Kerala budget 2018-19: Tighten your belt for austerity drive

THIRUVANANTHAPURAM: The state budget 2018-19 to be presented on February 2 will be an opportunity for the government to regain the confidence of the coastal population. A comprehensive package for the livelihood development of the fisher folk is learnt to be among the priority list of the government.The total outlay for the fisheries sector will be far above than the Rs 500 crore set aside in the previous budget. A stimulus package to tide over the crisis after the demonetisation and GST implementation. Features of the fishermen package would be early warning systems, marine rescue systems, education support and skill development programmes for the children of fishermen and a housing scheme.

The 2018-19 budget will have the distinction of the second full budget in the state to be presented before March 31. Early presentation of the budget, on the lines of the Central budget, is aimed at giving departments sufficient time to spend the allocations. This year, the departments are expected to effectively utilise the summer months to initiate and make a significant progress in project implementation.

Finance Minister Thomas Isaac has hinted austerity measures have become unavoidable considering the fiscal position of the government. Fiscal deficit will not be allowed to go up above the three per cent mark. A time-bound plan will be rolled out to bring down revenue deficit to zero. This fiscal’s target would be to reduce revenue deficit by 0.2-0.3 per cent and fiscal deficit below three per cent.

Among the austerity measures is a strict no to luxury cars for ministers. Telephone connections of public offices and officials will be switched to cheaper packages. Post-GST state’s tax revenue saw only a 10 pc growth while the expenditure continues to register 15-16 pc growth making austerity measures inevitable.The state hopes the issue would be addressed when the eway bill system is implemented.E-way bill is the electronic permit for transporting goods worth Rs 50,000 or above within a state or in between states.

E-way bill generation will be possible on GSTN only in February this year. Until then, state’s tax officers cannot cross check the invoices. Since Kerala being a consumer state and 80 per cent of goods brought in from other states, tax evasion has affected the state’s revenue in post-GST months, according to Isaac.Allocation for health, education and infrastructure development will see a significant increase and the KIIFB would be strengthened.

Special schemes for wetland conservation and boosting agriculture production will be another feature of the third budget of the Pinarayi Vijayan Government, according to Isaac. Support will be given to successful wetland conservation projects.While the government plans to scrap hundreds of obsolete posts in different departments there will not be a ban on new recruitments.

Hits and misses

Finance Minister T M Thomas Isaac is known for announcing outlandish (some say Utopian) plans in his budget, which either fail to take off, or simply die a quiet death. We look at three of them

Fat Tax
In his 2016-17 budget, the Finance Minister announced ‘fat tax’, becoming the first state in the country to impose such a levy. Under this, burgers, pizzas, doughnuts and tacos were taxed at 14.5 per cent. The tax was aimed at global fast food chains such as KFC, McDonald’s, Burger King and Domino’s. Isaac justified the tax saying Malayalees were eating a lot of junk food and the tax would make them health conscious. The tax helped Isaac gain national and even international coverage. But in the next year’s budget, (2017-18), the ‘fat tax’ got subsumed in the GST. There was no mention of the amount it collected, or its status though.

Pravasi Chitty
In his last budget (2017-18), Isaac proposed an ambitious plan to mobilise D10,000 crore in three years through the ‘Pravasi Chitty’ scheme aimed at non-resident Keralites. The scheme is being launched through Kerala State Financial Enterprises (KSFE), the non-banking finance company of the state government. Some progress has been made such as the back-end systems are almost ready, and nearly 200 ‘Pravasi Bandhu Samgamam’ (meeting of relatives of NRKs) were held. The scheme was originally planned to be launched on Kerala Piravi Day (November 1) last year. Officials now say the Pravasi Chitty scheme will be launched in March.

Islamic Banking
Yet another novel concept announced by Isaac in the 2016-17 budget was Islamic Banking. This was at a time when the Reserve Bank of India (RBI) was yet to decide whether the country should have Islamic Banking or not. Isaac, in his budget speech, entrusted Kochi-based Cheraman Financial Service Ltd, a non-banking finance company operating on Islamic finance principles, with the task of modernisation of the Kerala State Drugs and Pharmaceuticals. The budget proposed CFSL to modernise KSDP after collecting funds through the Islamic finance mode. Two years down the line, hardly any progress has been made on the Islamic finance mop-up.