White Paper: strong medicine for hard times

By Roy Mathew

THIRUVANANTHAPURAM, JUNE 19. Eminently worthy of implementation. This can be said about most of the proposals in the White Paper on State Finances released on Monday. However, sustained political will would be required if the proposals are to be carried through.

The state of the finances is not as alarming as it is made out to be. (This is subjective. The point is that it is still within manageable limits). What is alarming is the fact that the LDF chose to turn a blind eye when matters began to worsen in 1998, and that there is intense resistance to some of the proposals in the UDF Government itself. More alarming is the state of affairs of the Kerala State Electricity Board (KSEB).

The Paper treats Government employees with kid gloves though much of the trouble had begun with the pay revision. There is no proposal for a freeze on salaries. Though a minimum of 10 per cent of the basic pay is proposed to be impounded in Provident Fund or Treasury Savings, an additional interest of 0.5 per cent is added as a sop. Besides, the pension age is proposed to be raised to 56. The redeployment and retraining proposed is not drastic, at least, for the time being.

The employees may gripe over the proposal to limit medical reimbursements to emergencies. However, it is to be noted that there used to be some false claims over minor illnesses and treatment in Government hospitals is still free.

Appointments to Government services and aided schools would be nearly frozen owing to the proposal to raise the pension age, abolition of posts that were vacant for over a year, closure of uneconomic schools and redeployment of protected teachers. The cost of education in colleges would inevitably go up. Employment has to be created elsewhere to offset the fall in employment opportunities.

A sum of Rs.750 crores is proposed to be collected through tax revenue augmentation. The success of the measures proposed will depend entirely upon the political will that the Government can muster. How far the Chief Minister, Mr. A.K. Antony, can keep his Government free of corruption is also crucial to this. Words like rationalisation and simplification of tax structure were concepts that had been repeatedly stated in the LDF Government's successive budgets. But things did not work out in the absence of political will and clear direction. The LDF Government did not have the will to implement the proposals on

non tax revenue. Many of these were recommended by the Committee on Non-tax Revenues in 1999.

The proposals for revision of rents on Government leases had been hanging fire for over two decades. Successive Governments failed to enforce the law passed by the Assembly in this respect in 1980. An amendment to the Act passed a few years ago is still waiting clearance by the Centre. There is no sound reason for the delay except that vested interests are at work. The measure is estimated to fetch as much as Rs. 175 crores.

The proposal to harvest more windfallen trees for an additional Rs. 50 crores is fraught with danger. When trees are dragged out of interior forests, the process causes considerable damage to the undergrowth. It is not a secret that standing trees are felled in the name of windfallen trees by contractors. More trees fall when forest tracts get opened up. If revenues from fallen trees go up, it means more and more forests are getting denuded.

A better option would be to take measures to improve returns from forest plantations. The functions of the Forest Department regarding maintenance of plantations and forest protection should be separated to achieve better efficiency.

A hard drive has been proposed for the mobilisation of national savings deposits. Even if the target of increasing the deposits from Rs. 876 crores in 2000-01 to Rs. 1,200 crores this fiscal is not realised fully, the Government may still be able to get the estimated Rs. 260 crores as the Centre has decided to devolve the entire sums mobilised to the State Governments. So, the Government can forgo this measure. The Government, it is to be noted, is already excessively dependent on small savings and the people have been feeling the pinch of its over-drive.

The Paper does not propose measures to clear the entire accumulated financial liabilities of the Government which comes to nearly Rs. 5000 crores (The figure given in the Paper is Rs. 3477 crores. This does not account for all the liabilities, especially the recent accumulations). The plan is to clear them over a period. This would mean that some of the treasury restrictions might continue for a few years.

Borrowings by the Government this year is proposed to be limited to the levels approved by the Planning Commission for the last year. (The borrowings proposed is to the tune of Rs. 3,180 crores. The total public debt is stated to be Rs. 20,176 crores at the end of 1999-2000. This would exceed Rs.30,000 by 2002-03 according to projections).

The Government may do well to drop the proposals for extending the World Bank-aided Forestry Project and avail a high interest loan from the Japanese Bank for International Cooperation for the Kerala Water Supply Project. Extravaganzas like the Kerala Horticulture Development Project need to be shunned. Departments show a tendency to spent money lavishly when they are flush with foreign funds. The Paper itself emphasises the need to arrest the excessive dependence on debts to finance budgetary operations.

The Award of the Eleventh Finance Commission has struck a crippling fiscal blow on the State's finances. What the State lost was Rs.3,664 crores to be received over five years (2000- 2005). If this had not happened, the resources needed to be raised immediately would have come down by half. The State should approach the Centre for amending this.

The problem with the Kerala State Electricity Board is acute. The increase in electricity tariffs proposed (60 per cent) is quite hard to stomach. The Board would need nearly as much resources as the State to balance its accounts. An enquiry is needed to fix responsibility for the gross mismanagement. The people have replaced the Government which mismanaged the State's finances. If anyone responsible for this sorry state of affairs remains at the helm of the KSEB, their removal is in order. So, the Board should be reconstituted with professionals and asked to propose bail out measures, instead of the Government readily agreeing to a steep hike in power tariffs.

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