Tamil Nadu White Paper: Tamil Nadu’s finances deep in red, DMK govt pushes for radical reforms | Chennai News – Times of India

CHENNAI: Four days ahead of his first budget, Tamil Nadu finance minister Palanivel Thiaga Rajan on Monday presented a white paper on the state’s finances, advocating “once in a generation reforms” to get out of the “unsustainable fiscal situation”, which it blamed on the “reckless economic management” of the previous AIADMK government.
He took note of the state’s fall from a revenue surplus of Rs 1,760 crore in 2012-13 to a deficit of Rs 61,320 crore in 2020-21. The state needs to shun the business-as-usual approach and adopt radical reforms, he said, especially in sectors such as power, water supply and transport.

“The budget that I will be presenting this Friday will be practically for six months. Hence one cannot say how many changes could be included in this exercise. Going forward, bitter medicine will be rightly delivered for vested interests who exploited the state’s revenues for their personal benefit. Through prudent steps, we are confident of righting the wrongs of the AIADMK government and fulfilling all the poll promises made by our chief minister in this five-year term,” the minister said. Pointing out that motor vehicle taxes and other charges, levied as fixed costs, have remained unchanged for 15 years, Thiaga Rajan questioned the uniform approach towards the rich and the poor while levying property tax that was last revised in 2008. Water charges too need a relook, he indicated, where large consumers would have to pay higher taxes. It would also hold true for electricity, with the need to prevent big consumers benefiting more from subsidised charges. The accumulated debt of the power and transport sector PSUs stood at Rs 1.99 lakh crore as on March 31, 2021, while the accumulated losses of the two water boards amount to Rs 5,282.57 crore at the end of last financial year.
Experts saw the white paper as a prelude to big reforms. “It makes a case for an increase in property tax and rationalisation of electricity and transport subsidies. The latter may be difficult to achieve given that the state aims to be a major player in manufacturing and use of electric vehicles. An increase in the running cost of e-vehicles may adversely impact adoption,” said Vidya Mahambare, economics professor at Great Lakes Institute of Management.
The focus is now on the first budget by the DMK government on Friday, after it came back to power after a decade. “Fiscal transformation will happen if the will of those in power is shown by stopping schemes like free power and lax fiscal management. I believe the will exists, as the last para states Go TN!” tweeted Gopal Srinivasan, chairman of TVS Capital Funds.
The current levels of fiscal deficit are unsustainable because the share of revenue deficit in fiscal deficit exceeds 50% or more since 2017-18. Though in most years, since 2013-14, the fiscal deficit was maintained within the prescribed 3% limit, it was adhered to only by postponing certain items of expenditure, he said.
The rising revenue deficit-driven fiscal deficits are funded mainly by borrowing, which sharply increased the total (visible) debt outstanding to a little more than Rs 5.70 lakh crore on March 31, 2022, amounting to around Rs 70,000 on every citizen of the state and nearly Rs 2.64 lakh on every family living in Tamil Nadu. The growing gap between the fiscal deficit and the net public debt each year has been covered by transactions in the public account and drawdowns of cash balances.
Total government guarantees nearly doubled to more than ₹91,800 crore in 2020-21, which means a large contingent liability and fiscal risk for the state. In 2019-20, Tamil Nadu had the third highest guarantees outstanding among all states, behind Telangana and Andhra Pradesh, the states going through division pangs.


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