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Tamil Nadu
By V. Jayanth
Another objective the Government has set in its fiscal reform programme is reduction of the revenue deficit as a percentage of fiscal deficit to below 35. This was at an all-time high of 73 this year, thanks to conversion of arrears owed by the Tamil Nadu Electricity Board to Central utilities, amounting to Rs. 1,962 crores, into a subsidy to the TNEB during the year. In yesterday's budget, the Finance Minister, C. Ponnaiyan, estimated it at 56.64 for the coming year. In another index of fiscal health, Tamil Nadu wants to lower the fiscal deficit as a percentage of Gross State Domestic Product (GSDP) to a level below 2.5. It is projected at 4.07 per cent for 2003-04. Similarly, the Government plans to reduce interest payments as percentage of total revenue receipts to below 15, from the current level of about 20. To achieve this, the Minister has also unveiled an agenda for fiscal and budgetary reforms. The Government has already set up two commissions to go into tax reforms, revenue augmentation and expenditure reforms. It is expected to accept most of their recommendations and begin implementing some "tough measures" from this year, in continuation of the fiscal reforms programme that has already begun. And when the World Bank steps in with a restructuring loan, its own conditionalities will come into play. The State will then review all non-tax revenues and adopt the principle of "adequate cost recovery for services". The Government has approached the Centre to present a clutch of ambitious projects for World Bank funding. This will include the road sector, water resources consolidation, poverty alleviation, health care, water supply and sanitation in rural areas and urban development projects as well. These comprehensive schemes will in all require about Rs. 10,000 crores, and part funding will come from the World Bank. Tamil Nadu is expecting the first tranche of Rs. 1,000 crores this year. Andhra Pradesh and Karnataka, among other States, are already in the midst of World Bank-funded fiscal restructuring programmes and Tamil Nadu will soon join the list, to become entitled to strong financial support. Officials explain that as funding has become a major bottleneck, approaching the World Bank, the Asian Development Bank and multilateral institutions is one of the avenues of mobilising resources. Simultaneously, the Government will take concrete steps to attract foreign direct investment and encourage private-public partnership as well. In addition, a series of measures to contain expenditure, disinvest in state-owned undertakings, restructure high-cost debt, target subsidies and promote `user charges' for the services or utilities is on the anvil. Officials explain that the objectives now set for fiscal reform were in vogue till 1995-96 and a year later. But the fiscal health collapsed in 1997-98, when the State stretched its means, beyond limits, to implement the Fifth Pay Commission recommendations. A stage was reached when 82 paise of every rupee borrowed was deployed to meet revenue expenditure commitments, and not for capital works or creation of assets.
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