Since mid-2021, the Tamil Nadu government has rolled out several women-oriented welfare schemes that involve a significant annual financial outgo. At the same time, the State was unable to announce a cash component for Pongal festival this year. In an interview with The Hindu, Finance Minister Thangam Thennarasu says the government is managing the situation through prudent fiscal management. He also highlights the Centre’s passive approach to the State’s request for funds to handle natural calamities such as the recent Cyclone Fengal. Excerpts:
The State government has introduced numerous welfare schemes, such as Vidiyal Payanam (costless bus travel for women), Kalaignar Magalir Urimai Thogai and Pudhumai Penn, which have significantly benefited women and involved substantial financial outlay. How is the state managing to balance its finances while implementing these initiatives?
This state has been a pioneer in rolling out landmark schemes which have then paved the way for the entire country to follow. Today, what is globally acclaimed and recognised as the Mid-Day Meal programme was introduced in 1920s in the Madras Municipal Corporation- run schools. This government, under the leadership of our Chief Minister M.K.Stalin, is continuing this illustrious legacy. Each of these schemes are showing remarkable results. While we are implementing these schemes for the welfare of the people, we are also ensuring prudent fiscal management. We have been taking concerted efforts to ensure a sound growth in revenues in all sectors, be it GST, stamps and registration, motor vehicle taxes, etc. We have also introduced the Tamil Nadu Public Fund Tracking System to ensure a just-in-time fund release for schemes. This is helping us to save the interest costs by efficient cash and debt management.
Recently, at the Pre-Union Budget meeting, you reiterated the request to the Centre to release funds for cyclone relief and the Chennai Metro Rail project. How confident are you that the Centre will allocate these funds? What impact has the non-release of funds had on the State’s finances?
This is an issue of major concern for the state. The funds from Union Government have not been released for Cyclone Fengal (2024). Even for Cyclone Michaung (2023) and the unprecedented rainfalls in southern districts, the Union Government had released a meagre sum of ₹276 crore, against an amount of ₹37,907 crore sought by the State. For Samagra Shiksha Scheme, disbursal of ₹2,152 crore is pending. These funds are meant for salary of teachers, maintenance of schools and RTE Act reimbursement. As a result of non-receipt of funds, the State is having to bear these expenditures from their own budgetary resources, causing a severe strain on the finances.
Given the significant impact of Cyclone Fengal across several districts, affecting daily life and assets, will there be any implications for the State’s Own Tax Revenue (SOTR)?
Definitely. All such natural disasters have an adverse impact on the economy and thus revenues of the state. Despite our best efforts at planning and mitigation, there is a significant loss of livelihoods and property of the people and substantial damage to the infrastructure. This poses a double blow to state finances – One one hand, we are not able to receive the revenues and on the other, the expenditure for providing the necessary relief increases suddenly. This has become a major challenge for the state and its economy, especially because Chennai and surrounding areas which are more prone to such disasters, contribute about 33% of our State’s GDP. (Gross Domestic Product). This is why we are consistently seeking funds from the union government under the NDRF window.
While the revenue collections have been in double digits, there has also been increase in revenue expenditure? Will this affect the capital expenditure? Will the State be able to meet the capital expenditure targets?
There has been a setback to the growth of capital expenditure due to the onslaught of Cyclone Fengal. However, we are continuously following up to ensure that the pace of implementation of projects is fast. We will make our best efforts to achieve the capital expenditure targets in the budget.
How has the growth in the State’s Own Tax Revenue progressed so far in the current fiscal year 2024-25?
The growth in State’s Own Tax Revenue up till November has been 13.96%. This has been primarily owing to a good growth in the Goods and Services Tax (GST) component driven by higher Integrated Goods and Services Tax (IGST) settlements. The government has been taking active measures to ensure that the transactions are correctly recorded and the amount of revenue due to the state is timely received. Further, several technological measures and use of data analysis tools is helping us to improve the tax collection efficiency. Apart from GST, the effects of rate revision in Tamil Nadu State Marketing Corporation Limited (TASMAC) and motor vehicle taxes have also shown a positive impact on the revenues. However, the sales volume in these sectors continue to be a cause of concern amidst a general economic slowdown in the country. Therefore, we are still away from the anticipated growth in revenues for this year. But, we are committed to the path of fiscal consolidation and are taking all measures to maintain a balance between receipts and expenditure.
The state has made several representations before the Sixteenth Finance Commission. Could you share some of the key demands put forward? How optimistic are you that the state’s requests will be addressed?
We have made a detailed and a compelling case before the 16th Finance Commission. We have sought an increase in vertical devolution from the current 41% to 50% for the states. We have also advocated for a more equitable formula for horizontal devolution that rewards states for their performance rather than penalizing them for their progressiveness. We firmly believe that when such progressive states are given higher share, it results in a higher pie for everyone, leaving more for redistribution to the lesser developed states. The question posed to the commission is simple: Do we want a smaller pie for the country and a larger inter-se share for less developed states, or a larger pie for the country, with a reasonable inter- se share and a larger absolute amount for the less developed States?
There has been limited recent discussion regarding the Economic Advisory Council to the Chief Minister of Tamil Nadu. Does the Advisory Council meet regularly, and what are the key insights or recommendations they provide?
The Economic Advisory Council to Chief Minister is being consulted at regular intervals and their insights are constantly helping us to shape our policies and decisions. Most recently, the Council had been convened before the visit of the Finance Commission in the month of November to seek their valuable inputs on our case to the 16th Finance Commission. Many of the arguments in the Memorandum are influenced by their suggestions.
Published – January 12, 2025 11:17 am IST