While it may be a little early to say that the Tamil Nadu government is facing financial stress, there is enough evidence to conclude that the funding of a string of social welfare schemes is increasingly a challenge. Though the state economy is growing at a robust 8-10 percent annually, outperforming the national average, the exchequer is finding itself in a tight spot as the ruling DMK considers the welfare schemes to support weaker sections its prime job.
The fund crunch is real. A recent story in this newspaper revealed that the state government is mulling a major overhaul of its special public distribution scheme for tur dal and palmolein oil. When the state started the popular scheme in 2007, tur dal used to be procured at `50 a kg and sold at `30. Similarly, palmolein was bought at `45 a litre and sold at `25. But now, when their prices have shot up nearly three times, the scheme is drilling a huge hole in the state coffers.
On the flip side, when electricity, water and land registration costs eventually move north to shore up the depleting kitty, common people will feel the pinch. After restructuring the electricity rate slabs, the government has now raised tariffs—for the third time in three years—to save the debt-ridden state utility that is struggling to stay afloat. The move to raise the cost of property registration and enhance guideline values has helped shore up the revenues, but has drawn flak from the public.
TN’s finance minister recently blamed New Delhi’s fiscal policies for the state’s financial troubles. He said the state shouldered the entire cost of the Chennai Metro’s second phase to avoid a delay in execution, but the Centre is yet to open its purses. This has forced TN to borrow and allocate Rs 12,000 crore in the current year.
This would be a huge burden on any state. The minister pointed out the money could have been used to buy 25,000 new buses, apart from building 30,000 km of rural roads, 3.5 lakh new houses and 50,000 new classrooms. Serious efforts are under way to attract more investments to the state to expand industrialisation while pushing exports, manufacturing, IT and smaller enterprises. But till the state becomes flush with funds, its struggle to fund welfare schemes will continue.