The best part of the stiff rise in the bus fares and milk prices, and the imminent increase in the electricity rates which are pending clearance by the Tamil Nadu Electricity Regulatory Commission, was the calm, cool, collected, composed and cogent manner in which the Tamil Nadu Chief Minister, Ms. J. Jayalalithaa, personally made the announcement in Tamil over the Jaya TV in the evening of November 17.
It was entirely in keeping with her leadership style that instead of leaving the unpleasant task to the Ministers concerned or taking recourse to a media release, she boldly grasped the nettle herself and pulled it off by means of meticulously assembled arguments backed by a sober and sequential recounting of the facts and circumstances leading to the decision. Her diction, intonation, inflexion, emphasis, pauses and delivery were just perfect. It was altogether a tour de force in the art of communication and public relations.
That's where, unfortunately, the compliments must stop. The contents of the announcement beg several questions, with the result the Chief Minister did not wholly carry conviction. The reason is the unbridgeable cleavage between vote bank politics and hard-nosed economics.
SELF-INFLICTION
The prime justification for the jacking up of the various imposts is stated to be the step-motherly attitude of the Centre towards the State's demand for financial assistance amounting to Rs 182,402.18 crore, composed of a special assistance of Rs 100,000 crore towards debt relief, Rs 40,000 crore as a bailout package for Tamil Nadu Electricity Board (TNEB)'s subsidiary, Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO), and Rs 20,000 crore for improving urban infrastructure in the State.
Meanwhile, as per assorted computations put out in the media, the State government has inflicted on itself during 2011-12 a liability of Rs 9,381 crore (up from Rs 7,739 crore in 2010-11), dipping into the already parlous State finances for free distribution of mixers (Rs 3,500 crore), grinders (Rs 3,500 crore), fans (Rs 1,000 crore), and sheep and cows (Rs 191 crore). These estimates do not include the amount of Rs 10,200 crore which the Chief Minister herself had projected to the Centre as the cost of 912,000 free laptops to school and college students and subsidy for rice under the public distribution system, presumably, including the cost of 20 kg of free rice for the poor, which, according to the State Food Secretary, came to Rs 4,500 crore.
To expect the Centre to pick up the bill for all of these items which could have waited for a better balance-sheet is a bit much.
CONSIDERABLE CONFUSION
Even if you give or take Rs 1,000-2,000 crore here or there, the drain is mind-boggling. From the look of things, even the inflow of Rs 10,000 crore or so from the increases may not be able to plug the enormous hole in the State's pocket. Where was the tearing urgency to make a public commitment to incur these obligations on freebies, especially when the dent, as stated by the Chief Minister, made by the profligacy of the predecessor Government was yet to be set right?
There is also considerable confusion in the public mind about the precise implications of the accusations of the state of insolvency in which the State is supposed to be on a variety of counts.
The State Finance Secretary, Mr K. Shanmugam, ata media meet on August 4, gave an optimistic, and, indeed, comfortable, picture of the revenues during 2011-12. He even affirmed that the State's public debt was “well within the limits” of 24.5 per cent of the GDP stipulated by the 13th Finance Commission.
On April 8, on a visit to Chennai, the Finance Minister, Mr Pranab Mukherjee, certified Tamil Nadu's financial position to be “quite sound”, and that it had not taken overdraft “for a single day because of the sound financial position.”
According to him, on March 24, the State's cash balance was Rs 13,537 crore, its fiscal deficit had never gone beyond 3.5 per cent of the GDP, being just 1.01 per cent in 2005-06, 1.61 per cent in 2006-07, 1.34 per cent in 2007-08, 3.01 per cent in 2008-09 and 3.44 per cent in 2009-10.
WHITE PAPER NEEDED
From some other figures culled from the public domain, the State government's total liabilities were of the order of Rs 1,01,541 crore (or 19.58 per cent of the GSDP) at the end of 2010-11, as against the debt-GSDP ratio of 22.29 per cent in 2005-06. The former Chief Minister, Mr M Karunanidhi admitted that the liabilities rose by Rs 44,084 crore during his regime from 2005-07 to 2010-11, but claimed that during the same period, the government utilised it productively on capital expenditure, which grew by Rs 44,667 crore.
The Chief Minister, Ms Jayalalithaa, soon after she assumed charge in 2001 brought out a comprehensive White Paper on the State's finances which injected a lot of clarity into the public understanding of the exact situation at the time. She owes it to the people of the State to bring out a similar White Paper on the State's finances removing all ambiguities and confusion and placing before the people in clear-cut terms the exact logic behind the increases and how much they would yield in higher realisations for the public coffers.
People will certainly extend their cooperation to the Government towards restoring the financial health of the State, provided they are sure that the cost of inefficiency of the public sector undertakings is not being passed on to them, and that the government will not burke enforcing stringent criteria of productivity of the government and public sector employees who account for nearly 70 per cent of the revenue expenditure on salaries, perks and pension without any commensurate return.
The White Paper needs also to include an Action Taken Report on each of the A. M. Swaminathan Committee's recommendations to prune the staff, streamline the departments and cut down infructuous expenditure.