A rough ride

Print edition : January 19, 2002

Even as the political climate remains unfavourable to it, the A.K. Antony-led UDF government in Kerala takes drastic and unpopular decisions to tide over the State's financial crisis.

R. KRISHNAKUMAR in Thiruvananthapuram

KERALA is one of the largest markets in southern India for broiler chickens. Hence their occasional political importance. According to the Kerala Poultry Growers' Association, about five lakh of these birds reach dinner plates in the State every day.

Traders estimate that nearly Rs.500 crores worth of broilers are transported across the border from Tamil Nadu every year. This chokes the livelihood of Kerala's poultry farmers but allegedly helps line the pockets of some corrupt tax officials. They have cast a shadow on the A.K. Antony-led United Democratic Front government which came to power in May 2001 with a brute majority and promised to improve the State's finances and ensure probity in public life.

Following frequent complaints from poultry farmers in Kerala, the previous Left Democratic Front (LDF)-government had decided to impose an 8 per cent tax on broilers imported into Kerala. It was meant to protect poultry farmers in the State, especially in central Kerala. The LDF government also decided to waive the sales tax imposed in 1990 on broilers sold by them within the State.

At the United Democratic Front meeting in Thiruvananthapuram on January 8, (from left) Congress (I) leader K. Karunakaran, Chief Minister, A.K. Antony, Kerala Pradesh Congress Committee president K. Muraleedharan and UDF convener Oommen Chandy.-C. RATHEESH KUMAR

Yet, a large number of hatcheries and broiler farms continued to spring up in Tamil Nadu close to its border with Kerala, making use of the liberal assistance offered by the Tamil Nadu government for its farmers. The free flow of low-price broiler chickens into Kerala continued through illegal means, especially using fake bills from farms that exist on paper within the State's borders and with the connivance of officials. Farmers' representatives said that poultry farming became a losing proposition in Kerala.

This was an opportunity the broiler chicken farm owners in Tamil Nadu, most of them businessmen from central Kerala, had created for themselves. The loss-making farms in Kerala soon became breeding grounds for chicks sent from hatcheries in Tamil Nadu, with the requirements for feed and medicines being met by the Tamil Nadu businessmen who were willing to pay those ready to undertake the rearing of chicks for them. The local "contract farmers" were happy with the rent and the overseeing charges which fetched them more money than when they raised the chicks themselves. "Contract broiler farming" soon spread to many parts of the State. The businessmen from Tamil Nadu had realised that they could get over the hassle of paying the additional tax if they had their chickens raised in Kerala itself, on farms and hatcheries run on leased land. Once the chicks were ready for the market, they were to be sold in Kerala without the tax.

The local farmers who did not want to lease out their farms now had to fight both the businessmen from Tamil Nadu and the contract farmers in Kerala. With pressure from them mounting, the LDF government made the 8 per cent tax applicable to chicken reared through contract farming as well. Although objections were raised by inter-State businessmen, the government refused to budge. Some big-time hatchery owners approached the High Court and then the Supreme Court but to no avail, except that the court said officials could decide on individual cases based on merit.

The business interests eventually won when, after the assumption of office by the UDF, they managed to get a "clarification" from the Sales Tax Commissioner. The 8 per cent tax was waived in the case of broiler chickens produced in farms run on leased land within Kerala. On December 7, Leader of the Opposition V.S. Achuthanandan raised the issue in the State Assembly through a submission. He alleged that the State was losing tax revenue to the tune of Rs.35 crores owing to the waiver and that there was corruption involving politicians and officials in the deal. Finance Minister K. Sankaranarayanan, a confidant of Antony who was a surprise choice for the post, denied that his department issued such an order.

However, the controversy refused to go away, and in early January a beleaguered Sankaranarayanan was forced to admit that tax was waived for farms run on leased land within the State. But he added that this was done without his knowledge and that officials had misled him into reading out a statement to the contrary in the State Assembly. As pressure mounted for an inquiry and the resignation of Sankaranarayanan, the Cabinet met and authorised the Finance Minister himself to conduct an inquiry and promptly withdrew the tax concessions to broiler farms run on lease with retrospective effect. "It is like asking the fox to look after the chicks," said Achuthanandan referring to the Cabinet decision.

The "broiler scam" was the latest of the unlikely preoccupations of the eight-month-old Antony government since it assumed office with the declaration that the State's coffers were empty and that the UDF was duty-bound to try and remedy the situation. To the consternation of Antony, more than the Opposition clamour for the resignation of the Finance Minister, it was his own partymen, led by his long-time rival within the party and former Chief Minister K. Karunakaran, who were emphatic in their demand for a judicial inquiry and the resignation of Sankaranarayanan. (There are several aspirants within the "I" group led by Karunakaran - the most prominent being his daughter Padmaja Venugopal - waiting for a vacancy to arise in the State Cabinet.)

THE controversy could not have come at a worse time for the UDF government which was going through yet another credibility crisis with regard to its liquor policy. Moreover, the government was already being arraigned by the Opposition and Antony's rivals in the party for its slipshod handling of the State police force. Leaders of the ruling coalition, the architects of a last-minute arrack ban in Kerala introduced in early 1996 (just before the term of the UDF government was to end), were not the same 'principled' lot this time around. In October 2001, although a six-member Kerala Pradesh Congress Committee(I) sub-committee led by Antony-loyalist Aryadan Muhammed had produced draft recommendations for the new government's liquor policy, the government soon realised that the communal and political forces within the liquor lobby and their supporters would not allow the recommendations to be implemented fully.

Following a series of tragedies in the State involving the consumption of spurious liquor, the previous LDF government had entrusted the running of toddy shops to cooperatives of toddy workers in order to control the flow of adulterated liquor. The KPCC sub-committee recommended that the toddy cooperative societies should be disbanded, because most of them were being run by benamis of big-time liquor contractors.

The sub-committee made a significant recommendation that under no circumstance should the government, once it disbanded the toddy cooperatives, allow the shops to return to the hands of the liquor mafia following the auctioning of toddy shops individually. It said that auctioning of shops would only allow the organised rackets to legitimise their activities, also leading to illegal arrack and spirit flowing into Kerala. The KPCC sub-committee was also not in favour of introducing a system of individual licensing of toddy shops. The committee said it would have the same result as that of liquor barons taking direct control of the shops.

V.S. Achuthanandan, Leader of the Opposition.-

However, after months of an unseemly controversy - during which the prominent liquor-lobby leader who is the secretary of the Sree Narayana Dharma Paripalana (SNDP) Yogam, Vellappalli Natesan, disclosed that KPCC president K. Muraleedharan, UDF convener Oommen Chandy and Sankaranarayanan had given an assurance ahead of the Assembly elections that toddy shops would be taken away from the cooperatives and given to the "private sector" - the UDF had to introduce the individual licensing system. At a crucial meeting of the UDF 'high power committee' on January 8, among several other important and unpopular decisions, the ruling coalition took the decision to introduce a licensing system for toddy shops, despite clear warnings by even prominent Congress(I) leaders like the former Speaker and Member of Parliament from Alappuzha V.M. Sudheeran, that it will lead to the free flow of alcohol into Kerala. The only consequence of the furore was that, in order to appease the anti-liquor groups in the State, the UDF decided to introduce an 18-point "eligibility criteria" for those seeking to obtain the licence. It decided to draw lots in cases where there is competition for the licencee and to reduce the number of toddy shops in the State from 5,972 to 4,000. However, it was poor consolation for people who expected from the government led by a 'principled' politician like Antony substantial measures to curb the liquor menace.

But what awaited Antony after the January 8 meeting was more trouble. A month after it assumed office, the Antony government had issued with fanfare a White Paper on the State's finances. It said that the State was facing an acute financial crisis. For the first time in its history, the State government was unable to honour valid and legal instruments drawn on it. It was unable to honour cheques it had issued or make payments on items already included in the Budget. The unique achievements that Kerala had made in the social sphere were being undermined because of paucity of funds for proper maintenance of infrastructure facilities. There was profligacy and mindless waste. The State was witnessing a vicious cycle of slow economic growth and low investment in the public and private sectors. The White Paper said that there was an inexorable growth of the revenue deficit; an inordinate increase in public debt as a proportion of the State domestic product; increasing reliance on debt to finance current expenditure; and an unsustainable salary and pension bill.

However, even as it entered the eighth month of its term, the UDF government had taken no action whatsoever to remedy the situation. Moreover, the government was immobilised by political controversies and lack of firm decision-making; poor and controversial policy initiatives (especially in the education and health sectors and in the virtual dismantling of the democratic decentralisation programme); and frequent police atrocities and social tensions which seemed to flare up as communal clashes at the drop of a hat. After the recent communal clashes (in Pathanamthitta on December 6 and 10, coastal Thiruvananthapuram on December 29 and in Kozhikode district on January 4 in which five people were killed), Antony, who also holds the Home portfolio, was frequently referring to "unseen forces, not just fundamentalist and extremist elements", which were stoking these dangerous tendencies in a State known for peaceful coexistence and communal amity. Hence, for the Antony government, introducing austerity and revenue generation measures to tide over what it calls "the serious financial crisis" has so far been way down in its list of priorities.

Antony tried hard to start the new year on a positive note, latching on to perhaps the only issue on which his government could claim some credit. On January 1, at Marayur in Idukki district, Antony seemed to deliver what he had promised the State's landless tribal people a few months earlier, at the end of their 47-day-old agitation before the State Secretariat in Thiruvananthapuram. In what the government described as the most significant campaign in the State for the rehabilitation of adivasis, Antony inaugurated the distribution of 1,078 acres (about 430 hectares) of land to 383 tribal families at Kundala and Marayur. However, doubts remain about the quality of land that is to be distributed; on whether the government would be able to identify and transfer land to all the landless tribal people in the State and so on.

IN a politically significant move in the new year, the Chief Minister also visited the Sivagiri Math in Thiruvananthapuram district and the headquarters of the Nair Service Society (NSS) in Kottayam district, the seats of power, so to say, of the Ezhava and Nair communities in the State, evidently to make amends for past "mistakes". The police action at the Sivagiri Math in 1995 in the course of implementing a High Court order and the entry of the visiting Prime Minister P.V. Narasimha Rao's security personnel into the 'Mannam Samadhi', the memorial at the NSS headquarters premises of NSS founder Mannath Padmanabhan, had been used to the hilt by Antony's rivals both within the Congress(I) and in the Opposition, to bring down his government in 1996.

At Sivagiri, participating after a gap of six years in the annual pilgrimage festival, Antony expressed regret for the police action in 1995. He made similar gestures at the NSS headquarters. But hardly had he done that and the second phase of violent communal clashes erupted in north Kerala. Opposition leaders then pointed out that the UDF government was paying the price for allying itself with communal forces including the Rashtriya Swayamsevak Sangh-Bharatiya Janata Party combine, the People's Democratic Party (PDP) and the National Democratic Front (NDF) and seeking the financial support of the liquor lobby during the Assembly elections.

However, it will be the State Cabinet's in toto ratification of the harsh decisions of the January 8 UDF meeting to cut salary and other administrative costs, the chief victims of which will be the State government employees, that will be the main source of trouble for the Antony government in the coming days. Although the government had all along been trying to harness public opinion in favour of tough measures to tide over the difficult financial situation, the decision finally to implement them had the immediate effect of alienating the powerful section of State government employees and school and college teachers.

The important measures announced by the Cabinet included a two-week delay in payment of salary for employees in February and March; abolition of leave surrender facility for employees; a two-year voluntary off-duty scheme at reduced salary for all excess government staff; a two-year training period at a lower salary for all new government employees; and introduction of a contributory pension scheme for new recruits. In the education sector, the pertinent decisions included the discontinuation of the system of "protection" for school teachers who were in excess of the need; a scheme to redeploy excess teaching staff; a reduction in their salary if they cannot be redeployed; redeployment of excess junior college lecturers in higher secondary schools; closure of schools with less than 100 students and a 50 per cent cut in pay for teachers in such schools until they are redeployed; and provision of University Grants Commission (UGC) scale of pay only in colleges which have implemented the UGC academic norms. The Cabinet also decided not to raise the pension age from the present level of 55 years.

"We no longer have soft options. It is purely a choice between a total collapse of the State and harsh measures. Almost the entire resources of the government were being spent on employees, with no money left for the people or developmental efforts," Antony said.

Ironically, the government's action came at a time when there was a general consensus that successive governments had failed to take unpopular decisions needed to save Kerala from financial doom. Antony said the new measures would help save Rs.500 crores in the first year and Rs.800 to Rs.900 crores in the subsequent years. However, even as the Chief Minister announced the decisions on January 9, government employees, irrespective of party affiliation, had laid siege to the Secretariat and announced an immediate programme of agitation. On the other hand, given the drought of achievements in the first eight months of his rule, Antony seemed to be aiming for long-term glory - that is, if his government could stick to its guns and turn around Kerala's financial situation. Will his foes, especially within the Congress(I), allow him to wear that halo is the crucial question.

This article is closed for comments.
Please Email the Editor