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Andhra Pradesh Lost ₹38,000 Crore in Central Grants After 16th Finance Commission, Says Finance Minister

Andhra Pradesh Finance Minister Payyavula Keshav informed the State Legislative Assembly that the State missed out on up to ₹38,000 crore in Central grants as a result of recommendations made by the 16th Finance Commission. Addressing legislators, the Minister explained that this funding could have helped reduce the State’s mounting revenue deficit while detailing the alternative financial assistance secured from the Union government.

What Happened

Responding to a query raised by Telugu Desam Party (TDP) MLA Burla Ramanjaneyulu regarding the discontinuation of special grants in the Union Budget, Finance Minister Payyavula Keshav noted that the recommendations of the 16th Finance Commission had impacted all States. However, he emphasized that Andhra Pradesh faced an unusually difficult situation because the previous administration utilized nearly ₹50,000 crore in Central grants, which included drawing funds from the 15th Finance Commission for 2024-25 and 2025-26 in advance.

To navigate the fiscal strain, the State government sought financial backing from the Centre across multiple infrastructure initiatives and capital projects. Minister Keshav stated that the Central government provided financial sanctions for major projects, offered long-term loans, and helped restructure high-interest debt taken by the previous government.

Key Highlights

  • Loss of Grants: The State missed out on approximately ₹38,000 crore in Central grants following the 16th Finance Commission recommendations.
  • Revenue Deficit Pressure: The revenue deficit, recorded at ₹16,000 crore between 2014 and 2019, is projected to rise to ₹48,000 crore in 2025-26.
  • Advance Utilisation: Nearly ₹50,000 crore of Central grants, including 15th Finance Commission allocations for 2024-25 and 2025-26, were drawn in advance by the previous government.
  • Project-Specific Central Support: The Centre sanctioned ₹15,000 crore for the Amaravati capital project and ₹12,157 crore for the Polavaram irrigation project.
  • Capital Investment Loans: Under the Special Assistance to States for Capital Investment (SASCI) scheme, 50-year interest-free loans were sanctioned amounting to ₹7,900 crore in 2024-25, ₹8,255 crore in 2025-26, and around ₹3,430 crore so far in the current fiscal year.
  • Other Major Allocations: The Centre gave in-principle clearance for the Rayalaseema Global Horticulture Hub with an agreed contribution of ₹10,000 crore (alongside the State’s ₹30,000 crore share), backed the Visakhapatnam Economic Region project, and invested ₹10,300 crore in Rashtriya Ispat Nigam Limited (RINL).
  • Debt Relief and Scheme Revival: Renegotiating interest rates on loans raised at up to 13.50% saved around ₹1,100 crore annually with the assistance of Union Finance Minister Nirmala Sitharaman, while about ₹30,000 crore was directed to revive 89 Centrally Sponsored Schemes.

Why This Matters

The reduction in expected Central grants significantly affects Andhra Pradesh’s ability to cover its budgetary shortfall. With the revenue deficit projected to widen to ₹48,000 crore in 2025-26, the ₹38,000 crore shortfall in grants places immediate pressure on the State’s financial planning. The situation has necessitated relying on long-term interest-free loans and earmarked capital project allocations to continue regional infrastructure development and revive suspended Centrally Sponsored Schemes.

What to Watch Next

Observers will monitor the progress of sanctioned capital projects, including works on Amaravati and the Polavaram project, alongside the implementation of the ₹10,000 crore Central support for the Rayalaseema Global Horticulture Hub. The continued rollout of the 49 projects under the Visakhapatnam Economic Region in PPP mode and further debt servicing management will remain key areas of tracking.

Frequently Asked Questions

Why did Andhra Pradesh lose out on ₹38,000 crore in grants?

According to Finance Minister Payyavula Keshav, the reduction in Central grants resulted from the recommendations of the 16th Finance Commission, which he stated affected all States.

How large is Andhra Pradesh’s projected revenue deficit?

The State’s revenue deficit, which stood at ₹16,000 crore during the 2014-19 period, is projected to expand to ₹48,000 crore in 2025-26.

What Central funds were sanctioned for major State infrastructure projects?

The Centre sanctioned ₹15,000 crore for Amaravati, ₹12,157 crore for the Polavaram project, nearly ₹4,000 crore from the Urban Infrastructure Development Fund, and ₹10,300 crore in Rashtriya Ispat Nigam Limited (RINL).

Source: Legislative Assembly statements reported by The Hindu.