Tamil Nadu’s revenue, fiscal deficits back in focus
The interim budget in February ahead of the May assembly election showed that Tamil Nadu faced a revenue deficit of Rs9,154.78 crore
Chennai: Large revenue and fiscal deficits that the Tamil Nadu government earlier this year blamed on poor tax collection and welfare spending will be back in focus on Thursday, when finance minister O. Panneerselvam presents the state budget for 2016-17.
The interim budget in February ahead of the May assembly election showed that Tamil Nadu faced a revenue deficit of ₹ 9,154.78 crore. While total revenue receipts were estimated at ₹ 1,52,004.23 crore, total revenue expenditure was pegged at ₹ 1,61,159.01 crore.
Fiscal deficit was projected at ₹ 36,740.11 crore or 2.92% of the Gross State Domestic Product (GSDP). As per data available in ‘The Handbook of Statistics on Indian States’ published by the Reserve Bank of India (RBI), Tamil Nadu’s gross fiscal deficit has shot up from ₹ 3,690 crore in 2007-08 to ₹ 31,830 crore (budget estimates) for 2015-16. This is the highest among all the other states.
Here are some of the areas to watch in the TN budget:
Policy revisions
Framework for a new granite policy is expected, after the Madras High Court appointed U. Sagayam in September 2014, an IAS officer as legal commissioner to probe a multi-crore granite scam. He had previously investigated illegal granite mining while he was district collector of Madurai in 2012.
“A new granite policy will be framed and the sale of beach minerals will be undertaken directly by the state government to further augment resources," said, K. Rosaiah, governor of Tamil Nadu, during his maiden address in the 15th assembly, last month.
The Pattali Makkal Katchi (PMK) which announced a ‘shadow budget’ earlier this week to offer suggestions to the Tamil Nadu government on various issues, proposed that the government should cancel all licences granted to granite quarries under its control and auction licences afresh. “This will fetch additional revenue of ₹ 22,000 crore to the state’s treasury," the draft from the PMK said.
Also, the government is expected to present a roadmap for establishing a Lokayukta in Tamil Nadu, once the proposed amendments to the Lokpal Act are made by Parliament.
Rising expenditure, falling revenues
Tamil Nadu is known for its social welfare measures and the ruling All India Anna Dravida Munnetra Kazhagam (AIADMK) had announced a bunch of welfare schemes in its election manifesto, from free mobile phones for ration card holders to laptops for higher secondary school students, 100 units of free electricity and 50% subsidy for women to buy two-wheelers. Financial assistance and loan waivers to farmers, fishermen and students are also expected to increase the state’s expenditure.
While announcing the interim budget, Panneerselvam said the implementation of welfare schemes and lower tax income from petroleum products were the main culprits for the widening deficit.
Streamlining commercial tax collection would increase revenue for government by ₹ 22,000 crore, according to PMK founder S.Ramadoss.
According to the commercial taxes department, Tamil Nadu has collected a total revenue of ₹ 14,604.51 crore through commercial taxes in the first quarter of 2016-17, up 6.6% over ₹ 13,698.55 crore collected during the corresponding period last year.
TANGENDCO and TASMAC
The government has already promised that in the next five years, additional 3,000 MW of solar energy and 13,000 MW of thermal power capacity would be added to the state grid. It will be interesting to watch if the government takes up to restructuring its electricity department to fulfill its promises. Also, the state government’s stand on whether to join Centre’s Uday (Ujwal Discom Assurance Yojana) scheme will be crucial.
State power distribution utility Tamil Nadu Generation and Distribution Corp. Ltd TANGEDCO has accumulated losses of ₹ 65,000 crore as on March 31, 2015. Meanwhile, the government gives 100 units of free electricity every two months for all households from May this year.
The government is also expected to work out how the losses incurred due to closure of liquor shops run by Tamil Nadu State Marketing Corporation Ltd (TASMAC) will be met. More than 30% of the state’s revenue used to come from liquor sales. Jayalalithaa ordered closure of 500 TASMAC shops across the state last month, as promised in the election manifesto.
The 6,800-plus liquor shops run by TASMAC— the state-owned company with exclusive rights to retail alcohol—record average sales of ₹ 68 to ₹ 70 crore per day. Revenue from liquor sales across the state for fiscal 2015 stood at ₹ 26,188 crore.
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