Govt. may opt for soft options

By Girish Menon

THIRUVANANTHAPURAM, JULY 12. All eyes would be on the Finance Minister, Mr. K. Sankaranarayanan, when he stands up to present the UDF Government's first budget on Friday. The Budget would have far more significance for the State because apart from performing his first important task as the custodian of the State coffers, Mr. Sankaranarayanan would, in fact, try to address the dilemma facing the UDF.

His budget would be something more than merely an exercise at taxation, raising additional revenues or juggling with figures to cover deficits. It would be a barometer of sorts of the UDF's inclination to take hard decisions to overcome the worst financial crisis in the State's history.

His options, as far as raising revenues through taxes are concerned, are limited since the tax revenues have already hit a plateau. He would have to take a fresh look at hiking non- tax revenues including outdated user charges for a horde of services.

There are a few luxury items which could be taxed but these are the time-tested methods which hardly present scope for innovation. Another source of revenue is through liquor.

But with a coalition committed to compressing supply of spirit in preparation towards phased prohibition, it would find it hard to explain its attempts to skim additional revenues from this sector. However, the hard measures prescribed in the State Government's White Paper are likely to force the ruling coalition to look for soft options. Several indications about this line of thinking are available from the reactions of various political leaders and their parties.

The Opposition LDF has already warned that the ideological divide would only widen if the State Government were to go ahead with summary increases in rates. Besides, the UDF leadership would have to fight a battle from within if it were to go in for steep hikes.

With a strong Left positioning among certain partners and the Congress itself, the Government would be pinned down from taking tough decisions. Besides, the Chief Minister, Mr. A.K. Antony, appears to be in no apparent hurry to take harsh decisions, which, his Government believes, need to be taken after much thought. Almost all political parties are resigned to an upward hike in rates. But the disagreement is focussed on the levels at which tariff increases should be effected.

The UDF is in a no-win situation. It can take hard decisions only in the first two or three years in office before political compulsions overtake it. It has to live up to its promise of being pro-liberal on policy issues relating to the economy while at the same time avoid the allegation that it was blindly following the NDA-Government's policies.

It has to sustain the public sector undertakings, at least profit-making ones. At the same time, it has to ensure that the loss-making ones do not eat up whatever budgetary allocation is available. The UDF merely has to pick up the threads of its 1991 industrial policy, which had a three-pronged strategy to tackle PSUs. But it is finding it difficult to follow this strategy.

In the current context, sustaining the profit-making ones is not going to be an easy affair. This is because the profit-making units, like the Kerala Minerals and Metals Ltd. and Travancore Titanium have to withstand the vagaries of import duty regimes. The Finance Minister would find it tough to balance between the official and political prescriptions to tide over the financial crisis.

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