In a state of struggle

The government machinery comes to a halt in Kerala as government employees oppose austerity measures that target their allowances and benefits.

R. KRISHNAKUMAR in Thiruvananthapuram

KERALA came to a standstill on February 6, after the A.K. Antony government locked horns with the unions representing government employees and teachers. About 5.5 lakh government employees went on strike protesting against the government's refusal to withdraw its austerity measures which, among other things, caused the slashing of allowances and benefits they enjoyed. Neither the invocation of the Kerala Essential Services Maintenance Act (ESMA) nor the threat of loss of pay and even jobs against the employees helped stir the government machinery into action.

During the initial days of the agitation, there were mounting heaps of garbage in the streets as even employees in the lowest rungs of administration struck work. Unemployed youth, many of them women, queued up before deserted government offices seeking temporary jobs. Kerala has about 44 lakh persons in its official list of the unemployed, a fact that came in handy for Chief Minister A.K. Antony and his Cabinet colleagues to threaten the agitating employees with. At many places the police used force to control eager employment-seekers, including graduates who were willing to work as garbage collectors. At several places, mobs gathered before government schools to compel striking teachers to return to work, and before private schools to prevent the wards of government employees from attending classes. The government announced that it would be forced to postpone examinations, including the one for Secondary School Leaving Certificate scheduled for March, if the strike was not withdrawn early enough.

As a definite indication of the social division sought to be created by the government in the wake of the strike, some organisations of farmers, aggrieved at the effects of crashing prices in a globalised market, came out in support of the government action against the employees. The powerful traders' lobby, which had earlier obtained sales tax concessions from the government, declared its support for the austerity measures. Political parties and student organisations held demonstrations for and against the strike. Even as the employees demonstrated unprecedented unity that lasted several days and burnt the Chief Minister's effigy in several places, large crowds attended the meeting organised by the ruling United Democratic Front (UDF) to explain the rationale behind the austerity measures.

The "back-to-the-wall austerity measures" were announced on January 9, following a "unanimous" decision by the leaders of the Congress(I)-led UDF the previous day and its ratification by the Cabinet later. The government turned down the employees' long-pending demand to raise the age of retirement from 55, scrapped the "leave encashment" facility and reduced pension commutation benefits. It also decided to defer by 15 days the payment of salaries for February and March, identify and redeploy excess staff (more than 60,000, according to some Ministers) in all government departments and introduce a voluntary two-year off-duty scheme with reduced salary for the excess staff, confine the University Grants Commission (UGC) scales of pay to college teachers who have the UGC scheme of work, close down "uneconomic schools" with less than 100 students (if there are other schools within a radius of 2 km) and redeploy, wherever possible, the "protected school teachers" or reduce their salaries by half.

Other unpalatable decisions included a "careful" review of the temporary posts created so far and the scrapping of unnecessary posts, making government concurrence mandatory for new appointments in institutions that are run with government funds, the scrapping of government pension and the introduction of a contributory pension scheme for all new recruits and the introduction of a two-year training period with only the basic salary for all new staff in government and public sector undertakings, scrapping of loans to purchase houses, vehicles and computers, and so on.

The government said that it expected to save Rs.500 crores this year and around Rs.800 crores in the coming years through these measures. Simultaneously, it announced a Rs.240-crore project, which is yet to be formulated, to help farmers and farm labourers and workers in traditional industries and the fishing sector and to buy essential medicines for government hospitals.

"This is a rescue operation," Antony said, announcing the austerity measures. "Cosmetic changes will not work any longer. Kerala is facing a financial crisis as never before. The new government inherited an empty treasury, a public debt of nearly Rs.24,000 crores and an immediate liability of nearly Rs.6,000 crores. Government revenue is not sufficient to meet the salary and other administrative expenses and to pay the interest on loans taken by the previous government. In order to pay the salaries and the interest on loans, the government is forced to resort to new borrowings. How will it then meet the essential requirements of the majority of other sections of society which have found a drastic fall in their incomes in recent years?" he asked.

According to Revenue Minister K.M. Mani, the government needs Rs.6,885 crores every year to meet salary and pension expenses alone, but its annual revenue is a mere Rs.6,270 crores. In short, the government's commitment towards the salary and pension of its employees is 112 per cent of its revenue income. Mani said that the government was forced to borrow more or to utilise Plan funds to pay its employees. As a result, he said, there was hardly any developmental activity in the State. "It is in this context that the government was forced to reduce certain benefits of the employees," he said.

But, according to Pinarayi Vijayan, State Secretary of the Communist Party of India (Marxist), it was the Antony government that had created a development crisis in the State "through its inefficiency and tax concessions to big-time traders and businessmen". It was now implementing an outdated strategy of turning various sections of society against its own employees who have played a key role in the development achievements of the State, he said.

V.S. Achuthanandan, Leader of the Opposition in the State Assembly, said that there was no justification for "punishing" the 5.5 lakh government employees for no fault of theirs. The government was trying to take away the allowances and benefits earned by them through years of struggle, he said. He pointed out that the action came close on the heels of the imposition of a Rs.2,000-crore additional burden on the people by way of a hike in electricity and transport charges. The CPI(M) leader said that the current financial crisis was the direct outcome of falling revenue collection in the State. He said that in the first eight months in office, the UDF government could collect only 47.6 per cent of the targeted revenue collection because it succumbed to the pressures of liquor barons and big traders. Among the other critics of the government's austerity measures and of the way in which it handled the strike was Congress(I) leader and former Chief Minister K. Karunakaran.

But the mounting criticism has not dented the government's resolve to go ahead with its measures. Antony kept reminding the striking employees that they were but only a small section of society and that they had the luxury of a regular income. Even though their welfare was a priority for the State government, he said, it had no option but to take these unpalatable decisions.

MORE than two weeks into the strike, the employees were in no mood to relent. They were worried about the shift in the attitude of the government and about what was in store for them if the current measures were allowed to be implemented. Employees unions affiliated to parties in both the UDF and the Left Democratic Front (LDF) showed unusual unity in this period. Their argument was that they were being penalised for the mistakes of successive State governments of Kerala.

K. Varadarajan, president of the Kerala Non-Gazetted Officers Union, accused the Antony government of hiding the real reasons for the financial crisis and trying to turn other sections of people, including farmers and farm workers, against government employees. "Antony says the government was forced to introduce these severe measures to get over the temporary financial crisis of the government. But several measures announced by the government have only a long-term impact and would not provide any immediate relief," he said.

According to K.N.K. Namboothiri, general secretary of the Joint Action Council of State government employees, the Chief Minister is creating a wrong impression that the austerity drive is temporary and that the benefits of the employees will be restored. Many of the austerity steps announced now were part of the understanding that the State had with the Central government and were based on the conditions put forth by the Asian Development Bank (ADB) for the assistance it has promised for the State, he said.

ADB representatives had met the Chief Minister and some of his Cabinet colleagues in November 2001 for talks on a $200-250 million assistance to Kerala. They had said then that the quantum and disbursement of the assistance would depend on the structural reforms undertaken by the State. Antony said soon after the ADB team's visit that the State would get the bank's assistance for "various programmes" from May 2002 and that an agreement in this regard was likely to be signed in March. The negotiation with the ADB was a continuation of the process set in motion by the previous LDF government, he said. (Pinarayi Vijayan, however, said at a press conference that though the LDF government had tried to get assistance from the ADB, it had, in line with its policy, not accepted the "anti-people conditions" set by the bank.)

State officials said then that the ADB team had expressed satisfaction over the measures taken by the government until then, including the publication of a White Paper on the State's finances and the appointment of a committee for public sector reforms. However, they had expressed the doubt whether ADB assistance could be obtained for all the programmes planned by the government as it may not be able to agree to all the conditions put forward by the bank. The bank's representatives reportedly suggested that Kerala undertake reforms similar to those undertaken by Madhya Pradesh and Gujarat. These States, they said, had already received such assistance as part of the bank's strategy "to focus on selected States to bring about structural reforms followed by sectoral reforms".

ADB documents say that up to half of the bank's annual lending to India goes to State-level operations with focus on "supporting macro-economic reform and fiscal consolidation to improve public saving and enhance resource mobilisation, increased efficiency in resource use through rationalisation of unproductive expenditure and restructuring and disinvestment of state-owned enterprises, strengthening local government and improving good governance, and policy reforms in key physical infrastructure sectors, especially power".

Several criteria have been suggested for the States to make themselves eligible for such assistance. Important among them are "an evident commitment to policy reforms, an urgent need for reforms as reflected in social and infrastructure indicators, a satisfactory record of project implementation, capacity to service the loan and absence of major assistance from other lending agencies".

The documents say that the economic reforms initiated at the national level since 1991 have lagged behind at the State level and that the focus of the bank's operations is, therefore, to help the States to adjust themselves to policy changes, in order to facilitate Centre-State coordination and "fully benefit from the outward and market-based orientation of the development process".

Antony has denied the allegation that the slashing of allowances of government employees is linked to the bank's assistance for the State.

No one, including the agitating employees, has denied that the State's finances are in a poor state. In fact, disillusionment about the renowned Kerala model of development had set in in the early 1990s. Kerala had impressive accomplishments in the social sector despite the low level of economic development. Its achievements compare favourably with those of many developed nations. The State spent heavily on education and healthcare, initiated an impressive array of welfare programmes and established an effective public distribution system. But all these were at the cost of its productive sectors. The beginning of a policy shift to solve the deepening crisis in the agricultural, industrial and power sectors was evident from the early 1990s, when the UDF government triggered a debate on privatisation of education and healthcare. But it did not take any significant policy initiative to achieve these ends.

In May 1996, as the LDF took over the reins of power, E.M.S. Namboodiripad, CPI(M) leader and the key architect of the LDF's policies, said in an interview to Frontline: "Please praise us less (for the Kerala 'model') and please understand our limitations. Greater emphasis on the social sectors automatically leads to the neglect of the productive sectors... I want emphasis on industry and agriculture, and the social services to be subordinate to that. Of course, the social sectors are important because they create human resources. But human resources should serve the needs of economic development. I want a complete reorientation of economic and social life. How does one go about it? Here again, I want the help of experts. But I am convinced that the present approach and orientation is wrong and has to be changed."

The focus of the LDF government's shifting policy was, however, on decentralisation. In retrospect, and given the present state of Kerala's finances, it is clear that though it tried to introduce the concept of decentralised planning for development and initiated significant policy initiatives in the power sector, the LDF government failed to curb the deterioration in public finances.

It is a do-or-die battle for the Antony government. Mani's statement titled "These reforms are for a better tomorrow" on February 18 confirmed what the Opposition and the employees' unions had been alleging all along. "The government had to take steps to cut certain allowances of the employees because of the financial crisis faced by it and in view of the economic reforms which it intended to implement in Kerala," he said. According to him, the challenges posed by the processes of globalisation and liberalisation are perplexing. "If the State failed to raise its economic, social, cultural, industrial, agricultural and labour sectors to global standards, it will be pushed behind in the competition for the global market." The remedy, the Minister said, was "to make a fast-track entry into a better system by utilising opportunities, attracting acceptable investment from all over the world, industrialising the State, expanding the labour sector and ensuring jobs and income for the unemployed". The State, he said, had to make preparations in order to imbibe these changes. "We cannot wait any longer."

Will the Antony government eventually decide to drop all that had facilitated Kerala's achievements in the social sectors? Has the State government finally made up its mind that the steps that are needed to revive Kerala's ailing economy are the same as the ones prescribed for the smooth operation of a global market economy? Or is the government being forced to bend before a lending agency and its unfriendly conditionalities? What impact will the slashing of the benefits enjoyed by government employees have on other sectors of the State economy? The result of the standoff between an adamant government and its employees will be keenly analysed in Kerala mainly for its future implications.