TN stares at mounting fiscal debt

Noted economist, Soma Valliappan observed that the need of the hour was the setting up of a task force, to increase revenue generation, before the entire finance goes haywire.

“The major portion of the income generated and borrowings go into regular recurring expenditures such as salary and pension nearly accounts for 50 per cent; another chunk goes towards interest payments.

Subsidies grow at a constant pace and there is no political will in restricting them to need-based utilities.

While inflation is another factor, the state’s basket of subsidised items also gets fatter alongside of the subsidy per component. To add to all this, not much is being invested by the government,” Valliappan said.

Pointing out that a certain amount of debt was required for growth, he said the quality of debt and borrowings determines the growth factor.

According to him, it is not in sync, in the case of Tamil Nadu. “Why does the state keep borrowing further, instead of cutting down on its expenses and increasing its income?” Valliappan asked.

Reforms in income generation was possible only in land revenue, liquor and fuel revenues which do not come under the purview of GST, said the economist, adding that this was not possible right now, due to a lull in real estate sector and other factors. “With the AIADMK’s poll promise of phased prohibition, it is impossible to increase TASMAC revenues, which leaves us only with fuel prices; but it directly affects the common man and the state would not want to meddle with it,” he said.

Considering the above factors, Valliappan said that the only way out for the state was to identify new avenues for generating income, for which a specialised task force should be appointed to study and identity new areas that can be tapped.

The state’s budget estimates a total fiscal deficit of Rs 41,976 crore with the total expenditure is projected at Rs 1.75 lakh crores excluding Rs 25,982 crore to be repaid towards interest and total revenue receipts workout to Rs 1.59 lakh crore.

Seconding Valliappan, former Union Health Minister Anbumani Ramadoss noted that the combined administrative debts of the state from Independence until 2011 stood at just over Rs 1 lakh crore.

“It had gone up by 300 per cent in the current regime and is hovering around Rs 3.25 lakh crore. However, that doesn’t reflect in everything we see around us in terms of infrastructure, while industrial investments are moving out of the state, considering the lack of conducive atmosphere here. The total debts by factoring in the debts of state-undertakings including Electricity, Transport and Highways, would amount to over Rs 5 lakh crore,” he said.

“Transport department alone accounts for Rs 20,000 crore debt. It stands testimony to the state’s mismanagement of finances and the plaguing corruption in almost every other department,” Anbumani said.

He also differed on the subsidies aspect and observed that subsidies are needed for the poor. “However, freebies aren’t. There are no corrective measures when a corruption is unearthed. The state is definitely heading towards bankruptcy,” he said. Senior officials from Finance department however, claimed that state’s fiscal indicators were well within the prescribed norms. An official observed that the state’s fiscal deficit breached the Tamil Nadu Fiscal Deficit Act norm which is 3 per cent of Gross Domestic Product (GSDP).

However, the state had been allowed to borrow beyond 3 per cent only to absorb the burden of TANGEDCO’s debt to the tune of Rs 22,815 crore.