Published Mar 31, 2026 | 4:04 PM ⚊ Updated Apr 01, 2026 | 10:20 AM
CAG logo. Credit: x.com/IndiaCAG
Synopsis: CAG’s latest audit exposes irregular land allotments by TSIIC, including a ₹34.6 crore undue benefit to Adani Defence Systems. It highlights Telangana’s worsening fiscal health, with a sharp revenue deficit, rising debt, and poor governance across irrigation, health, and public enterprises. Systemic lapses, unrealistic budgeting, and weak implementation have pushed the state towards fiscal fragility.
The Comptroller and Auditor General of India (CAG) has flagged irregularities in industrial land allotments by the Telangana State Industrial Infrastructure Corporation (TSIIC), including a concessional deal that extended an undue benefit of ₹34.60 crore to Adani Defence Systems and Technologies Limited (ADSTL) under the previous BRS dispensation.
According to the CAG’s Compliance Audit Report (Report No. 3 of 2025 for the period ended March 2022), tabled in the Telangana Legislative Assembly on March 30, ADSTL was allotted 20 acres of land in Hardware Park (Phase II), Mamidipally near Shamshabad in Hyderabad at a heavily discounted price of ₹40 lakh per acre, against a prevailing market rate of about ₹2.13 crore per acre. This resulted in a substantial loss to the state exchequer.
The company had originally sought 50 acres in the same park. A Cabinet Sub-Committee (CSC), tasked with finalising incentives for mega projects, recommended that concessional pricing be extended only if the project was shifted to the Aerospace Park at Kongara Kalan on the city’s outskirts.
However, the Industries and Commerce Department, along with TSIIC, deviated from this recommendation. In April 2018, it approved allotment of 20 acres at the Mamidipally site itself at the concessional rate. The land was allotted in June 2018 and the sale agreement executed in September 2018.
The CAG noted that this move “violated the CSC’s decision” and bypassed established procedures, as no fresh approval was obtained from either the Cabinet or the CSC.
The Industries Department justified the decision citing the need to utilise resumed land and existing infrastructure at the Hardware Park. However, the audit rejected this explanation, stating that concessional pricing was explicitly linked to relocation to the Aerospace Park.
This case is cited as one instance of irregularities flagged in TSIIC’s functioning between 2018 and 2022. The audit pointed to land allotments made without proper approvals, continuation of policy benefits beyond their validity, and diversion of funds, all contributing to revenue losses and undue benefits to private entities.
The audit reports also raised serious concerns over Telangana’s fiscal health and governance, painting a picture of systemic inefficiencies and growing financial stress.
The reports, including the audited Finance Accounts for 2024–25 tabled in the State Legislature on March 30, along with multiple compliance and performance audits, highlight a steady erosion of fiscal discipline.
Earlier warnings in audits for 2022–23 and the performance review of the Kaleshwaram Lift Irrigation Project had already pointed to weaknesses. The latest findings indicate that the situation has worsened further.
A key concern is the sharp shift in the state’s revenue balance. Telangana moved from a revenue surplus of ₹779 crore in 2023–24 to a deficit of ₹9,420 crore in 2024–25. Budget estimates had projected receipts of ₹2.21 lakh crore, but actual utilisation was only 76 percent, with total expenditure at ₹1.68 lakh crore.
Revenue expenditure too reached only 80 percent of estimates, pointing to unrealistic budgeting and delays in implementation.
Committed expenditure continues to strain finances, with around 41 percent of revenue receipts spent on salaries, pensions, interest payments, and wages. This has severely limited fiscal space for development spending. Government guarantees have also surged to ₹2.41 lakh crore by the end of 2024–25, an increase of ₹21,000 crore. The CAG flagged a lack of transparency in reporting these guarantees and gaps in compliance with accounting standards such as IGAS-1, including the absence of clear data on invoked guarantees.
The state’s growing dependence on Ways and Means Advances and short-term borrowings signals cash flow stress and raises concerns about debt sustainability. Public debt remains elevated, while off-budget borrowings continue to obscure the true fiscal position.
The Kaleshwaram Lift Irrigation Project stands out as a major example of underperformance. Initially estimated at around ₹82,000 crore, the project’s cost has escalated to over ₹1.47 lakh crore. Its Benefit-Cost Ratio has dropped to 0.52, indicating that every rupee invested yields just 52 paise, rendering it economically unviable.
The audit found serious planning lapses. Contracts were awarded before detailed project reports were finalised, and works were taken up without full approvals. Redundant components and incomplete works further inflated costs. Despite massive spending, irrigation benefits remain far below targets. Additionally, over ₹4,000 crore allocated to the irrigation sector remained unspent, underscoring weak monitoring and execution.
State Public Sector Enterprises (SPSEs) are also under stress. Of the 18 enterprises in Telangana, 11 are loss-making, with total losses of ₹11,970 crore. Nine have completely eroded their net worth, with a combined negative worth of about ₹51,000 crore.
Nearly 1/5th of these entities are defunct, and many have pending accounts, reflecting poor governance and accountability. Even the Singareni Collieries Company Limited, a key contributor to state revenues, has been flagged for contract irregularities and operational inefficiencies.
Urban governance has also come under scrutiny. The CAG identified major gaps in solid waste management across Urban Local Bodies, including the absence of a clear state policy, weak monitoring systems, and poor implementation. Segregation at source remains minimal, processing facilities are inadequate, and legacy waste continues to accumulate, posing environmental and public health risks.
The audit further highlighted irregular land allotments by TSIIC, including allocation of excess land without safeguards and failure to penalise units that did not operationalise projects. These lapses have affected industrial growth and led to significant revenue losses.
In the health sector, the findings are equally concerning. There is a 69 percent shortage in Community Health Centres, along with gaps in primary and sub-centres. High vacancy levels persist, and drugs worth ₹390 crore were wasted due to expiry, pointing to severe deficiencies in inventory management.
Overall, the CAG reports underline a pattern of weak financial management, poor planning, and ineffective implementation across sectors. The cumulative impact of these failures has pushed Telangana towards fiscal fragility, raising serious concerns about the sustainability of its growth trajectory.
