Kerala finances alarming, says white paper; former govt UDF rejects report

Kerala's finances are 'alarming' and there is a need to ensure 20-25 per cent annual growth in tax collection for the next five years, according to a white paper tabled in the state assembly on Thursday.

The white paper tabled by Finance Minister T M Thomas Issac said that for a state holding a negative cash balance in reality, it was an impossible task to take on immediate and short-term liabilities of over Rs 10,000 crore and that the situation was 'alarming'.

Apart from meeting the day-to-day challenge of keeping the Treasury afloat to meet the routine expenditure of administrative machinery, Kerala was constantly facing grave paucity of resources for financing all its other plan and capital expenditure, the report said, adding the state has been living on a 'financial lie'.

In the last three years, budgetary exercise was 'fudging of accounts', Issac told reporters. Schemes and projects were announced without the funds to back them up, he said.

The Annual Plan size during this period had been fixed at about 10-15 per cent even beyond the state's estimated capacity - to announce an artificially-bloated plan size each year, the minister said. In the process, unfortunately, budgets have lost their sanctity and budget speeches have become exercises in conjuring up unachievable visions of schemes and projects, he claimed.

Kerala was also unable to reduce revenue expenditure beyond a certain extent due to commitments in the social sector and increase in salary, interest payments and pension, which is mainly attributed as reason for its burgeoning revenue deficit of the state, he said.

However, the minister said, government would check Non plan revenue expenditure, which was necessitated as the previous government had announced various projects which were not included in the budget and were sanctioned as Outside the Agenda (OA) by the cabinet.

Citing an example, he said about Rs 700 crore to Rs 800 crore had been spent for former Chief Minister Oommen Chandy's pet Mass contact programme. Such heads of expenditure added to rise in Non Plan Revenue expenditure, he said.

The report said efforts would be made to galvanise tax collection machinery in all departments, mainly in commercial Taxes, Motor Vehicles, Registration, Revenue and Excise. Kerala would have to gear up its tax machinery and ensure that growth rates in tax collection are sustained at 20-25 per cent per annum for the next five years, it said.

"There is no escape from this conclusion, given the limited range of fiscal choices available to the state', it said.

UDF slams White Paper 

UDF chairman and Kerala opposition leader Ramesh Chennithala dismissed claims made by the LDF government in its White Paper and said there had been "better financial management" during the tenures of the UDF government than that of LDF. He also claimed that though there was financial slowdown, the UDF government was able to collect taxes up to 99 per cent in its last tenure.

"There had been better financial management during the tenures of UDF government than that of LDF. Kerala had suffered the worst financial crisis during 1998-2000 when LDF was in power. Even the state treasury was closed that time," he said at a press meet in the Assembly media room.

Former Finance Minister and KC(M) supremo K M Mani also critisised the White Paper, saying it failed to present the real picture of the state's financial position.