Previous Budget Speeches



Speech of

Sri P. Mahendranath,

Minister for Finance

presenting the Vote-on-Account Budget for 1988-89

the Andhra Pradesh Legislative Assembly
on 24th March, 1988.

I rise to present the Vote-on-Account Budget of Andhra Pradesh for the year 1988-89

Three years of the current Seventh Five-Year Plan are over and it is now time to look back and reflect on our priorities and the extent to which we have been successful in pursuing our developmental goals in the desired directions. To an extent, our efforts have been blunted by the severe drought for the fourth year in succession affecting 18 districts. By adversely affecting our revenue realizations the natural calamity has greatly impeded our efforts to sustain the plan targets.

As Hon'ble Members are aware we had submitted a detailed Memorandum on Drought Relief in response to which the Central Government indicated a ceiling of Rs.57.84 crores along with special assistance from Planning Commission of Rs.11 crores. The latter is for accelerating selected irrigation projects. The works which are in brisk progress are primarily aimed at creating additional employment.


Despite the severe drought in large parts of the State and floods later during the year, culminating in a fall in agricultural production, the net State domestic product increased during the year 1986-87 both in terms of constant as well as current prices. At constant prices (1970-71) the net domestic product was Rs.4510 crores registering an increase of 1.5% over the preceding year. At current prices both the net domestic product and the percapita State Domestic Product increased by 7.8% and 5.8% respectively. The above rates of growth were possible due to the share of the secondary and tertiary sectors rising over the year. This is a normal concomitant of the developmental process and points to the diversification and sectoral shift of the economy.

The increase in the state annual average consumer price index in 1986-87 was 7.9% over the previous year. The consumer price index for agricultural labourers rose by only 4.8% during 1986-87, but broadly attained the same level of growth for the first 8 months of 1987-88 as the index for industrial workers. For the country as a whole, the overall rate of inflation as measured by the wholesale price index, was 9.8 per cent in January, 1988. The inflationary pressures are basically a result of the policies of the Government of India. These would have manifested themselves to a larger degree if it had not been for the policies of the State Government which shielded the poorer sections of the State's population from its effects, by a well-distributed Public Distribution System and by making essential commodities available at a reasonably subsidized price.

In spire of the continuing drought during the year, the foodgrains production taking both Kharif and Rabi seasons is not expected to decline more than marginally. The annual production of foodgrains during the year is expected to be about 90.72 lakh tonnes as against 91.41 lakh tonnes last year. This bears ample testimony to the strength of the agricultural sector in the State which is more insulated from the adverse effects of drought due to the policies of the Government.

During the first 9 months of the current year, the index of industrial production increased slightly over the corresponding period during 1986-87. Industrial activity would have recorded a much higher rate of growth had it not been for the crippling drought which affected hydel power generation. However, overall, due to an expansion of thermal power generation. However, overall, due to an expansion in the first 9 months of the year was slightly higher than the generation in the corresponding period of 1986-87. In spite of all this, as Hon'ble Members are aware, measures had to be introduced to apportion power to industries with reference to availability of power.


In consultation with the Planning Commission our Plan outlay for 1988-89 has been fixed at Rs. 1250 crores and the sectoral outlays are reflective of our priorities, A brief on the Plan and the programmes included therein, has been furnished separately to the Hon'ble Members in the volume entitled Survey of Economic Trends and State Plan. Our board development goals and thrust of our policy initiatives remain the same, i.e. development of our infrastructure in terms of irrigation and power and welfare of the economically and socially weaker sections of our society. We continue to lay emphasis on these objectives and despite the strain on our resources, the programmes for the poor and the socially disadvantaged are being continued with greater emphasis.


As a large proportion of our population is engaged in agricultural activities, agriculture continues to occupy an important position on the State's economy. The drought for the fourth successive year resulted in a deficit of 23% in rainfall during Kharif 1987 leading to a decline in the area sown. The cyclonic rains during October to December 1987 however, considerably brightened Rabi prospects so that the overall foodgrains production during the year is not likely to be lower than last year. To mitigate the hardships faced by the farmers in the 18 drought affected districts, contingency drought relief programme for raising crops in Rabi in areas with assured irrigation support of adequate soil moisture is being implemented.

Hon'ble Members may recall my mentioning last year, the Government's intention to set up a body to look after the farmers interests at the mandal and State levels. I am happy to inform the Hon'ble Members that steps have been taken to establish the Karshaka Parishads. We hope this will usher in a new era of prosperity to the millions of our brothers in the rural areas.

A special thrust is being given for increasing the production and productivity in dry land areas which constitute 68% of the total cultivated land in the State. Special schemes like National Watershed Development Programme for rainfed agriculture and the State Integrated Watershed Development Programme for dry land areas had been taken up on a priority basis. Besides the watershed approach to comprehensive dry and development, simple dry land techniques are also being popularized in about 1500 villages spread over 800 mandals in the State. In all about 7 lakh hectares are covered under dry land development programmes during the year and special efforts are being made to promote the raising of high yielding varieties in dry land areas. Concerted efforts are also being made to increase the production of oilseeds and pulses so that the country's dependence on imports is reduced. Similarly, for increasing rice production, a Crash programme is proposed to be launched during 1988-89 in 12 potential districts in the State with the objective of achieving 25% increase in productivity.

To cover the farmers against the vagaries of the monsoons and the attendant risks in agricultural production, the comprehensive crop insurance that was started in 1985 is being continued

As the Honourable Members are aware, our State produced the finest varieties of long staple and extra long staple cotton in the country. Unfortunately for our cotton farmers, this year a series of natural calamities followed by wide spread pest attack have crippled their financial position. The State Government has announced a series of measures to alleviate the suffering of these farmers. Our Chief Minister had also submitted a memorandum to the Prime Minister indicating the areas where the financial institutions have to play an active role to reduce the suffering of the cultivators. I hope the Central Government which control the Banking institutions would respond to our request and extend necessary relief.

Honourable Members are aware that our State was the first in the country to implement the Single Window Credit Scheme which involved re-organising the Co-operative Credit and Marketing structure. As a result, about 6700 Primary Agricultural Credit Societies were re-organised on the basis of viability into 4564 societies. The 27 Co-operative Central Banks were re-organised into 22 District Co-operative Central Banks. The Co-operative Marketing Societies which were working well, have been merged with the District Co-operative Marketing Societies and those that were not functioning satisfactorily, have been liquidated. Elections were held in 1987 in the re-organised Primary Agricultural Co-operative Societies and the Societies have taken up a number of activities including the supply of inputs, distribution of consumer articles, distribution of Janatha Sarees and Dhoties, etc.

The continuing adverse seasonal conditions have seriously eroded the repayment capacity of the farmers which in turn has increased the over dues of the societies. In order to provide relief to the farming community as well as to give an incentive for prompt repayment, Government have granted concessions by way of waiver of interest and penal interest as well as interest rebate for prompt repayment.

The bulk of our small and marginal farmers are unable to eke-out satisfactory incomes from their limited land holdings from farming alone. Dairying is an important subsidiary occupation for such farmers. The Dairy Development Co-operative Federation provides marketing and infrastructure support to these farmers as well as ensures the supply of hygienic milk to urban consumers. Between October, 1987 and September, 1988 the Federation expects to procure more than 2500 lakh litres of milk. Tetra Brick Plant coming up at Milk Products Factory, Vijayawada, will facilitate the preservation of milk for six months without refrigeration. A number of dairy units in the tribal and non-tribal areas have been opened all over the State.

In order to benefit the large poor fishing community in the State, an integrated development of fisheries to increase the production of inland and marine fish has been undertaken. During the coming year it is proposed to set up new Fish Seed Farms and provide marketing support as well as establish two new Fish Farms Development Agencies


In order to ensure that agricultural development is self sustaining, it is imperative to develop irrigation facilities. Over the years a major proportion of our developmental outlays has been earmarked for irrigation. There is still a vast irrigation potential which needs to be tapped. Our effort has been to complete as many schemes as possible while at the same time speeding up the utilisation of the potential already created. In the Major Irrigation sector, priority is being given to the Godavari Barrage and the Yeleru and Singoor Projects. The progress of the work on the Telugu Ganga Project is contingent on clearances from Government of India from the environmental angle. We hope this will be expedited. An agreement has been entered into with the World Bank for a loan assistance of Rs. 68 crores for the implementation of National Water Management Projects in selected blocks of Nagarjunasagar Project, Rajolibanda diversion scheme, Mylavaram, Nizamsagar and Thandava Projects, in addition to the Kurnool-Cuddapah canal.

Minor Irrigation works which include the construction of tanks, check dams, etc., have been taken up in the backward and drought affected areas on priority basis to provide immediate relief as well as create productive assets. Assistance from the European Economic Community. Assistance from the European Economic Community is being availed of for implementation of minor irrigation schemes in drought prone and tribal areas. The Godavari and Krishna rivers in the State are being considered for declaration as National Water ways. Once this is done, the financial responsibility for their development, maintenance and management would rest with the Inland Water Authority of India.


Power is vital for agricultural and industrial development. We have continued to accord a very high priority to this sector. During the current year it is expected that with the commissioning of the third unit of the Pochampad Hydro Electric Scheme in March, 1988, the capacity addition would be 18 MW. The demand for power in the State has been rising much faster than the national average and it is therefore necessary that the generating capacity is increased to keep pace with this demand while at the same time ensuring optimum utilisation of the power stations already established. Honourable Members will be happy to note that the plant load factor of our thermal power stations is amongst the highest in the country. The on-going schemes such as Srisailam Hydro Electric Scheme Stage-I, the Vijayawada Thermal Power Station Stage-II, the Nagarjunasagar Pumped Storage Hydro Electric Scheme Stage-II, the Srisailam Hydro Electric Scheme Stage-II etc., would be continued during 1988-89, in addition to taking up some new schemes such as Vijayawada Thermal Power Station Stage-III and Muddanur Thermal Power Station.

During the current year up to February 1988, 700 villages were electrified and more than 77,000 pump sets energized. Special care has been taken for electrification of Harijanwadas. 725 Harijanwadas were electrified during the year and the programme for electrification of villages under the Tribal Sub-Plan has made considerable progress.

A fillip is being given to the harnessing and utilisation of non-conventional energy sources. It is planned to establish 25,000 family size bio-gas plants during the year 1988-89 with an estimated outlay of Rs. 22.50 crores. It is also proposed to install 25 Community/Institutional bio-gas plants as well as 1.5 lakh fuel efficient wood burning chulhas. Solar energy programmes are also proposed to be continued.


The pace of industrialization has been maintained during the current year with 72 Letters of Intent and 70 DGTD approvals received in the first six months. The level of investment in these new sanctions is about Rs. 300 crores with an employment potential of 26,000 persons. 34 DIR registrations have also been received covering an investment of about Rs. 350 crores and a likely employment of nearly 7000 persons. A branch office of the DGTD was opened in Hyderabad in October, 1987 and we hope with this, DGTD registration of medium scale industries will be expedited.

By the end of November, 1987, there were nearly 61,000 small scale industrial units in the State with a total outlay of over Rs. 800 crores employing about 5.7 lakh persons. The Government is committed to extend all help and assistance to entrepreneurs in setting up small industries. We had earlier exempted 75 categories of industries from all types of clearances, permits and approvals. The Government are contemplating to enlarge this by another 49 categories. Steps have been taken to simplify small scale industries registration procedure and industrial intensive campaigns are being continued for speedy industrialization of the State.

The State has been successful in attracting Non-Resident Indian Investment with 23 units covering an investment of about Rs. 19 crores, having been commissioned. Additionally, 60 NRI Projects are in various stages of implementation with a total investment of about Rs. 27 crores.

As Honourable Members are aware, Government have been making sustained efforts at improving the socio-economic conditions of the thousands of handloom weavers in the State. The working capital requirements of handloom co-operatives have been increased and the scheme of production of Janatha Sarees and Dhoties in the handloom co-operatives has been continued to provide employment to weavers and also to supply cheap cloth to green card holders. It is expected that about 50 lakh green card holders would benefit from the scheme during the current year. The package of welfare measures for the handloom weavers which include thrift-fund-cum-savings and security scheme and construction of worksheds-cum-houses was continued. In order to ensure the supply of hank-yarn to the weavers, two Co-operative Spinning Mills at Nandyal and Parachuru are being established and Government are assisting in the modernisation of the existing Co-operative Spinning Mills.

As Honourable Members are aware, out State ranks second in the country in the development of Sericulture. More than 6 lakh rural people, specially small and marginal farmers, are engaged in this field. The activities have been considerably expanded during the year and a massive programme for Sericulture development with World Bank assistance is in the offing.


The welfare of Scheduled Castes, Scheduled Tribes and Backward Classes continues to be accorded the high priority that it deserves. Under the Special Component Plan all departments of Government have reoriented their Plan programmes towards maximization of the benefits for the weaker sections of society. The construction of community irrigation wells, the rehabilitation of jogins, pensions to landless agricultural labourers and indigent widows and old age pensions were continued and so were schemes for maintenance of existing hostels providing scholarships and stipends, supply of textbooks, supply of dresses, etc. For imparting high quality of education to the students, Government have started Residential Schools and is also giving coaching to Scheduled Castes, Scheduled Tribes and Backward Classes candidates, so that they can qualify for the higher services. In addition to the existing scheme of self-ownership of rickshaws for the Rickshaw pullers, Government have announced a new scheme during the current year for the supply of one set of clothes to each rickshaw puller. This is expected to benefit about 2.3 lakh Rickshaw pullers in the State.

The programme for construction of houses for the benefit of weaker sections was continued during the year and it is proposed to continue to build 1.45 lakh houses every year.

To provide better employment opportunities to tribals in scheduled areas and in involve them in administration, certain posts have been reserved entirely for local Scheduled Tribes. A number of hostels and Ashram schools have been taken up during the year.

Residential Schools and Government hostels for Backward Class students have been sanctioned during the year. The scheme for scholarships for post-matric students and internship scholarships was continued during the year.


As Honourable Members are aware, our State was the first to provide equal property rights for women. Government consider that the welfare of women who constitute about half of the population of the State is of paramount importance in our overall development. The Telugu Bala Mahila Pragathi Pranganams Scheme was started last year with the objective of helping women to develop skills in various fields including tailoring, dress making, soap making etc. Two Pranganams have already started functioning and five more are expected to commence operations soon. It is proposed to extend the coverage of Pranganams to some other districts in the State during the coming year. The policy of reserving 30% of the posts for women for which women are either better suited or equally suited has been extended to all State Public Sector Undertakings, Government Corporations, Co-operatives and Panchayat Raj Bodies. Under the scheme of maternity assistance to women of agricultural labour families, an assistance of Rs.40 per month in non-ICDS areas and Rs.20 per month in ICDS areas is provided to enable pregnant and nursing mothers to recoup their health. This scheme was extended during the year to cover women working as casual labour and in construction works, quarries, road works, etc., in the urban areas also.


The Rural Development schemes to assist the Small and Marginal Farmers under the Integrated Rural Development Programmes and other programmes, i.e., Drought Prone Areas Programme, Programme for Assistance to Small and Marginal Farmers and Employment oriented programmes such as the National Rural Employment Programme and the Rural Landless Employment Programme Guarantee Programme were continued during the year. It is proposed to extend them during the coming year also.

Provision of drinking water to all villages has been our endeavour. All the problem villages in the first two lists have already been covered and out of the 3rd list of problem villages a number of villages and hamlets were covered by December, 1987. It is programmed to take up 4000 villages during the coming year with an outlay of Rs.29 crores. Additionally, Government of India are expected to provide Rs.24.21 crores for accelerated rural water supply schemes, External Aid is also being tapped for rural water supply from the Netherlands Government as well as under U.K. assistance. These projects are under consideration in Government of India. Desalination plants in 18 shore area villages are proposed to be set up shortly. Construction of buildings for Mandal Praja Parishads has been taken up in a phased manner with 335 buildings being under various stages of construction. Elections to the Gram Panchayats in the State were conducted recently.


Concerted efforts are being made for the development of the urban areas in the State. In order to augment water supply to various municipalities, projects with a total outlay of Rs.46 crores to cover 49 municipalities are under execution. The Manjira Water Supply Scheme Phase III (Stage-I) which would bring an additional quantity of 30 million gallons per day to the Twin-Cities is in full swing. It is proposed to pose the Manjira Water Supply Scheme Phase III (Stage-II) along with the Hyderabad Sewerage Scheme for World Bank assistance.

In view of the high cost involved in providing sewerage schemes and in order to liberate scavengers from the degrading unhygienic profession of scavenging, the Government have launched a low cost sanitation programme. This Vimukthi programme is being implemented in 75 municipalities with the help of grants and loans from the State Government as well as loans from HUDCO and assistance from Government of India.

The Quli Qutub Shah Urban Development Authority has taken up a number of works in the old city with the help of Government. The activities cover widening of roads, improvement of hospitals, construction of school buildings, improvement of sanitation conditions, development of green belt, conservation of historical monuments and remodelling sewerage schemes.


As a part of the strengthening and expanding of health care infrastructure in the State, 200 new Primary Health Centres are being established during the current year. Selected hospitals with less than 30 beds will be upgraded into 30 bedded hospitals to ultimately convert them into Community Health Centres. It is expected that the Andhra Pradesh Vaidya Vidhana Parishad will undertake the establishment of complexes in a number of hospitals by raising loans from financing institutions

Family welfare programmes have been stepped up with the couple protection rate registering an increase of 2% during the year.

Under the School Health Programme, 59 lakh students have been examined and the universal immunization programme has been extended to 10 districts. It is expected to cover the remaining districts in the next two years. A number of vacancies such as anti-cholera vaccine, Tetanous Toxide, Anti Rabis Vaccine are being produced at the Institute of Preventive Medicine. The Nizam's Institute of Medical Sciences which has already earned a name for itself as a Centre for excellence will establish new specialities of Nephrology, Urology, Medical and Surgical Oncology during the coming year.

Drugs Control Administration is being strengthened with a view to ensure that quality medicines are made available to the people. Drug formulations are being very carefully checked and with a view to deter offenders a proposal for amending the Drugs and Cosmetics Act providing for heavy punishment has been sent to Government of India.


The goal of the Government is to universalize primary education by the end of the VII Plan period. Towards meeting this goal it is proposed to enroll additionally 5 lakh children in the age group 6-11 years and 2.66 lakh children in the age group 11-13 years during the coming year. In addition to the 4 Navodaya vidyalayas established during 1986-87, 12 more Vidyalayas have been established in rural areas. Audio Visual equipment which had already been supplied to 600 schools is proposed to be supplied to 400 more schools.

In keeping with the New Educational Policy, the State Government propose to cover a large number of schools under the operation black board scheme. The scheme envisages provision of 2 teachers in place of one besides construction of class rooms and toilet facilities. It is proposed to start the District Institute of Education and Training in each District which will look after the pre-service and in-service training programme of primary school teachers. Vocational education at secondary level has been taken up by the Government. It is proposed to construct vocational workshops at Mandal Headquarters to enable students to be trained in various vocations. The programmes of Adult Education have been taken up in a big way with a high priority coverage of women and those from the Scheduled Castes and Scheduled Tribes. It is proposed to start Jana Shikshana Nilayams in a phased manner during 1988-89 for post-literacy and continuing education.

A Council for Higher Education has been established with the objective of looking after the interests of Universities and other Institutes of higher learning.

During the current year, Government have started model residential polytechnics for Scheduled Castes at three centres and also established a polytechnic for women. Career guidance and counseling cells have been set up in the Polytechnics. During the coming year, four Government Polytechnics for women are proposed to be set up in the polytechnics. During the coming year, four Government Polytechnics for women are proposed to be set up in addition to three model residential polytechnics for Backward Classes.

ACCOUNTS 1986-87

The actual 1986-87 resulted in a revenue deficit of Rs.188.45 crores against the estimated deficit of Rs.181.05 crores. The year 1986-87 closed with a deficit of Rs.5.19 crores against the revised estimate of minus Rs.66.65 crores.


The Revised Estimates 1987-88 reveal a revenue deficit of Rs.145.84 crores against the deficit of Rs.12.81 crores originally estimated. This is primarily due to shortfall in receipts under Sales Tax and Motor Vehicle Tax and increase in revenue expenditure mainly due to providing for drought relief and flood relief schemes. The year is expected to close with a minus balance of Rs.60.09 crores against the original estimated deficit of Rs.237.76 crores.


For the year 1988-89, the revenue deficit is estimated at Rs.112.69 crores. The improvement in the year 1988-89 compared to the year 1987-88 is mainly due to buoyancy of State tax receipts. The overall transactions and the year is expected to close with a minus balance of Rs.211.39 crores after taking into account the estimated opening deficit of Rs.60.09 crores. This gap in resources is proposed to be covered by implementing various economy measures in Non-plan expenditure and mobilizing additional resources.

The President of India constituted a new Finance Commission, headed by Sri N.K.P. Salve, M.P. The Finance Commission will look into the financial position of the States and the Centre for the year 1989-90 and for the Plan period 1990-95 and make suitable recommendations for allocation of resources between the Centre and States. The Andhra Pradesh State Government and States. The Andhra Pradesh State Government had strong reservations about the terms of reference of this Finance Commission which had been considerably modified by the Government of India, compared to those which have traditionally been followed by earlier Finance Commissions. After mutual consultations among the various interested States, specific revised terms of reference have been proposed to the Government of India. These mainly concern the manner in which the normative approach has to be followed in determining receipts and expenditure, as also regarding the Finance Commission taking account of Plan and Non-Plan revenue receipts and expenditure together.

Honourable Members will appreciate that the exercise of framing the Budget is contingent upon certain assumptions relating to seasonal conditions which have a bearing both on realization of revenue and the direction and quantum of expenditure. These trends are amenable to a more accurate estimation after July. In view of the fact that we have had the misfortune of drought conditions successively for the past four years, I consider it prudent to come back before the House and present the full details at an appropriate time after taking stock of the situation. For the present, I am seeking a Vote-on-Account to cover the expenditure for the first six months of the financial year 1988-89.

Sir, I commend this Budget for approval by the House.