The Hindu : Hard economic decisions on the anvil

Online edition of India's National Newspaper
Sunday, Mar 10, 2002

Southern States

Southern States - Tamil Nadu

Hard economic decisions on the anvil

By Radha Venkatesan

The Governor, P.S. Ramamohan Rao, arriving in the Assembly hall to address the House in Chennai on Saturday, while the Chief Minister, Jayalalithaa, the DMK leader, M. Karunanidhi, and the Leader of the Opposition, K. Anbazhagan, look on. _ Photo: K. Gajendran

CHENNAI March 9. In a clear indication that more hard economic decisions are on the anvil to tide over the financial crisis in Tamil Nadu, the Governor, P.S. Ramamohan Rao, today said the recent series of reform measures to cut down non-plan expenditure ``have not been sufficient'' to reverse the erosion in the State's fiscal health.

Making a clear case for greater reforms in all sectors, the Governor, in his first address to the State Assembly, said the Government was ``placed in an unenviable position of having to take hard decisions in the best interest of the State.''

The proposed reform package would include cutting down administrative non-plan expenditure, targeting of subsidies to benefit the poor and disinvestment of public sector units.

The Government, which had already increased the power tariff, bus fare and milk prices, would send out a clear message to all financial institutions on shedding its non-reformist image created in the last few years. However, the reforms would have minimum adverse impact on the poor, the Governor assured the Assembly.

The Government had signed a memorandum of understanding on power reforms and the State Electricity Regulatory Commission would be activated soon.

As for the public transport sector, the cash-strapped State Transport undertakings would be restructured along with a phased privatisation of select bus routes, services and operations.

The Government would examine the second State Finance Commission's recommendations on devolution of funds for local bodies.

The Governor's address did not fail to record the State Government's anguish over the ``inequitable allocation of funds'' by the Centre.

The Union Government's decision to reduce the share of taxes by Rs. 512 crores had come as a rude shock, the Governor said. Tamil Nadu had been denied its fair share in devolution of Central funds by successive Finance Commissions and the State Government would insist that the 12th Finance Commission adopted a more rational and equitable mechanism of fund devolution.

The devolution should be based on parameters such as tax effort, good governance and other development indicators such as population control, per capita income and infrastructure growth. ``The main aim will be to ensure that Tamil Nadu is not penalised for being more progressive in socio-economic development.''

The Government would sign a memorandum of understanding with the Centre on a medium-term fiscal reform programme to access funds (over Rs. 400 crores over the next five years) from the Fiscal Reforms Facility set up by the Union Government based on the recommendation of the Eleventh Finance Commission. However, the Centre should allot more funds to the fund-starved States.

In a bid to raise the tax revenues of the State, the Government would urge the Centre to amend the Constituion to allow the States to levy tax on the service sector.

Ariyalur-Perambalur merger

In a major decision, the Government citing reasons of ``reduction in expenditure and improving administrative efficiency'' decided to merge the Ariyalur and Perambalur districts, bifurcated during the previous DMK regime. Perambalur would be the headquarters of the composite Permabalur district.

But, some important district-level offices would continue to function from Ariyalur.

Later, the Finance Minister, C. Ponnaiyan, told The Hindu that the plan outlay for the current fiscal had been done at the instance of the Centre which wanted the rising revenue deficits to be curbed.

Most State Governments were resorting to such measures under the compulsion of the Centre, he said.

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