Tamil Nadu to release white paper on finances on August 9

P. Thiaga Rajan, Tamil Nadu Finance Minister.

The Tamil Nadu government will release a 120-page white paper on the assets and liabilities of the State on August 9 in order to highlight the fiscal mismanagement in the past decade and to make the people aware of the precarious nature of the State’s finances.

This is ahead of the presentation of the State’s revised Budget for 2021-2022. Tamil Nadu will also present a separate budget for agriculture. Governor Banwarilal Purohit has convened the budget session of the Assembly to meet from August 13. The Dravida Munnetra Kazhagam government, which has come to power after a gap of a decade, will present the Budget on that day.

“Fiscal situation much worse than we feared,” Finance Minister P. Thiaga Rajan had tweeted on June 20 and had added that the government would release a white paper. Thiaga Rajan had earlier explained that the reason for this was that the Budget presented before the Assembly election in May did not reflect a true picture of the state of Tamil Nadu’s finances.

Former Chief Minister Edappadi K. Palanisami had contested this and claimed that the Budget and the State’s expenditure were audited by the Comptroller and Auditor General. The DMK questioned this claim and demanded to know why the AIADMK government refused to table as many as five CAG reports ahead of 2021. These were tabled after the DMK convened the first session of the Assembly.

Other concerns

Regardless of a white paper, it is clear that Tamil Nadu has a huge debt burden. The Tamil Nadu Finance Minister gave a hint of what one of the approaches will be in an interview in July and in a tweet on July 5. Making it clear that “states are not minions of the Union”, he said that Tamil Nadu “will do what is in our interest as the Constitution allows, independent of other states and Union.”

Responding to an assertion that restructuring State loans was an impossible task, he said that it was not so; this was “eminently do-able”. His other concern was that the State had begun to lose revenue as a percentage of GSDP. Pointing out that the revenue earned was about 10 per cent to 11.5 per cent from 2003-2014, he said that there was a steep decline since even pre-COVID times. This plus the faulty implementation of the GST and the Centre not returning the GST due to it was a major problem, he said.

The State was not in a position to raise revenue from predictable items such as petrol prices. This was because, Thiaga Rajan pointed out, there had been a “rampant increase in taxation of petrol and diesel” by the Union government, and the State’s share of such tax revenues had been reduced.

The new DMK government has put on hold implementing some of the schemes that it had promised ahead of the Assembly election. Defending the move, Thiaga Rajan said that when the party made the promise, it did not know that the Union government would switch about Rs.50,000 crore from excise to cess, which is not shared with States. There was also no way of predicting the severity of the second COVID wave and the DMK was also unaware of the full extent of fiscal decay.