The annual Budget for Tamil Nadu was passed amidst what can only be termed as Masonic secrecy. It made it to the news only after the passage of the Finance Bill and, when it became public, it did not make for good reading. Tamil Nadu, often held up as a model state, not only showed a record deficit, it would appear that the Government does not have a clue as to what needs to be done to stem the rot either.
The State’s finances were termed by experts to be in a shambles even before the Budget was presented and the final figures when revealed did not provide for any comfort either. The fiscal deficit stood at 4.58 per cent of the Gross State Domestic Product (GSDP). This was in clear violation of the 3 per cent norm stipulated by the Fiscal Responsibility Management Act. The State Government has of course, blamed it on several factors – demonetisation, sluggishness of the world(!), and Indian economy, and most laughably, fall in revenue owing to the ban imposed by the High Court on the registration of property in unauthorised layouts. The last would almost appear to indicate a frank admission that the political establishment would love the status quo to continue on rampant construction in areas such as wetlands. The Government, on the other hand, is refusing to look at how its consistent fixing of guideline values for sale of properties at unreasonably high levels has brought down the volume of transaction and, thereby, revenue as well.
The State Government has taken comfort in the fact that a significant part of its deficit can be attributed to its taking over the State-run power utility Tangedco’s debts of around Rs 22,815 crore. This was mandatory as part of the Central Government’s Ujwal Discom Assurance Yojana (UDAY) in terms of which the State Government had to take over a part of the loans of the distribution company and issue bonds in lieu of it. The point is that while it is convenient to shift the blame to the Centre, there is no denying that Tangedco remains one of the worst-run distribution companies in the country and that is the State Government’s responsibility. By stubbornly refusing to reform the distribution utility, the State is only adding to its woes. It is, in fact, sitting on a 2010 report of the Tamil Nadu Electricity Regulatory Commission that recommended splitting Tangedco into a power generation and four regional distribution companies on the lines of the State Transport Corporation. This is already in practice in other States and is a scheme that Tamil Nadu could do well to emulate.
One of the reasons why this is not being considered is the amount of free power being extended to farmers – around 20.6 lakh farm pump sets now operate gratis in the State. Besides the above, there is a yawning gap between the expected tax collection (Rs 109,850 crore) and the actual (Rs 87, 287 crore) – a 25 per cent shortfall. This too has plenty of scope for improvement. The State Government rarely bothers with the observations each year by the Comptroller and Auditor General on loopholes in commercial tax collections in the State and the way they can be improved. The TN Commercial Tax Department does not carry out inspections, and an overall sluggishness in administration has meant that the pressure has ceased on revenue collection.
Come July, the Central Government will roll out the GST scheme. That will mean further reduction in the State’s manoeuvrability on taxes. Add to this the fact that the State is facing one of the worst droughts in recent times, which can have a further adverse impact on revenue. And then you have a Government that is not very securely in the saddle. The future it would appear, is not very bright.