Telangana’s Non-Tax Revenue Declines: Key Insights and Policy Reforms

Non-tax revenue, comprising income sources other than taxes, plays a critical role in a state’s financial health. In Telangana, FY 2024 witnessed a stark decline in non-tax revenue, as revealed by the Comptroller and Auditor General’s (CAG) Monthly Key Indicator (November 2024). The state collected only ₹5,217.26 crore till November 2024, a sharp drop of 70.78% compared to the corresponding period in FY 2023. This represents just 14.81% of the estimated target of ₹35,208.44 crore.

Key Reasons Behind the Revenue Dip

1. Absence of High-Value Transactions
   In FY 2023, Telangana raised substantial non-tax revenue through:
   • Leasing the Outer Ring Road: ₹7,380 crore.
   • Land Auctions: ₹5,000 crore.
   However, similar large-scale transactions were absent in FY 2024, directly impacting revenue collections.
2. Challenges in the Mining Sector
   • Telangana’s significant non-tax revenue sources include royalties and seigniorage fees from mines and minerals.
   • Inefficiencies in auction processes and loopholes in sand mining practices have historically impacted earnings.
3. Policy Gaps in Revenue Diversification
   While efforts are underway to rationalise and improve revenue streams, the absence of comprehensive reforms has limited the state’s ability to meet its targets.

Bright Spot: Stamps and Registrations Revenue

Contrary to speculation about a slowdown in Telangana’s real estate market, Stamps and Registrations revenue showed resilience:

• Revenue reached ₹9,524.19 crore by November 2024, a 2% increase from the previous year.
• This marks 52.25% of the estimated target of ₹18,228.82 crore for FY 2024.

This uptick highlights the sector’s underlying stability despite broader economic challenges

Policy Reforms: A Step Towards Revenue Recovery

In July 2024, Telangana’s government outlined strategies in its Statement of Fiscal Policy to boost non-tax revenue:

1. Reforms in Mining and Sand Sectors
   • Rationalisation of mine auctions to enhance transparency and competitiveness.
   • Plugging loopholes in sand mining operations to curb revenue leakages.
2. Diversification of Revenue Streams
   • Exploring untapped sources of non-tax revenue.
   • Encouraging private-sector participation in infrastructure projects.
3. Strategic Land Monetisation
   The state is considering resuming land auctions under a more structured approach to avoid speculative downturns

Implications for Development and Welfare

The dip in non-tax revenue poses challenges for funding development and welfare programmes. However, the government remains optimistic about recovering lost ground through robust policy measures in the next fiscal year.

If successful, these strategies could not only stabilise Telangana’s finances but also create a sustainable model for revenue generation without over-reliance on taxes.

Conclusion

Telangana’s FY 2024 non-tax revenue decline underscores the importance of consistent and diversified revenue-generation strategies. While setbacks like the absence of high-value transactions and inefficiencies in mining operations have impacted collections, the state’s proactive reforms signal a commitment to recovery.

By focusing on transparency, efficiency, and diversification, Telangana can lay the foundation for stronger fiscal health in the years to come.