Rebuilding Kerala's finances

THE PRUNED PLAN outlay for Kerala for the year 2001-02 is but a logical end of the recent fiscal developments in the State. Faced with declines in the overall financial health, the State by reducing the Plan outlay - to Rs. 3,015 crores, against the Rs. 3,600-crore outlay presented by the previous Government - has exercised one of the options presented by it in its recently- published White Paper. In a situation of declines in the crucial financial and economic indicators of the State, lowering the Plan outlay will only mark the commencement of a long process of correctives. While there are several factors at play, including the broader national economic picture, it will be in the long- term interest of Kerala's economy if the State Government brings in measures that improve its house-keeping. An immediate consequence of the lower allocation will be the control exercised by the Government in its level of borrowings. This will only mean a welcome step in curbing the unhealthy growth of the debt servicing commitments of the State and thereby starting a series of course corrections. For, any short term measures for raising resource through more debt would have only further exacerbated the present crisis.

However, to translate the process into a healthier financial position of the State's finances, the Government will also have to carry out politically hard exercises for internal resource mobilisation, reducing waste and a broad restructuring of its core operations. It is against this backdrop that the suggestion made by the Deputy Chairman of the Planning Commission, Mr. K. C. Pant, to the Kerala Chief Minister, Mr. A. K. Antony, that the State Government should pay more attention to agriculture, irrigation and power, should be seen as an important pointer to the path ahead in checking the slide in the economy. That the years ahead will see hard options being exercised by the Government was made clear in the White Paper, which proposed, among other things, a revised approach to the issues relating to user-charges. In addition to this, the time has come for the State Government to start implementing the measures proposed through its White Paper on generating more resources, augmenting non-tax revenues and restructuring public sector undertakings (PSUs). In drawing up its proposals, much of which are likely to change the distinct economic course that Kerala has chosen, the Government should ensure a continuity with the past, particularly the accent on human resource development.

Among the options at hand for the Government, the restructuring of its PSUs is one which is bound to have long term consequences. With most of its PSUs running at losses they have become a burden on Kerala's budgets. That for the period between 1990-91 and 1999-2000 alone, the State has given loans amounting to Rs. 2,087 crores to loss-making units; that the State's 111 PSUs paid an abysmally low dividend of Rs. 51.4 crores for the same period, with an approximate rate of return of 0.2 per cent, are indicative of the steady sinking of public finances. In addition to PSUs, the issue of raising non-tax revenue is a sensitive one, which requires adept handling. As much as correcting the slide in finances forms a part of the rehabilitation exercise that is to unfold from now, the aspect of allocations will also be watched for shifts in the Government's priorities. In seeking increased allocations to the road sector, in urging the Union Government to permit international airlines to operate from the Kochi airport and in calling for correctives to the import policies that have affected the interests of the State's agriculture, Mr. Antony has presented a reasonable wish-list. It is imperative that the requests made by the Chief Minister are viewed by the Union Government as part of the efforts at re-building the State's economy and adequate support given to it.

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