Hyderabad Revenues and Costs

Gautam Pingle
HYDERABAD

EPW, Vol – XLVIII No. 44, November 02, 2013 |

G Gangadhara Rao’s “Hyderabad and the Bifurcation of Andhra Pradesh” (EPW, 19 October 2013) presents interesting data on the implications of the creation of Telangana for the revenues of the new Andhra Pradesh (AP). The problem is that the data is published district-wise. The author has compounded this problem by adding the revenues of Rangareddy district to Hyderabad district which produces a total revenue figure of Rs 37,556 crore for 2012-13.

http://www.epw.in/letters/hyderabad-revenues-and-costs.html

First, the extent of Hyderabad city has to be defined. The revenue district of Hyderabad is 217 square kilometres (sqkm), the Greater Hyderabad Municipal Corporation (GHMC) 626 sqkm, the Hyderabad Urban Development Authority (HUDA) 1,348 sqkm and the Hyderabad Metropolitan Development Authority (HMDA) a massive 7,073 sqkm. One selects what one likes. But the revenue figures presented are for the revenue district and more or less cover the GHMC.

Most of the state’s own tax revenue (such as sales taxes, stamp duties, transport tax, excise, mineral royalties) is based on location and for Hyderabad amounted in 2012-13 to Rs 11,730 crore out of the state total of Rs 51,441 crore. However sales taxes are based on location of the registered offices of the payer. By virtue of Hyderabad being the capital of the state, many manufacturers/distributors have registered their offices and are paying sales tax for their statewide sales to the Hyderabad division of the commercial tax department. These division-wise figures for commercial taxes are available and they indicate that in Hyderabad city (GHMC) the sales tax paid in 2012-13 was Rs 8,960 crore. Of this, nearly Rs 3,000 crore is estimated to be the sales tax paid by petroleum companies and AP Beverages Corporation Limited (APBCL). These entities pay taxes on sales in the entire state at Hyderabad and, as such, the sales to Seemandhra on division of the state will become interstate sales and attract central sales and will be transferred to the consuming state. More likely, the companies and many others registered in Hyderabad will set up offices in Seemandhra and pay taxes there. Some part of this will automatically flow to Seemandhra.

Hyderabad city has huge costs. The GHMC budget for 2013-14 alone has a total outlay of Rs 3,800 crore, including revenue expenditure of Rs 1,529 crore and capital expenditure of Rs 2,271 crore. It receives from the state government assigned revenue of Rs 770 crore and now wants a share of the commercial taxes collected in its area. Hyderabad also has huge commitments towards improving its infrastructure and services. The Telangana state will have to make major financial contributions to GHMC in order to just maintain infrastructural and service facilities, let alone increase them and improve their quality and coverage.

Hyderabad city needs 1,000 MW with a peak demand of 1,500 MW of power. It was estimated by the Srikrishna Committee that by 2019-20 it will need nearly 5,000 MW! Already many areas face load-shedding. With the division of the state it will take some time for the new Telangana grid to adjust and cope with the new situation. With a common capital, is this power going to be shared by residual Andhra Pradesh or the central government? As it is, the state has to enforce power restriction in the hinterland to supply Hyderabad with what little power it provides today.

As of now the residents in Hyderabad are supplied water for about two hours on every alternate day through 5,00,809 connections. While the total water supply is 200 million gallons per day (mgd), the average supply is 162 litres per capita per day (lpcd) in the metro areas and only 91 lpcd in the surrounding municipalities in the GHMC area.

A huge gap is indicated between current supply and demand, and this is likely to widen by 2021 (in the maximum years contemplated for the common capital) when the estimated demand will double to 400 mgd.

The government had accorded administrative sanction of Rs 1,670 crore for taking up the Krishna Phase-III with permission to raise Rs 1,500 crore as loan assistance from the HUDCO with a government guarantee and a balance of Rs 170 crore from the state government budgetary provision. The project to bring Godavari water to the city for drinking purposes would be implemented in three phases. Phase-I with a cost of Rs 4,000 crore is expected to bring 120 mgd water to the city. This has not been taken up yet.

Hyderabad is the destination of many who seek a better life. This internal migration both from the hinterland, Seemandhra as well as the rest of the country, will continue. There is no way to stop it despite local irritation and jealousy. A variety of migrants bring cheap labour, hard work, entrepreneurial skill, capital and a migrant’s drive for success. They also require infrastructure and service. Both water and power are in short supply. There are 811 officially recognised slums housing 1.4 million persons.

The idea that Hyderabad city is paved with gold is alright as far as migrants and real estate operators are concerned but in no way is Hyderabad city a net revenue earning government entity. In fact it never was. After division and the expected downturn in activity, it will be less so for the Government of Telangana. Hyderabad, engine of “growth”, as it is and may be, will remain dependent on state revenues for the foreseeable future.