Kerala is facing a severe financial crisis, according to the White Paper on the State's fiscal health, tabled in the Assembly on Thursday by Finance Minister TM Thomas Isaac of the CPI(M). The document alleged that the present situation was brought about by the financial indiscipline of the previous Congress-led UDF Government.
A sharp drop in tax collection, unnecessary tax relaxations, announcement of mega projects, without providing budgetary allocations, increase in non-plan expenditure and lack of control on expenses and absence of measures for increasing revenues during the 2011-16 rule of Congress Chief Minister Oommen Chandy were the main reasons for the present situation, the paper said.
The Finance Department stated in the White Paper that increasing revenue by achieving better growth in tax collection and controlling expenses were the two practical ways before the Government to overcome the crisis situation. However, no controls would be imposed on the benefits to the poor and salaries and pensions, it added.
Immediately after the CPI(M)-led lDF took over the reins of the State administration on May 25, following its huge victory in the May 16 election, Thomas Isaac, himself an economist, had promised to publish a White Paper on Kerala's economy at the earliest. The document was tabled in the Assembly as a prelude to the 2016-17 Budget he is to present on July 8.
“Kerala cannot go ahead in the current condition. If it does, the result will be financial anarchy. There is no meaning in blaming the financial slowdown. We must take into account that the tax revenues of the State had plummeted much faster than the drop in domestic income,” Isaac told mediapersons, after tabling the paper.
According to the document, the public debt of the State doubled during the UDF rule. During 2011-16, the public debt had (almost) doubled from Rs78,673.24 crore (in 2011) to Rs150,000 crore. It was an alarming situation that would certainly hinder the development of the State, the White paper said.
Stating that Kerala urgently needed Rs5,900 crore to meet the Administration's routine expenses, the document said Kerala's current Revenue deficit amounted to Rs8,199.14 crore and the Fiscal deficit stood at Rs15,888.17 crore. As a result of the UDF's mismanagement, the arrears that were to be cleared urgently amounted to Rs10,000 crore, it said.
Pointing out that the 2006-11 lDF Government, in which Isaac himself was the Finance Minister, had achieved 17.4-per cent growth in tax collection, the White paper showed that this had dropped to between 12 per cent and 14 per cent. This tax drain was one of the main reasons for the financial crisis the State was currently facing, it claimed.
The document blamed the financial indiscipline and mismanagement of former Chief Minister Chandy and his Finance Minister KM Mani, who had resigned in November last on the charge of taking bribe from bar owners, for the drop in tax collection, a result of deactivation of the machinery.
The White Paper also contradicted former CM Chandy's claim that there was a balance of Rs1,643 crore in the Treasury when his Government went out by pointing out that the actual figure was Rs1,009 crore. If the former Government had paid the bills pending before it, the Treasury would now be running on a negative balance of Rs173 crore, it said.