Speech of Sri Brahmananda Reddy, Chief Minister
presenting the budget for 1967- 68
to the Andhra Pradesh legislature
on the 22nd June, 1967.

Sir,.

I rise to present the budget of the state of Andhra Pradesh for the year 1967-68.

While presenting the interim budget in March, I had stated that it was intended only for obtaining a" Vote on account" to enable the Government to carry on the administration till the final budget was passed by the legislature. The budget which I am now presenting covers the estimated receipts and expenditure for the whole year including the expenditure authorised in March. These estimates broadly follow the trends already indicated in the interim budget and also take into consideration certain new factors which have since arisen.

Before explaining the details of the budget proposals, it seems necessary to indicate briefly the economic and seasonal conditions in the country in general and this the state in particular, the financial position of the state and our commitments and programs under the Forth Five-Year Plan.

Economic Situation

The economic situation in the country during the last one year has been far from satisfactory principally due to the failure of rains and consequential consequential fall in food production and other problems created by drought, steady rice in prices of essential commodities and raw materials, slackness of industrial activity and adverse trends in exports.

Revival of industrial activity and maintenance of price stability very largely depend on the monsoon this year. If the monsoon turns out to be normal then production in the case of agriculture- based industries such as textiles, sugar, vanaspathy and oils, which have suffered due to severe shortage of raw materials in the past, would pick up and that will set a favorable chain reaction for other sectors including transport and capital goods industries. Let us all earnestly hope that the conditions will be normal throughout out the country this year.

Seasonal conditions: - in Andhra Pradesh we had unprecedented drought conditions in 16 out of 20 districts during 1965- 66 and Government had to spend large sums of money for providing relief to the people in drought- affected areas. In July- September 1966 extensive damages were caused in some districts and ones again Government had to undertake relief measures on an extensive scale. For the second year in succession, the rainfall was unsatisfactory in the sense that it was belated, excessive uncertain cases, and distributed unevenly. Inspite of this, the seasonal conditions in 1966- 67 were better than those in the previous year.

Agricultural production: - Though the area under rice fell by 1% the actual production in 1966- 67 is estimated to be 40. 6 lakh tonnes as against 38. 99 lakh tonnes in 1965- 66. Similar trends are indicated in the case of other important food crops such as jawar and bajra.

Industrial production: - production in the case of textiles, jute, cement, paper, asbestos cement and vanaspathy showed definite signs of recession mainly on account of stringency of raw materials, short- supply of power and labour unrest uncertain cases.

Employment Situation: - There was a slackening of the tempo of registration in 1966- 67 as compared to the preceding year. Placements were reduced from 0. 41 lakh in 1965 to 0. 34 lakh in 1966 although there was an improvement in the employment offered by the Local Bodies and the Private Sectors.

Plan Outlay

(b) short falls under publicity loans ( Rs. 3. 55).

(c) shortfall in central assistance under certain heads ( Rs. 11. 72 crores).

(d) revision of dearness allowance of Government employees ( Rs. 5 crores).

(f) non- receipt of certain dues from the state Electricity Board due to shortfall in generation and sale of power ( Rs. 11. 36 crores).

(g) payment of interest on loans for Nagarjunasagar project for which know provision existed in the Budget ( Rs. 2. 82 crores).

(h) procurement of foodgrains and pulses and short- term advances to Government Companies, co-operatives was, industries, etc ( Rs. 2. 27 crores).

As I shall presently explain, the state finance are still suffering from the strain caused in 1965- 66.

Revised estimates for 1966- 67.

Against the Budget Estimate of Rs. 174. 24 crores the Revenue Receipts amounted to Rs. 177. 43 crores while the Expenditure rose from Rs. 173. 93 crores in the Budget Estimates to Rs. 185. 84 crores in the Revised Estimates, there by converting the anticipated surplus of Rs. 31 lakhs into a deficit of Rs. 8. 41 crores. There were large variations in receipts under Land Revenue, State Excise duties, Motor Vehicles Tax, Sales Tax, Interest, Agriculture, States' share in Central Taxes and Grants, etc. , while on the expenditure side, the variations mainly occurred under Interest, Community Development and extra dearness allowance sanctioned to Government employees from April 1966 and again from January 1967.

Capital outlay increased from Rs. 39. 98 crores in the Budget Estimates to Rs. 49. 21 crores in the Revised Estimates mostly on account of larger outlays on the Nagarjunasagar project, Tungabadra high level canal and Pochampad project.

Transaction under Public debt, transaction Loans and Advances, Deposits, etc, resulted in a net incoming of Rs. 55. 37 crores. As regards cash balance, the year which had opened with a debit balance of Rs. 54. 48 crores, closed with a debit balance of Rs. 46. 32 crores, after absorbing the ad hoc net Central assistance of Rs. 31 crores. This further corps engage of the financial condition was largely due to the deficit on Revenue Account and the carry over of large stocks of fertilisers involving about Rs. 12 crores at the end of the financial year.

(ii) interest on ad hoc Central loans ( Rs. 1. 79 crores).

(iii) Anticipated economies in publicity expenditure under various heads ( Rs. 4. 85 crores).

(iv) reduction in the revenue element of Annual Plan for 1967- 68 ( Rs. 1. 98 crores).

The variations under individual heads have been explain in the Finance Secretary's Explanatory Memorandum.

Revenue Deficit: - the Revenue Estimates disclose a deficit of Rs. 12. 76 crores.

Capital Outlay: - in view of the reduction in the size of the annual plan for 1967- 68, the capital outlay has been reduced from Rs. 49. 21 crores in 1966- 67 to Rs. 40. 15 crores in 1967- 68. Some of the principal items are as follows:

Loans and advances: - Loans and Advances and transaction is under publicity Debt and Deposits Heads, etc, account for a net incoming of Rs. 37. 15 crores. Principal items are as follows: -.

(Rs. In Crores)

Loans to Co- operative Societies and Land Mortgage Banks
88.14

Loans to Panchayat Samithis for Irrigation and reclamation
20.00

Loans for Water Supply and Drainage Schemes
67.87

Loans to Students of Professional Colleges and National Loan Scholarships
44.12

Loans to Electricity Board
214.00

Publicity loans and small savings: - the target for open market loan has been fixed at Rs. 10 crores, while that for small savings is Rs. 2 crores.

Cash balance: - the year is expected to close with a cash balance of minus Rs. 16. 39 crores without taking into account the dhal receipts that are likely to be realised from fresh taxation measures which are being introduced during the current session of the Assembly.

The programs and activities of the various Development Departments will be explain in detail when the relevant demands come up for discussions. Mean while, I shall confine my self to mentioning the progress of some of the important schemes and programmes concerning Irrigation, Power and Industries.

As already announced on several occasion in the past, an irrigation potential of 5. 79 lakh acres was created under Nagarjunasagar by the end of June 1966 and water was released into canals in the first week of August 1966. Due to failure of monsoon, however, flow of water in Krishna was not continues and adequate for irrigation as a result of which water could be supplied only for 15, 000 acres under both the canals in 1966- 67. It is hoped that there will be adequate storage in the reservoir this year due to increased height of the dam and that the irrigation potential already created will be largely utilised in 1967- 68. The construction of the dam is proceeding briskly and is expected to be completed shortly. The excavation of the main canals and branches and distributaries is also in progress, and could have been accelerated still further but for limitations of finance. Against an expenditure of Rs. 16. 5 crores last year, we have been able to provide only Rs. 8. 5 crores in the current year will be just sufficient to keep the work going for another month or so unless the Government of India are able to extend dhal financial assistance as they have been doing during the last three years.

Pochampad Project, the second major Irrigation Project in execution in the State, is expected to make good strides in the coming years and create Irrigation Potential for 2. 7 lakh acres during the Fourth Plan period. Construction of mansonry dam and earthen dam and excavation of main canal is in good progress. Last year, expenditure on this project was Rs. 1. 8 crores while provision in the current years' Budget also is Rs. 1. 8 crores.

Work on excavation and concrete lining of diversion tunnel, construction of upstream and downstream coffer dams and other essential works on the Srisailam project are also making steady progress. It is proposed to complete the diversion tunnel and coffer dam works in the current working season. A sum of Rs. 4. 64 crores was spent on the civil works of the project last year while the Budget Estimates now presented provide Rs. 4. 20 crores for this purpose. This is exclusive of the expenditure on transmission line which is being incurred by the State Electricity Board.

The works on the Tungabadra High Level Canal Scheme ( first stage) were completed last year and the water let out in July, 1966.

The Planning Commission has approved the second stage of Tungabadra High Level Canal scheme and has also given clearance for Guntur Channel, Gajuladinne in and Gandipalam schemes.

The total installed capacity at the beginning of the Third Plan was 213 MW. It rose to 292 MW. At the end of the Third Plan. During the Fourth Plan it is proposed to increase it further to 992 MW. As blow:

By the end of the March 1967, the installed capacity was rised to 402 MW. And is expected to increase to 642 MW. By March 1968.

According to the Fourth Annual Power Survey, a demand of 944 MW. Is anticipate by the end of 1970-71, which can be achieved only if the installed capacity is rised to 1, 227 MW.. Thus there would be a shortage of installed capacity to the extent of 245 MW. At the end of the Fourth Plan. The following schemes are under consideration for meeting this shortage.

Pumped Shortage Scheme at Nagarjunasagar.

Due to the reduction in the size of the Annual Plan, the provision for Power Schemes in 1967- 68 had to be limited to Rs. 32 crores only as against a demand of Rs. 42. 5 crores.

A total generation of 2, 710 MU has been contemplated during 1967- 68 against 1, 468. 4 MU in the previous year. On an average, the daily generation should be 7. 6 MU as against 4. 02 MU last year. The daily generation has now rice in to 5 MU and that is to increase by 50 per sent more if the target is to be achieved. This requires a tremendous effort in improving the transmission and distribution lines to the various load centres in the state and in developing load nearly 75,000 new connection. The Electricity Board is expected to make every possibly effort to improve its sales and revenue.

Out of 27, 296 villages in the state, 6, 024 villages including hamlets, were electrified till the end of March, 1967, while 67, 855 pump sets were energised. About 75, 000 new services ( including bulk loads) will be connected during this year and spill over works in villages where more than 60 percent of the work has already been done will be completed.

There is increasing demand for energising pump sets all over the state particularly in the dry taulks. Even in the canal- irrigated areas, the demand for pump sets is overwhelming because the farmers are keen on raising a second and even a third crop for which canal water is normally not available. It has been impressed upon the Government of India that unless adequate funds are released as dhal assistance for rural electrification outside the plan, progress in the electrification of villages, energisation of pump sets and in the achievement of increased agricultural production is bound to be slow and halting.

I am glad to say that the Electricity Board has already initiated certain measures to reduce its operation and maintenance cost is through various economies and rationalization, and I have every hope that either long it will not only improve its finances but also render more satisfactory services to the consumers.

The Corporation has also continued to take an active interest in the projects which were sponsored sponsored by it and for which seperate companies have been floated in collaboration with private sectors entrepreneurs. The Ball Bearing Project, which has recently been pruned to Rs. 3. 6 crores, is now awaiting final clearance from the financing institutions. In respect of the Integrated Glass Project also, there has been a reduction in the project cost and assistance is being sought from the financing institutions for this project.

The Republic Forge Company for which the Corporation had issued a guarantee for deferred payments became a major responsibility of the corporation consequent on the inability of the original promoters to pay for the machinery which arrived in India in the latter half of 1965. During the year 1966- 67, the corporation took charge of the project and has extended considerable financial assistance to enable the machinery to be released and also to be installed at the sight. The Government of India has agreed to grant a loan of Rs. 2. 5 crores to the State Government for financing this project and it is expected that it would be commissioned shortly in the publicity sectors.

The activities of the corporation are now being diverted mainly towards the medium scale projects which are likely to have a greater impact on the growth of industries in the State. Specific programmes for the development of ancillary industries to automobiles, Synthetic Drugs and Electronics are also now being formulated by the Corporation in conjunction with the Directorate of Industries and it is expected that these would stimulate a wide interest in the setting up of such industries in the state.

The resources of the Andhra Pradesh Industrial Development Corporation are entirely provided by the state Government. So far Government have contributed a sum of Rs. 284 lakhs towards a share capital of the corporation including a sum of Rs. 50 lakhs during the year 1966- 67. A provision of Rs. 78. 75 lakhs has been made in the Budget for 1967- 68 for schemes for financial assistance as well as for expenditure on the sponsored projects.

State Financial Corporation.

During the year 1966- 67, the State Financial Corporation sanctioned 42 loans aggregating Rs. 155. 33 lakhs, agreed to guarantee deferred payments for purchase of machinery in case of one industrial unit for an amount of Rs. 16. 80 lakhs, and approved under writing of shares worth Rs. 13. 50 lakhs in the case of 4 companies.

During the same period, the corporation earned a gross income of Rs. 47. 82 lakhs and a net profit of Rs. 14. 86 lakhs.

Mining corporation.

The Andhra Pradesh Mining Corporation, which was set-up for undertaking exploration and exploitation of mineral resources and promotion of mineral- based industries, is at present working on an iron ore mine at Brahmadunda, a lime stone mine at Ramathritham, clay mines at Dwaraka Tirumala and Punyakshetram, a quarts mine at Shadnagar and an asbestos mine at Pulivendala. With the commissioning of Clay Washing Plant at Dwaraka Tirumala on which work is almost complete, it would be possible to meet the internal requirements of ball clay by the ceramic industry and there by help in saving foreign exchange of the order of about Rs. 25 lakhs annually.

The corporation had also taken up mining chrysotile variety of asbestos on an experimental basis and is now in a position into commercial production. This will also eventually save considerable foreign exchange to the country. Investigations are also being conducted in regard to the possibilities of processing indigenous as well as imported crude asbestos.

During the last few years the Corporation was able to export iron ore worth about Rs. 1 1\2 crores while export commitments for barytes to Japan have been entered into and efforts are being made to export other minerals.

Government of India have also sanctioned a scheme for undertaking hard- rock aerial survey for the purpose of locating base metals in the eastern Cuddapah basin.

Small Scale Industrial Development Corporation.

The Andhra Pradesh Small Scale Industrial Development corporation was registered in March, 1961, with an authorised capital of Rs. 50 lakhs which was latter on increased to Rs. 100 lakhs. Out of this, a sum of Rs. 67 lakhs has been subscribed. Besides this, Government have also advanced a lone of Rs. 100 lakhs to this Corporation. At present the Corporation is running 20 production units apart from 6 Raw Materials Servicing Centres to help the small scale industry. The Corporation after the initial teething troubles, has turned the corner, and showed profits in the year 1965- 66.

Apart from the units that have already been transferred to the Corporation, the Government is also considering. The desirability of transferring four more units, viz. , the Hyderabad Tanneries, Utility Leather Goods Center, Gudur Ceramic Factory and Gudur Glass Factory to the Corporation. It is also proposed to take over the yanam Tanneries from the Pondicherry Government and to hand it over to the Small Scale Industrial Development Corporation for managing it.

Besides running production units the Corporation has recently been registered as an" Export House". It has so far assisted 65 units by way of giving them loans at low rates of interest and 4 concerns by way of equity participation.

We are very much deficient in the production of Bengalgram dhal. We have requested the central Government for an allotment of 35, 000 tonnes of Bengalgram dhal. We have received only 4, 000 tons so far. We have requested the food Corporation of India to move the quantity immediately. The stocks are being received in small quantities.

Sugar: - Government of India were allotting 12, 870 tonnes of sugar a month till March, 1967, and have reduced it to 7, 520 tonnes in the current month. They have been requested to increase the allotment.

Method of Procurement: - Andhra Pradesh being surplus in rice and as there is a well- organised rice milling industry in the state, the Government have decided to procure rice from the mills through a system of levy. There is a large number of hullers dispersed all over the State milling nearly half of the paddy produced in the State. The outturn of rice from the hullers is 5 to 6% less on account of the large percentage of brokens. In fact, it is a national waste to keep them going on. They are exempted from levy and also do not pay any commercial taxes. They constitute a major hurdle to the procurement program. Government are seized of this matter and measures are being devised for bringing such mills also under discipline.

In recent weeks, the in- flow of paddy in the normal course into the mills has not been regular even though Government have announced the enhancement of second crop paddy prices by Rs. 4 per quintal. Since the Government have still to procure nearly 3 lakhs tonnes in a period of less than 5 months, instructions have been issued to collectors, to give wide publicity in the districts and to pursued the big stock holders who have not yet declared their stocks of paddy and rice to do so and deliver the surplus grain. At the same time instructions have been issued not to procure from the small producers.

The food corporation of India has been asked not only to purchase rice but also to mop up arrivals of paddy in the market soon after harvest when they will be available at controlled prices. This would mean a huge investment and organisation. There is no dearth of godown space in the state. However, there are certain practical difficulties encountered by the food corporation of India, which has not been able to make large scale purchases of paddy.

Measures to keep down prices. - The cost of cereals forms a significant part of the total food budget of the common man. This State Government are examining the possibilities of making large scale purchases of essential commodities such as pulses, edible oils, chillies, tamarind, etc. At state level. This needs control over movement and prices which is a subject now under discussions with central Government. After the scheme is prepared, the Government will come before the house with a policy statement.

Movement controls: - there is movement control on paddy and rice within some areas of the state. This is under close scrutiny. Movement of millets is free within the state. Export of paddy, rice, millets and Bengalgram from this state to other states is restricted. Since there is still large scale leakage of grains to other states, checkposts are being strengthened at the borders while there is a progressive liberalisation of movement controls within the state.

In common with the rest of the country, Andhra Pradesh has passed through a period of great stress and strain during the last few years due to natural calamities like flood and famine, external aggression and devaluation. We had to forego considerable amounts of revenue besides incurring large expenditure on relief of distress and revision of wages. Publicity borrowing also fell short of requirements. Shortages of raw materials inside the country and heavy drain on external finance, principally on account of import of food grains, gave rice to recession in industrial and economic activity. Prices kept on rising steadily and a stage has now been reached where the Governments both at the centre and in the states are obliged to undertake drastic curtailment of publicity spending. This is the first step towards arresting further deterioration of the economy in general and the financial position of the Governments in particular.

A number of steps have already been initiated by the central Government for controlling publicity expenditure and also for regulating the credit afforded by the banks and other financial institutions. The new policies enunciated by the Government of India and the Reserve Bank of India also aim at mobilising the available resources for productive purposes with particular emphasis on agricultural production.

In Andhra Pradesh also Government has already issued orders for avoidance of fresh commitments and creation of new posts, curtailment of expenditure in different directions and slowing down of the progress of non productive schemes which are already under execution. It is expected that the measures already initiated will eventually result in an economy of about Rs. 5 crores. It is, however, to be remembered that economies in administrative expenses have got their limitation apart from creating certain human problems, such as, retrenchment of staff and postponement of fresh recruitment. Care is being taken to avoid undue hardship in all cases.

While all this is being done, it is felt that these measures by themselves are not adequate to meet the situation. What is actually required is avoidance of wasteful and unproductive expenditure, and proper planning and speedy execution of schemes so that they may start bearing fruits according to plans. The experience of the last 3 plans has shown that some of the schemes have not been able to produce the desired result due to lakh of proper conception at the initial stages an coordination in the different fields of economic and productive activity which are complimentary to each other. Evaluation studies of number of schemes in the State Plans have also led to similar conclusion.

There is also the question of growth of establishment and organisations which is not always commensurate with the actual needs. It is, therefore, necessary to undertake a periodical review of the schemes under execution as well as of the agencies responsible for their execution. This has become all the more necessary in view of the limitations of financial resources available for Fourth Five-Year Plan.

The Fourth Five-Year Plan the state envisages a total outlay of Rs. 522 crores, of which Rs. 280 crores are expected to be provided by the Central Government and the balance of Rs. 242 crores is to be raised by the state. The sources of the revenue available to the states as we all know, are limited. This is particularly so in the case of Andhra Pradesh which, unlike some of the other States, can't claim to possess a highly developed banking system or industrial complex. The traditional sources of finance in the State have been current revenue surpluses, fresh taxation, publicity borrowings, small saving and deposits on account of local bodies, provident fund, etc. The estimates of current surpluses which were already rather limited, were further reduced on account of the unfair treatment of some of our legitimate demands by the Fourth Finance Commission. The small margin that was left has also since been wiped off by the revision of dearness allowance in 1966 and again 1967, apart from the increasing liabilities for servicing the ever growing publicity debt. Besides this, our immediate problem now is to make good the loss of revenue which has been caused by the verdict of the Supreme Court in regard to the Special Assessment Act. The scope for any large scale fresh levies during the Fourth Plan has thus been considerable restricted.

The prospect of market borrowing in Andhra Pradesh are also limited since the traditional investors like banks, insurance companies, finance institution and industries or mostly concentrated in places outside the State. We have, therefore, to rely in this case also on investments from rural areas which are essential suited for small savings.

Local bodies which used to maintain large account with the state treasuries have also started drawing heavily in order to meet their growing responsibilities, particularly after the advent the Pachayati Raj.

While this is the position in regard to the prospects of raising financial resources for Fourth Five-Year Plan this is very little scope for reducing the Plan outlays for the simple reason that about 200 crores out of the total outlay of the Rs. 522 crores represent commitments on account of the schemes which are already in progress and have been brought forward from the Third Five- Year Plan. A major portion of this committed expenditure is represented by the amounts required for irrigation and power schemes most of which have already reached fairly advanced stages and it will be unwise to curtail their scope or to slow down their progress. The proper course on the other hand is to accelerate the progress of these schemes so that they may start yielding result as quickly as possible. In fact, the country's future depends almost entirely on early completion of these irrigation and power projects. Fortunately, the central Government are also fully alive to the situation and I am confident that in spite of the present difficulties they will continue to extend necessary assistance for accelerating the pace of execution of the irrigation and power projects in Andhra Pradesh.

Credit facilities afforded by the Reserve Bank of India, particularly for agricultural production, are being utilised but not to the extent desired or warranted by the situation. This is mainly because the co-operative sector in Andhra Pradesh has not yet sufficiently developed. It is estimated that the agricultural credit required for the development of ayacuts under various irrigation projects during the Fourth Plan period would be over Rs. 300 crores. A substantial part of this will no doubt be raised by the formers through their own efforts but the balance, which will in any case exceed Rs. 150 crores, will have to come from the Reserve Bank of India and allied institution. This is besides the short- term credit required for the supply of fertilisers improved seeds, pesticides, etc. These problems, I believe, are receiving the attention of the Government of India and the Reserve Bank of India and hope that they will soon announce their policies in these matters.

Apart from the question of finances, it is also necessary to simplify and streamline the procedures for the distribution of agricultural credit and its accounting, so that the farmers can fully avail the facilities and make proper and timely use of the funds provided under various schemes.

While Government is doing everything possible to encourage the farmers there is also a feeling that the farmers have started relying too much on assistance from the Government and the banks and that their own efforts have started slackening. This is not a healthy sign. In a state like Andhra Pradesh where economy, by and large, depends on agricultural production, there is no justify occasion for any slackening of effort on the part of farmers. It is some times said that the farmers are not getting proper and adequate value for their produce which acts as a dis-incentive for further effort. While this might about true in some cases, it can't be said that the farmers, as a class, are not getting adequate returns. It is obvious that in a planned economy, particularly when most of the essential goods are in short supply, Government has to ensure not only a fair price to the producer but also a fair cost to the consumer.

There is also a growing tendency in the rural areas which have been very conservative for centuries, towards spending large sums of money on unproductive activity instead of investing their savings in agriculture. It is necessary to avoid unproductive expenditure.

The plan provision of Rs. 74. 87 crores in the current year is inadequate, as it hardly provides sufficient funds for the irrigation and power projects, for which another Rs. 2 or 3 crores may be needed. Even this provision, however, is based on the assumption that we shall be able to cover up the loss on land revenue through fresh taxation and that the Government of India will accept our request for allowing time for repayment of the second ad hoc loan of Rs. 35. 7 crores are granted in March, 1967.

A bill for increasing the rates of stamp duties has already been introduced in the Assembly and my colleague the Hon'ble Minister for Revenue has also announced the concessions that are proposed to be extended to small farmers in the scheme of new legislation on land revenue. A bill is already under participation on these lines and will be introduced shortly. It is expected that these measures will yield sufficient revenues this year to cover a major portion of the over all gap of Rs. 16. 39 crores in the estimates.

The progress of collections under small savings has not been very encouraging and it is necessary to intensify the campaign for savings and long term investment among organised labour in urban areas and the rural population in general.

I am confident that, as in the past, the people of Andhra Pradesh will fulfil their part in carrying out the difficult tasks ahead.