In these troubled times, the states of Telangana and Andhra Pradesh have seen opportunity. As demonetisation and the subsequent cash crunch hit the country hard, chief ministers of AP and neighbouring Telangana are vying with each other to become ‘digitally enabled’, a move being seen as key to insulate themselves politically and beef up their already deficit state economies.
Chief Minister of Telangana K Chandrasekhar Rao (KCR) and N Chandrababu Naidu, Chief Minister of AP are offering themselves up as role model ‘Digital CMs’ to the Narendra Modi regime and have designed strategies individually.
Naidu launched ‘AP Purse’ last week, a government sponsored payment platform with 13 mobile banking and 10 mobile wallets. In turn, KCR launched an e-wallet enterprise in collaboration with ICICI Bank. “Why should we oppose demonetisation blindly? If Telangana has to survive, we have to go for cashless transactions to increase our revenue by five times,” said KCR at the Secretariat on Saturday.
The idea behind trying to push the cashless transactions agenda is a banal one. Both states are hopeful of enhancing the prospects of central assistance for their mega infrastructure development agenda. Hence the push to leapfrog financial platforms — in an effort to project their states as the choicest destinations for infusion of global investment, technology and project monetisation in the near future.
Launching the new platform AP Purse on Tuesday, Naidu said that the government introduced Marpu Nestam (Friend for change), to educate people on digital financial literacy. The government will pay incentives to agents who train people in digital financial literacy.
AP Purse is an app which will provide links to 13 mobile banking and 10 mobile wallets with Aadhaar card to pay bills and purchases to retail traders and vendors in a cashless way. “We will train engineering students to enlighten the traders, vendors and also the common man on use of bank accounts and ‘RUpay’ cards,” he said. He made 90 lakh DWCRA (self-help groups of women) members and 70 lakh beneficiaries of the MGNREGS to open bank accounts in villages.
Naidu, who interacted with bankers and RBI representatives, said that Rs 2,472 crores was available with banks and that they would get another Rs 1,100 crores in December to tide over the cash crunch but emphasised that a cashless regime by 2017 was a stark reality. A document released by the CMO ahead of the launch of AP Purse said that there were only 46,126 (rural) and 60,173 (urban) banking outlets with internet facility, out of a total of 3.83 branches. There were only 10,516 ATMs of which nearly 6,250 were in urban areas. The Naidu government has let loose a blitzkrieg of advertisements in newspapers, Telugu TV channels and radio on use of cards, particularly the RUpay card of Jan Dhan accounts.
Telangana e-wallet and the Siddipet experiment
KCR has introduced the e-wallet in collaboration with ICICI Bank to address grievances of farmers, traders and Jan Dhan account holders.
KCR said that the state was geared to go digital at all levels. To begin with, stamps and registrations, civil supplies, excise and all government payments, including salaries to govt employees, would be on cashless platform of UPIS (Uniform Payment Interface System). “It will not be possible to change people’s habits overnight. Cash transactions are part of our life and culture. Initially all transactions above Rs 500 will be cashless,” he said.
The Telangana government has introduced a cashless transaction model in Rythu Bazaars (farmer markets) for the benefit of vegetable vendors in Hyderabad and Siddipet in collaboration with HDFC Bank. Customers can buy daily vegetables with tokens linked to their Aadhaar and HDFC cards. Besides Siddipet, the facility of Aadhaar linking for debit cards has been launched in Gajwel and Warangal market yards as well. “This is a temporary arrangement until the change crisis is resolved and banks’ link to markets is completed,” says T Harish Rao, state marketing minister.
Telangana has 5,200 bank branches with one bank for every three to four villages and has one lakh POS machines. “For a complete cashless regime, Telangana needs 20 lakh POS (swiping machines),” says a state finance ministry official. He said Rs 75,000 crores of cash was in circulation in the state before demonetisation, accounting for 86 percent of the total money in the state but so far only Rs 35,000 crores in banned notes were deposited in banks and the Centre has pumped in Rs 12,500 crores.
“Telangana has fewer banks and ATMs than Andhra — 5,212 bank branches and 10,000 ATMs. Hardly one tenth of banks and ATMs are in rural areas and Hyderabad accounts for 90 percent of branches and ATMs. Internet connectivity is very poor and only 60 percent of ATMs function in Hyderabad,” said Mohammed Ali Shabbir, Opposition leader in the Telangana Legislative Council. He also termed KCR’s claim of achieving cashless regime by 2017 as deceptive since there was only one bank branch to service 10 villages and just 88 lakhs people out of 4-crore population had bank accounts, he said.
Opposition criticisms apart, Hyderabad and many towns of Telangana and Andhra Pradesh’s Vijayawada and Rajahmundry witnessed public furore with large queues in front of ATMs and banks. “Satrol ho gaya (business has gone kaput)” say wholesale traders at Goshamahal, Feelkhana, Begum Bazar, Siddiambar Bazar, Monda and Pathergatti where traders took cash from retailers for bulk purchases. “We had roaring business with 80 percent in cash and 20 percent on cheques and now everybody is demanding credit,” says Syed Aneesuddin, a bulk goods trader at Feelkhana.
Many traders say business is down now as they cannot give discounts to retailers – thanks to online payments, they have to pay Goods and Service Tax. According to RBI figures, there are about 13 lakh POS units in Telangana and the demand was for a minimum of 54 lakh.
The decision to go digital immediately by the two states is to get the early bird benefits from the Centre and also to improve their monthly revenues. “If we prove to be enabled for cashless transactions, our credentials in international markets will be benchmarked for big global investments,” Naidu told reporters on Saturday at Vijayawada.
Both these revenue-starved states are willing to go to great lengths in order to increase fund inflow — even at the cost of spending heavily on improving infrastructure and reducing liquidity in the market. While AP claimed that it had lost over Rs 1,300 crores in revenue generation in just one month, Telangana says it lost nearly Rs 800 crores. Both the governments have promised lavish welfare measures and freebies. Coffers cannot be empty for too long. And so the Telugu speaking neighbours have decided to join the Centre’s chorus on encouraging cashless transactions.