Gordian knots and kid-gloves

THAT THERE ARE no soft options in restructuring State finances is obvious in the White Paper presented by the Kerala Government for wider public debate. With the impact of reforms on State finances becoming more obvious by the day, most other State Governments are bound to follow suit. As in the other States going through turbulent financial conditions, in Kerala as well there were no illusions. The earlier Left-Front Government had made it clear that the overall financial position had come under severe strain, largely on account of the pay revision effected following the recommendation of the Fifth Pay Commission - one crucial factor that has brought the financial situation of several States under severe pressure. Yet another has been the lower growth of Central transfers following the recommendations of the Eleventh Finance Commission (EFC). The anguish expressed by the earlier Government - that the EFC award did not factor in the substantial gains made by the State in the social sector - and the debilitating impact of the devolution formula require to be addressed by the present Government as well. It would also be useful for a larger and comprehensive debate if the recommendations of the State's Second Finance Commission, which submitted its report earlier this year, are included in the discussions.

While the EFC issue would continue to be addressed by several States at the national level, the debate within Kerala on the White Paper's suggestions should focus on its impact on the long- standing advantages of the State. The proposed closure of ``uneconomic schools'' and the thinking to increase user charges in hospitals are issues that would have to be explained in the broader context. Official estimates have it that a total of 2,244 schools have less than 25 students, rendering them unviable. Given the large numbers involved, there is the need to proceed with caution, as well as to put in place viable alternative facilities. While the case for pruning expenses is urgent, it is imperative that this is not done in a manner that impinges upon the development of human resource. The need to increase fees for educational institutions and hospital charges would indeed be tempting as ``easy options'' but given the role of the state in providing the basic infrastructure for human resource development, it would not be in the interest of the future generations of Kerala if the shoring up of finances is done at the expense of the social sector - especially primary education and health. In tackling issues that relate to public services, the Government will do well to soften the impact of the hard measures that are required. Explaining in clear terms that the costs of public services have escalated and they require to be balanced up is essential to the unfolding discourse. For instance, in the case of medical and public health, per capita expenditure has increased five times compared to 1985-86: from Rs. 46.27 to Rs. 232.68 in 1999-2000.

These exercises, however, will neither wish away a main cause of the malady, nor set it right unless the basic issue is addressed: that of over-burdened public services. With increased public salaries playing the single largest role in putting the finances in disarray, there is adequate reason for the Government to convince its employees on further belt-tightening. The issue of restructuring State undertakings is one that cannot be put away for long. Broadly put, the condition of Kerala's finances and the measures it has outlined for reining them in are but a precursor to what awaits several other States. The extent to which the hard measures are balanced with delicate handling of issues that are bound to evoke public sensitivities would largely determine the course of the painful path of restructuring State finances. There is indeed the need to hasten; but with care and caution.

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Section  : Opinion
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