TN facing tough financial situation, admits finance minister

Chennai: Admitting that Tamil Nadu was passing through a tough financial phase, finance minister O Panneerselvam in his reply to the budget debate in assembly on Friday said, "We will have to live with it". He blamed it on slow economic growth, low oil prices and the recommendations of 14th Finance Commission for deficit in the revenue account and burgeoning fiscal deficit.
He said the tax revenue has grown by 68% in the last five years but during the same period expenditure increased by 93%.This disparity has resulted in revenue deficit. But the situation was bound to change due to steps taken by chief minister J Jayalalithaa, said Panneerselvam. He did not elaborate on the measures to be initiated by the government to improve revenue.
"Fuel prices have been revised several times each year and every time it is lowered we lose on tax revenue. Other states like Telangana and Andhra Pradesh revise tax rate on fuel to compensate the loss of revenue. But, our chief minister wants to protect people from the additional burden," he said. While chief minister J Jayalalithaa was present in the assembly, the opposition benches were seen unoccupied.
He countered all queries raised by DMK MLAs E V Velu, K N Nehru, R Sakkarapani and Durai Murugan and Palanivel Thiagarajan during earlier sessions. He also took a dig at Thiagarajan, a debutant, saying he had spoken in English in the house. "There is no doubt we will have reduce the debt burden," said Panneerselvam, taking heart that money borrowed by the state was spent mostly on creating assets.
"There are several ways to increase tax revenue. New taxes can be levied or the existing tax rates can be revised upwards. But both will hit residents hard so we did not touch the tax rate. As for expenditure, subsidy and transfers have increased manifold," said the minister. For example, food subsidy now stands at Rs 5,500 crore. Similarly power subsidy increased from Rs 1,647 crore in 2010-11 to Rs 9,007 crore in 2016-17. Subsidy for social welfare ministry, which was Rs 1,208 crore in 2010-11, increased to Rs 3,820 crore in 2016-17, said the minister. He also discounted the RBI study on state finances and blamed the central bank for not taking revised budgets of Tamil Nadu and Maharashtra into consideration.
The changes suggested by the 14th Finance Commission has resulted in the state having to bear the full or partial burden of many central schemes. "The state's share of expenditure on schemes like National Agriculture Development Programme and rural housing scheme have been revised which has resulted in the government spending Rs 2,600 crore more annually," he said. Besides, while the centre had pulled out of some schemes, the state decided to continued them, adding to its expeniture, he said.
The finance minister hopes investments promised in the Vision 2023 document and the MoUs signed during the Global Investors Meet last year would improve tax revenue.