Introduction: The state should work on the Universal Basic Income Plan of providing cash in sync with the Central schemes and merge/dispense with the plethora of welfare schemes; also make these targeted at the weaker and most vulnerable sections.
The DMK is voted back to power and assumed charge under M K Stalin as Chief Minister. Stalin brings with him rich experience in political organisation mentored by the DMK supremo and his father M Karunanidhi; he also has rich experience as an administrator: he was the Mayor of Chennai metro for over five years and also served as a Minister and Deputy Chief Minister of the state.
The DMK alliance has returned with a decisive majority. A welcome feature of Tamil Nadu administration relates to the decisiveness of its voters in ensuring stability of administration for the full term of the legislature. This has been of considerable value to the administration delivering its election promises.
The course will not be easy though. Look at the experience over two decades: the DMK was part of the NDA alliance led by A B Vajpayee during 1999-2004. AIADMK Supremo J Jayalalithaa turned instinctively antagonistic to the Centre. DMK switched its allegiance to the Congress and became part of the UPA alliance during 2004-14. The AIADMK government continued with its antagonism.
The situation changed after the Modi government took charge in 2014. Centre-state relations improved after the demise of Jayalalithaa.
With the strident criticism of the Centre and its policies by Stalin, there is concern over the state getting pitted against the Centre. This can have its implications for coordinated developments efforts.
With the Congress party in disarray losing its clout in Assam, Kerala, Puducherry and West Bengal, DMK’s Stalin, TMC’s Mamata Banerjee and the CPM’s Pinarayi Vijayan as powerful regional leaders would strive to take on the strong Modi.
The DMK has several issues not in alignment with the Centre. eg. the three-language formula, New Education Policy, NEET, CAA… and more on the fiscal plane.
Declining share of Central transfers
A major complaint relates to the declining share of Central transfers: even while the state was voicing an unfair transfer of resources following the recommendations of the 14th Finance Commission, those of the 15th had contributed to more serious heartburns.
The issue has a long history. I cite an instance: the state was the leader in expanding power generation and distribution. Making effective use of the generation of large capacity by Neyveli Lignite Corporation in the 1960s and the Madras Atomic Power Station since 1980s; and augmenting capacities on its own at Ennore, Mettur and Thoothukudi, TN took power to all villages ahead of most other states.
Unfortunately, there had been decades of long neglect in strengthening the finances of the Electricity Board/Corporation. The DMK was prolific in expanding employment of the electricity board as also in its offering hefty subsidies eg. free power for agriculture, highly subsidised power for domestic consumers with the first 100 units of consumption free and next 100 charged at just Rs 2/unit for all.
When the Centre mandated the setting up of the State Electricity Regulatory Commission and separation of generation and distribution, the DMK resisted it for years. In contrast, neighbouring Andhra Pradesh and several other states did these early and improved the finances of their power companies through suggested tariff increases.
The state continues with the burden of over Rs 100,000 crore of debts of the power corporations alone. Despite the restructuring programme offered by the Centre through concessional loans for Discoms, there has been little improvement.
Irrational disparities in tariff
Even while the state resists reforms, there are vast irrational disparities in tariff: affluent sections of domestic consumers get their power consumptions subsidised; small scale industries and businesses are penalised with hefty tariffs: the average tariff for a small MSME unit drawing LT power is around Rs 9 per unit and for a small commercial business consumer, it is around Rs 14 per unit. The widespread sickness and increasing non-viability of small businesses are also the result of such hefty power tariffs.
While there is resentment over the price of petrol and diesel kept high on revenue considerations, power tariffs are kept irrationally high for industrial and commercial consumers despite the cost of procurement falling steeply. eg. wind power and solar power are bought in large volumes at just around Rs 2 per unit. The State Electricity Regulatory Commission (SERC), manned by retired bureaucrats, largely ex-TANGEDCO officials, is not effective in its regulatory/development roles.
Align welfare schemes with Centre’s
With the formula for sharing Central revenues stipulated by the Finance Commission, there is scope for the state policy aligning with that of Centre. But such conflicts continue. TMC’s Mamata Banerjee caused considerable loss to the farmers and other beneficiaries of her state by refusing to avail the benefits of Central schemes. Sense lies in coalescing state schemes with those of the Centre. eg. the health for all initiative was originated by DMK’s Karunanidhi through the state taking care of the health insurance of around 60 per cent of its population. In this access to top-class medical facility was provided to large sections of the population through the Kalaignar Kaappeetu Thittam (later named as Chief Minister’s Comprehensive Health Insurance Scheme by AIADMK), the Modi government adopted and improved upon this through providing up to Rs 5 lakh for surgeries and other treatments.
With the advent of GST, sources for augmenting revenue by the state have become extremely limited, eg. taxes on liquor, tobacco products, petrol and diesel… which are already heavily taxed. The state needs to align several of its welfare schemes with those of the Centre and save allocations on its own. eg. Ayushman Bharat Yojana, Jal Shakti Abhiyan, Swachh Bharat Abhiyan… Prudence demands a coordinated effort in several other schemes.
Of course, DMK’s stand on its anti-Hindi policy, the anti-Navodaya scheme… would continue to deny the advantages of the three-language formula. Still, this requires re-consideration with the choice provided to the willing citizens of the state.
Concern over state’s finances
An area of concern relates to TN’s finances. I have been pointing to a huge increase in the debt burden on the state. This has increased from around Rs 100,000 crore in 2011 to an estimated Rs 571,000 crore by March 2022. This has its serious implications with an increase in allocation for interest annually of over Rs 40,000 crore plus repayment of a portion of the debt which together could amount to nearly a third of the state’s revenues.
Equal concern relates to the huge outgo on salaries, pensions and subsidies that presently account for around 84 per cent of the state’s revenue expenditure. The deficit is met by fresh borrowings.
The new government has started with a reduction in the price of Aavin milk and free bus travel in cities for women which will further increase the burden on the state’s finances.
Take bold to revise tariffs/fares
With the comfortable majority of the DMK in the state legislature, the state will have to take bold to increase tariffs for power, bus fares, milk prices… Jayalalithaa did this soon after coming to power in 2011 and ensured its acceptance.
The Centre is embarking on a bold policy of privatisation of PSUs and monetisation of public assets. These are vitally needed for repairing the poor state of the fiscal. These measures are needed by Tamil Nadu also.
The 300 odd proposals announced in the DMK election manifesto would be in conflict with such an approach. But in the interest of the long-term development of the state, there is the need to look at making a drastic departure from past practices.
I cite a couple of instances of such impractical proposals: the first relates to the offer to fill in around 3 lakh vacancies in the government. Pensions and salaries accounted for 54 per cent of revenue of the state in 2020-21. Taking advantage of the improvements in technology, the state had worked hard to reduce the number of employees by around 3 lakh in the last ten years. In the absence of major expansion of state’s activities, it would make for a lot of financial prudence not to bloat state employment as Karunanidhi did in the initial years of his tenure.
Move towards UBI
Another proposal of 75 per cent reservation for the locals in employment also needs close scrutiny. Tamil Nadu has been attracting handsome investments by foreign companies as well as by entrepreneurs outside the state. These have been attracted by a proactive administration, rich infrastructure as also the flexibility over employment. There is the imperative for large sections of the workforce switching from agriculture whose share in the state’s GDP has been falling. The state has not suffered serious unemployment. In fact, it has been difficult to get suitable employees for a large number of occupations in the engineering, textile, hospitality, security sectors.
As late as 2015 I found a large textile unit in Coimbatore expressing difficulty in procuring local women for employment. I noticed a third of employees were women and not a single one, the Managing Director claimed, was from the state. Especially in the context of the reluctance of women of the state opting for full time employment, the proposal of DMK seems to be beset with practical difficulties.
The Covid-19 pandemic continues to wreak havoc on economic activity, depressing growth prospects. The state should work on the Universal Basic Income Plan of providing cash in sync with the Central schemes and merge/dispense with the plethora of welfare schemes; also make these targeted at the weaker and most vulnerable sections. This will call for a drastic departure from the electoral promises of the Dravidian parties. Of course, these have been effective! With the not so satisfactory state of the state’s finances, its handsome majority in the legislature, the DMK should embark quickly on this reform.
