Regional cafe: Tamil Nadu becomes the freebie capital of India

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Published: March 8, 2016 12:12:19 AM

Assembly elections will be held soon. While ruling AIADMK is showering people with consumer durables, opposition has announced welfare measures.

Tamil Nadu is getting into election mode. In preparation, ruling party AIADMK has started showering people with more and more gifts bearing the Amma brand. Since February 24, senior citizens are travelling free of cost on government buses. Bills have been passed to increase women’s representation in local bodies to 50%. The government has launched the Amma Drinking Water Scheme, under which poor families across Chennai will receive 20 litres of purified drinking water free of cost. Amma brand is visible with many welfare schemes and products named after chief minister J Jayalalithaa, who is referred to as Amma. There are Amma canteens, Amma pharmacy, Amma salt and Amma cement, to name a few.

The opposition parties are getting pretty active as well. Alliance talks have reached a peak. The first ones to jump into the act are the DMK and the Congress. The two had a bitter fallout in 2013 when the DMK pulled out of the UPA. It appeared as though the split was final after the 2G cases, which led to the arrest of DMK supremo M Karunanidhi’s daughter Kanimozhi and former telecom minister A Raja, who, in fact, has declared that former Prime Minister Manmohan Singh was aware of all his decisions. In spite of a lot of accusations and mudslinging, both parties have come together for Assembly elections. The alliance is as seen as essential for their survival in the state.

Another alliance which has kick-started its campaign is the newly formed People’s Welfare Front comprising of the CPI, the CPM, Thirumavalavan’s VCK and Vaiko’s MDMK. Its leaders say that they will provide an alternative to the two major Dravidian parties, that they are a secular combination, which means the PMK led by S Ramadoss and son Anbumani cannot be a part of this front as it is seen as a caste party. The AIADMK and the BJP have not announced their plans yet. The man everybody wants is Vijayakanth, who heads the DMDK. He has grandly announced that he will rather be king than kingmaker. Having said that, he has not ruled out entering into an alliance either. There are many other minor players waiting to latch on to what they will eventually see as a strong alliance or a party.

Whoever emerges the winner is not going to have it easy. Tamil Nadu, which is one of the most developed states in the country, has been struggling to maintain its position. The recent floods, power shortage, drought, global recession, slowdown in exports, declining investments have all taken their toll. The state faces a sharp increase in its revenue deficit. The revenue expenditure for the previous year was Rs 1,47,297.35 crore, leaving a deficit of Rs 4,616.02 crore for 2015-16. This is a marked deterioration from the surplus of Rs 1,364 crore achieved in 2011-12. The Interim Budget for 2016-17 shows that the state’s revenue expenditure has overshot its receipts by a steep Rs 9,154.78 crore. It could not introduce new revenue proposals or policy measures, as Assembly elections will be held before May-end.

Finance minister O Panneerselvam has said that the implementation of welfare schemes and a fall in the state’s tax revenue, especially because of reduced income from sales tax on petroleum products, were the main reasons for the shortfall. As a result, the state will, for the third year in succession, be unable to meet its fiscal responsibility norm of zero revenue deficit.

Where is the depleted revenue going? Mostly on subsidies, salaries, pensions and other non-productive expenses. Last year the government planned to spend 56% of its own revenues—and over 41% of its total revenues, which include central transfers and grants—on subsidies and freebies. Today, it is the freebie capital of India. Welfare schemes not only provide a social security blanket, but also consumer durables such as TVs, mixies, grinders and fans. At Rs 59,185 crore, the outlay on subsidies and give-aways is far higher than the Rs 27,213.17 crore budgeted.

State government employees have been on the warpath with more than two lakh of them launching an indefinite strike to press for their demands such as filling vacancies, fixing minimum wages for noon meal scheme workers to reinstating 12,000 panchayat union workers and cancelling new pension rules. All this means more outflow on staff expenses.

Power sector subsidy is literally crippling state finances. In the Interim Budget, Rs 13,819.03 crore has been provided to the power sector, including Rs 7,370.33 crore for tariff subsidy, Rs 2,000 crore as share capital assistance and Rs 1,483 crore as loan support. Over the past three years, the government has spent more on power subsidy and generation/distribution utility than any other state government in India.

Tamil Nadu is not getting much help from the Centre either. The GST Bill, whose passage is imminent, will eat into the state’s sales tax revenue. Transfer from the central funds to the states has been declining. Tamil Nadu has been seeing transfers being cut in centrally-sponsored schemes.

Jayalalithaa has expressed her concern over the Budget proposals. She says the levy of Krishi Kalyan Cess on service tax, infrastructure cess on excise duty of vehicles, doubling of the Clean Environment Cess on coal and lignite, and levy of surcharge even under new tax compliance schemes are retrograde measures and ways by which the Centre is trying to avoid sharing its tax proceeds with the states. “I strongly deprecate this practice. The proposal to treat assignment of spectrum usage as a service and not as a sale of intangible goods also eats into the tax base of state governments, while enhancing the base of the Centre, and I oppose this proposal.”

In an election year, no one is going to recommend cutting down subsidies and freebies, and tightening belts. Vijayakanth has has announced a slew of welfare schemes. He says farmers, weavers and fisherfolk over the age of 60 would be provided monetary support of R2,500 a month. His party manifesto says that the state will procure all agricultural, horticultural and poultry produce to help get them better rates.

Interesting times are ahead for Tamil

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