revision Commission  by Sri R.K.R.  Gonela,  IAS,  (Retd.),  the  8th   Pay  Commission  by  Sri  J.Rambabu,  IAS., (Retd) and the 9th  Pay Commission by Sri C. S. Rao, IAS (Retd.).   The following table  indicates  the  dates  of constitution,  time  taken  by  the  Commission  and other details relating to various Commissions appointed since 1958.

Statement showing the particulars of Pay Revision from time to time

02.02                The constitution of a Pay Commission, at regular intervals, is necessitated to examine the pay structure of employees and to revise it based upon the changing requirements. The expectation of the employee community is that  their  pay  should  be  increased  by  the  Government  from  time  to time keeping in view the increase in the cost of living, increased expectations with regard  to  life  style  and  in  the  case  of  the  retired  government  servants  the increase in life span with consequent problems arising out of age related problems.

02.03                In  order  to  meet  the  situation  arising  due  to  high  levels  of inflation, a mechanism  had also to be found by the Government  to neutralize the effect of inflation on the wages of its employees to cover the interregnum between the Pay Commissions. Sanction of Dearness Allowance at periodic intervals according to a pre‐determined formula was the Government response to counter the effect of increase in prices on the wages of the employees. While neutralization for increases in cost of living was extended in full to certain categories  of employees  others were compensated  only partially till the year

1996.  The 5th Central Pay Commission pointed out that in the absence of 100%

neutralization   for  increase  in  cost  of  living  to  all  sections  of  government servants there will be an erosion in the wages of the people who are not fully compensated for such increases resulting in distortion in the pay structure violently disturbing the ratio of maximum to minimum which was established in  the  first  year  of  implementation   of  a  Pay  Commission’s   award.   They therefore, recommended 100% neutralization for the increase in cost of living for  all  sections  of  government  servants  and  pensioners.     There,  however, remained the issue of erosion in the real value of other allowances which are related to salary and the employees, therefore demanded an increase in other allowances also commensurate with the increase in cost of living. Since the Government of India was appointing a Commission once in 10 years they addressed this issue by providing for increases in other allowances  when the DA, as a percentage of the pay, exceeded 50%. In our State, however, since the pay  revisions   are  taking   place  almost   every   5‐6  years  the  necessity   for considering a part of D.A., as pay for purposes of allowances has not arisen so far.

02.04                A    characteristic    feature    of    pay    revisions    has    been    the appointment of an Anomalies Committee immediately after the implementation of the report  of the Pay Commission.    The Anomalies  Committees  appointed prior to 9th PRC rectified many anomalies in the Pay structure suggested  bythe respective PRCs. However, the Anomalies Committees appointed under the chairmanship of Sri R.M. Gonela, I.A.S. (Retd.) after the 9th  PRC could not make any recommendation  on rectification  within the period of its working. On the

demand of employees the Government instead of extending the tenure of the Anomalies Committee, announced the constitution of 10th PRC.  It was for the first time that the Tenth PRC was announced by the Government before the due date of revision of pay, i.e. 5 years from the date of earlier PRC. This decision of the   Government   was   widely   welcomed   by   the   employees.   However,   the grievances of employees with respect to the recommendations  of 9th  PRC remained  unaddressed  and their subsequent  representations  have been subsumed into this report.

02.05              This Commission has looked at various aspects affecting the emoluments   of   the   employees   and   worked   out   an   appropriate   package consisting of a streamlined Master Scale, a span of scales that avoids stagnation, ensured    that the quantum of increment is consistent with the increases in the quantum of pay and that there is a reasonable increase in other allowances etc. The Commission has also adequately recognized the special needs of women employees  and  employees  who  are  physically  challenged  in  recommending special leave and enhanced allowances.   This time there was no request from the employees’ side either to adopt central pay scales or to look at the private sector for working  out the compensation  package.  All the Associations  relied upon the ILC norms to work out the ‘minimum pay’. Variations in the minimum pay demanded by various associations are on account of i) taking the number of members in a family unit as 4 instead of 3; ii) difference in the market price of food and clothing; and iii) addition of new items of expenditure such as mobile phone, transport, fuel, gas, electricity etc., not covered by ILC norms.

02.06. This  Commission  has  relied    upon    the  ILC  norms  to  work  out  the

‘Minimum Pay’, retained the family size of 3 and adopted the market price of food and other commodities as reported by the Directorate of Economic and Statistics. The Commission also while calculating the ‘Minimum Pay’ adequately provided for the new items of expenditure as demanded by most employees associations and thus made the pay structure more realistic and attractive.

CHAPTER – III STATE ECONOMY­AN OVERVIEW

Introduction

03.01                The terms of reference mandate the Pay Revision Commission to make recommendations on the revision of pay and allowances of employees of State Government, local bodies, aided institutions and non‐teaching staff of universities taking into account the overall financial position of the State Government.   There  are  a  number   of  competing   demands   on  the  limited resources of the State Government. The demands on the resources of the State have increased considerably in recent years because of the focus on inclusive growth and the welfare of the weaker sections of the society. The associations of   employees   have   represented   to   the   Commission   seeking   considerable increase in the existing pay scales and allowances on account of among others a considerable increase in the cost of living over the last few years. Given the committed liabilities and competing demands on the resources of the State Government, these demands cannot be met fully. The Commission is of the considered   view  that  while  the  pay  scales  of  the  employees   have  to  be reasonable to attract talented people into government service and retain them, the responsibility of the State to provide its citizens basic civic amenities and its role in promoting the growth of the economy cannot be viewed in isolation. Therefore, the present financial position of the State Government, its future commitments and growth prospects of the economy are crucial for arriving at a pay structure for employees consistent with the objectives of State policy.

03.02                Andhra Pradesh has been a middle income State. While there has been  considerable  improvement  in the levels  of per capita  income,  the State ranks below a number of states in terms of human development indicators. In this chapter, an attempt has been made to present an outline of the State’s performance in recent years and demands on its resources to arrive at an informed view of the reasonable  pay structure for employees  consistent with the resource position of the State Government.

Growth Performance

03.03. Until  the  nineties,  the  average  growth  of  the  Gross  State  Domestic Product (GSDP) of the State remained below the growth of the Gross Domestic Product (GDP) of the country.   In a sharp contrast to the past trends, the State economy registered a growth of 8.16 percent in 2000‐01 compared with the national growth of 4.15 percent. This was facilitated by an impressive growth of

13.16  percent  in  the  agriculture  sector  following  a  negative  growth  in  the previous   year.  Since  2003‐04,   there  has  been  a  turnaround   in  the  State economy and the growth of the economy has consistently been higher than the national  average  with  the  exception  of  2009‐10.  Lower  than  the  national growth in 2009‐10 was on account of a steep fall in the growth of agriculture and industry sectors. Growth of the industry and service sectors largely contributed to the growth of the State economy since 2003‐04. The growth of

03.04.               Though the growth of the State economy slipped from a peak of

12.02 percent in 2007‐08 to 5.29 percent in 2012‐13, it remained marginally higher than the national economy. Reviving the growth momentum is a major challenge for the State Government. Table‐1 presents the trends in the growth rates of GSDP and the GDP.

Table­1: Aggregate and Sectoral Growth Rates­Andhra Pradesh and India

03.05.               The  per capita  income  of the State,  which  remained  below  the national  average  till 1999‐2000,  witnessed  a turnaround  since  2000‐01.  The per capita income of the State remained higher than the national average in all the years since 2000‐01 partly due to higher than national average growth of the  State  economy   and  largely  due  to  the  moderation   in  the  growth   of population. The decennial growth of population in the State was   14.6   percent between   1991   and   2001   and   9.11   percent   between   2001   and   2011   as compared with the national average of      21.54 per cent and 17.67 percent, respectively.    In the year  2012‐13  for which  latest  data  is available,  the per capita income of the State at current prices was Rs.78,177  as compared  with the national average of Rs.68,757. Trends in per capita income of the State and the country are presented in Table‐2.

Table­2: Trends in Per Capita Income­Andhra Pradesh and All­India

03.06.               The  deceleration   in  the  growth  of  the  State  economy   being witnessed in recent years is a matter of concern. Given the global uncertainties and domestic supply constraints, it is difficult to estimate the extent of likely slowdown in the State economy and the duration of the slowdown.

Section­2: Fiscal Situation of the State

03.07.               The   finances   of  the  State   started   deteriorating   towards   the middle of the nineties and this continued till 2002‐03. Apart from the low buoyancies of State taxes and falling transfers from the Centre as a proportion of GDP, the introduction of full prohibition in the State in 1995‐96, subsidized rice scheme and the losses of the State Electricity Board largely contributed to the poor health of State finances. The revenue and fiscal deficits of the State deteriorated to 1.87 percent and 4.67 percent of GSDP, respectively in 2002‐03 compared with 0.47 percent and 2.90 percent in 1990‐91, respectively.  There has  been  a  major  improvement  in  State  finances  since  about  2003‐04.  The major contributory factor for such an improvement is the turnaround in the growth of the State economy as well as the national economy. The enactment of Fiscal  Responsibility  and  Budget  Management  Act  in  2005  mandating elimination of revenue deficit and containing fiscal deficit at 3 percent of GDP and the introduction of VAT have also greatly contributed to an improvement in

the   fiscal   situation.   The   trends   in   the   fiscal   situation   of   the   State   are summarized in Table‐3.

Table­3: Fiscal situation in Andhra Pradesh ­ 2007­08 to 2014­15 (Rs. Crores)

03.08. The improvement in State finances which started in 2003‐04 continued till  2007‐08.  While  the  fiscal  deficit  declined  from  3.90  percent  of  GSDP  in

2003‐04  to 2.41 percent  of GSDP in 2007‐08,  the revenue  account  improved

from a deficit of 1.55 percent of GSDP to a surplus of 0.04 percent of GSDP in the same period. This improvement in the fiscal situation was the result of marginal augmentation in revenue and compression of revenue expenditure. During this period, there was a marginal improvement  in total revenue  from

14.08 percent of GSDP to 14.84 percent of GSDP while the revenue expenditure witnessed  a  decline  from  15.63  percent  of  GSDP  to  14.80  percent  of  GSDP. Within the revenue, the major improvement came from the State’s own tax revenue which improved from 7.23 percent of GSDP in 2003‐04  to 7.89 percent of GSDP in 2007‐08. The buoyancy of State VAT coupled with an improvement in the revenue from State excise duties and stamps and registration contributed to this improvement. There was also a marginal improvement in the transfers from the Centre from 4.95 percent of GSDP to 5.01 percent of GSDP in the same period.

03.09.               Since  2008‐09,  there  has  been  a  moderation  in  the  growth  of revenue. The deterioration in the fiscal situation could be controlled because of a marginal moderation in revenue expenditure as proportion of GSDP. Because of  considerable  increase  in  revenue  expenditure,  there  is  an  increase  in  the fiscal deficit from 2.35 percent of GSDP in 2012‐13 to 2.87 percent of GSDP in

2013‐14. The actual realization  of revenue receipts in 2013‐14 is likely to be

lower than the budget estimate by about Rs.18,000 crore because of fall in own revenue collections  as well as transfers from the Centre. The deterioration  in the  fiscal  position  of  the  State  would  have  been  much  severe  but  for  the reduction in interest and repayment  liability following the debt consolidation and relief facility recommended by the Twelfth Finance Commission for the period2005‐10.

Expenditure on Salaries, Wages and Pensions

03.10.               Expenditure  on  salaries  and  pensions  witnessed  a  moderation from 76.13 percent of own revenues of the States in 2000‐01 to 57.54 percent in 2013‐14. As a percentage of revenue expenditure, the decline is modest from

43.88 percent to 39.87 percent in the same period. Even with the moderation,

over 57 percent of the State’s own revenue is spent on    salaries and pensions. The moderation in the expenditure on salaries and pension as a proportion of State’s own revenue and total revenue expenditure is mainly because of higher growth of State revenue and revenue expenditure relative to the growth in the expenditure on salaries and pensions. In fact, expenditure on salaries is one of the  fastest growing item of expenditure. Between 2001‐02 and 2013‐14, while the salary expenditure increased by 21.45 percent from Rs.7,791 crores to Rs.36,331 crores, expenditure on pensions increased by 16.33 percent from Rs.2,321 crores to Rs.14,209 crores.

03.11.               There  are  two  distinct  phases  in  the  ratios  of  expenditure  on salaries  and  pensions  to  own  revenue  and  revenue  expenditure.  The moderation in the ratios which started around 2001‐02 continued till 2008‐09. Between  2001‐02  and  2008‐09,  the  ratios  of  expenditure  on  salaries  and pension   to   own   revenue   and   expenditure   declined   by   over   20   and   15 percentage points, respectively. But there has been a reversal of this declining

trend  since  2009‐10.  In  2009‐10,  the  ratio  of  expenditure  on  salaries  and pensions to own revenue increased from 45.99 in the previous year to 55.25. The expenditure  on salaries  and pensions  as a percentage  of revenue expenditure increased from 31.49 in 2008‐09 to 36.71 in 2009‐10. The increase in the ratios is mainly on account of a slowdown in the revenues of the State Government. The increase in the ratio of expenditure on salaries and pensions to own revenue to 57.54 percent in 2013‐14 from 54.93 percent in the previous year is mainly on account of the interim relief of 27 percent paid to the government employees.

Table­4:  Expenditure on Salaries and Pensions as Proportion of State’s

Revenue and Expenditure(Rs. in Crores)

Salary Expenditure of Central Government Employees

03.12.               In the context of analysis of the trends in the expenditure of the State government on salaries and pensions, it may be relevant to compare these trends with those of the Central Government. The comparison is not straight forward because of a number of differences. Firstly, the salary expenditure  of the Centre as reported in the budget documents is exclusive of the salaries of defense personnel. Secondly, expenditure on pensions reported in the budget documents  of  the  Centre  is  inclusive  of  defense  pensions  but  exclusive  of Railways and Department of Posts which are treated as operating expenses of these  departments.  Even  with  these  differences,  a  broad  comparison  of  the trends in the expenditure on salaries and pensions reveal vast differences between the State and the Centre. The broad trends in the expenditure of the Centre on salaries and pensions are presented in Table‐5.

Table­5: Expenditure of the Central Government on Salaries and Pensions.

03.13.               The  ratios  of expenditure  on  salaries  and  pensions  to revenue receipts and expenditure are much lower for the Centre as compared with the State. This is because of the fact that the States are assigned more functional responsibilities than the Centre under the Constitution necessitating higher deployment  of  personnel  in  relation  to  revenue.  Added  to  this,  there  is  a vertical imbalance in the revenue of the States and the Centre. On an average the Centre collects nearly 63 percent of the combined  tax revenue. Thus, the

lower ratios of salary and pension expenditure of the Centre are reflective of its higher resource base. Between 1997‐98 and 2007‐08, the ratio of expenditure on salaries and pensions of the Centre to net revenue receipts declined by one‐ third from 25.06 percent to 8.53 percent. The sharp increase witnessed in the years 2008‐09 and 2009‐10 is on account of the implementation of the recommendations of the Sixth Central Pay Commission and payment of arrears. After the absorption of the impact of the Sixth Pay Commission, the expenditure on  salaries  and  pensions  of  the  Central  Government  constitutes  only  12.75 percent of net revenue receipts in 2012‐13, while such percentage for the State is 54.93.

Debt Servicing Burden

03.14.                The State raises debt every year to meet its plan expenditure. The loans raised by the State Government amounted to Rs.30,537 crore in 2013‐14 (RE). One of the important indicators of debt sustainability is the ratio of debt redemption (repayment + interest payments) to total debt raised in a year. The ratio of debt redemption to fresh debt raised in a year indicates the net debt available to the State. The higher the ratio, higher will be the borrowings of the State to meet the gap in its resources. The following table presents the trends in the debt redemption ratios (Table‐6)

Table­6: Trends in Debt Redemption Ratios.(Rs.in Crores)

03.15.               During the year 2006‐07, the debt redemption ratio in respect of internal debt was very high at 0.83 indicating that repayments and interest payments constituted 83 per cent of fresh loans. In the case of loans from the Centre, there is a reverse flow of resources in most of the recent years because termination of plan loans to states since 2005‐06.  There has been a moderation

in the redemption ratios in recent years mainly because of policy interventions. These include debt swap scheme under which the States were allowed to swap their  high  cost  debt  by  low  cost  additional  market  borrowings,  debt consolidation   and   relief   facility   (DCRF)   and   interest   reset   on   high   cost borrowings from the National Small Savings Fund (NSSF) following the recommendations of the  Twelfth Finance Commission.   Though the current redemption ratio for internal debt is about 0.40, it is unlikely that the lower redemption ratio will continue as nearly 48 percent of the outstanding market loans are due for repayment in the next five to seven years.

03.16.             Apart from the debt‐redemption  ratios, the Central Finance Commissions have been recommending certain desirable ratios with a view to maintaining debt sustainability. The Eleventh Finance Commission (2000‐05) considered that interest payments as a proportion of revenue receipts of States should  not  exceed  18  percent  for  maintaining  a  sustainable  debt  level.  The Twelfth  Finance  Commission   (2005‐10)  felt  that  a  debt‐GSDP   ratio  of  28 percent would be consistent with sustainable debt levels. The Commission also felt that ideally interest payments as a percentage of revenue receipts should stabilize around 17 percent. The Thirteenth Finance Commission (2010‐15) considered  that  a  debt‐GSDP  ratio  of  25  percent  for  all  States  was  feasible. There has been a moderation in the ratios of interest payments to revenue receipts and debt‐GSDP ratio. These are currently within the limits considered sustainable by the Central Finance Commissions (Table‐7). As indicated earlier, the improvement was mainly on account of debt swap scheme, DCRF, reduction of interest rate on outstanding loans from NSSF, the effect of which has started tapering off. The bunching of repayments of market borrowings in the next five years will exert pressure on the debt sustainability ratios.

Table­7: Debt Sustainability Ratios in Andhra Pradesh(Rs. in Crores)

03.17.               As observed  by the Reserve  Bank of India (RBI) in its Study of State   Budgets   for  the   year   2013‐14   the   conventional   debt   sustainability analysis though useful may not provide a comprehensive assessment of debt sustainability   as  it  is  based  on  a  narrow  coverage  of  debt  and  excludes contingent implicit and off‐budget liabilities. Apart from issues of debt coverage this analysis is generally done in a static framework and therefore it does not account for fiscal and economic behaviour in response to shocks (sensitivity analysis) and fiscal vulnerabilities (stress‐testing exercise).

03.18.               Apart  from  the  Government  guarantees  there  are  likely  to  be contingent liabilities on account of projects under public‐private partnerships (PPP). Faced with resource  constraints  and growing  infrastructure  needs the State Government is constrained to undertake investment projects through PPP route. Two types of liabilities will arise on account of PPP projects. These are both current and deferred liabilities as well as contingent liabilities arising on account of guarantees issued to Special Purpose Vehicles (SPV) or State undertakings   to  facilitate   borrowings   by  them.  The  explicit   and  deferred liabilities  in  the  case  of  PPP  projects  arise  from  annuity  payments  over  a number of years. PPP projects may also result in contingent  liabilities arising out of obligations to compensate private sector partners in the event of changes in specifications breach of obligation or termination of contract. The traditional debt sustainability ratios do not capture these liabilities. The number of PPP projects currently under implementation in the State is 169 with an estimated investment of over Rs.58000 crore. Another 37 projects are in the pipeline with an investment of Rs.8000 crore.

03.19.               Another major liability for the State Government is on account of its participation in the financial restructuring plan (FRP) of power distribution companies. The fiscal implications of the FRP for participating states are linked to  four   major   aspects:   (i)  issuance   of  bonds   by  the  state‐owned   power distribution companies (discoms) with respect to 50 per cent of short‐term liabilities (STL) as on March 31 2012 and its subsequent replacement through issuance of special securities by the state governments and  (ii) issuance of guarantees towards interest and principal repayment of the balance 50 per cent of STL to be restructured by banks/FIs governments arising from their participation.

Subsidies

03.20.               The subsidy burden of the State Government is significant and is increasing  year  after  year  on  account  of  the  continued  focus  on  inclusive growth  extension  of the coverage  of the existing  subsidy  scheme  and introduction of new schemes. Food subsidy to Andhra Pradesh Transmission Corporation  (APTRANSCO)  and  fee  reimbursement  and  payment  of scholarships are the major subsidy schemes being administered by the Government of Andhra Pradesh. The food subsidy is on account of distribution of Re.1 per kg. rice to 2.35 crore families in the State. Subsidy to APTRANSCO is on account of supply of free electricity to farmers. Under the fee reimbursement

scheme introduced in 2008 students belonging to weaker sections pursuing professional courses are reimbursed tuition fees. The expenditure on these schemes had increased from Rs.6,939 crore in 2008‐09 to Rs.12,296  crore in

2013‐14 (Table‐8).

03.21.               During the year 2013‐14 the Government had introduced a new scheme  called “Amma Hastam”.  Under the scheme essential  commodities  are being supplied in a package for Rs. 185 per month. The package includes one Kg. of toor dal one litre of palm oil one kg. of whole wheat atta one kg. of wheat half  a  kg.  of  sugar  one  kg.  of  salt  quarter  kg.  of  chilli  powder  half  a  kg.  of tamarind and 100 grams of turmeric powder. The expenditure on this scheme is estimated at over Rs.400 crore in 2013‐14. The State Government introduced another unique scheme called “Bangaru Talli” aimed at emancipating the status of the girl child eliminating the practice of female feticide and eradicating trafficking in girl children. To give statutory backing the State Government enacted the Andhra Pradesh Bangaru Talli Girl Child Promotion and Empowerment  Act in June 2013. The scheme envisages periodic payments to the girl child right from her birth to the completion of collegiate education. This is likely to impose  additional burden on the exchequer.

03.22.               The  implementation  of  the  Right  to  Food  Act  is  estimated  to impose an additional financial burden of over Rs.1000 crore per annum on the State Government.

Table­8: Expenditure on Major Subsidies by the State Government(Rs.in Crores)