KOCHI: An expert panel constituted by the Finance Department to identify additional revenue resources to fund the extra expenditure for combating the pandemic and to bridge the steep decline in income due to the Covid-induced slowdown has recommended a slew of measures including raising the retirement age of government employees and levying additional tax on fuel and liquor.
The panel headed by former chief secretary K M Abraham reviewed the state’s finances based on the report released by the Gulati Institute of Finance and Taxation which pegged the revenue loss at Rs 33,456 crore. The Centre has allowed states to borrow an additional 2% of the gross state domestic product (GSDP) to fight the slowdown. Though it will enable Kerala to borrow Rs 18,087 crore, the state will still need Rs 15,369 crore to meet the budget requirements.
The panel stressed on the need for rationalisation of salary and pension as they account for 72.92% of the state’s expenditure, with 20% going into pension alone. Though it was pointed out that raising the pension age will cut employment opportunities of youths, the perception was not given much weight as only 18000-20,000 jobs are offered by the government annually. If the retirement age is raised from 56 to 60 years, the government will be able to defer retirement benefit payment.
But the employee will be eligible for four increments during the extended period which will increase the quantum of pension payable to them. So instead of raising the pension age of all employees as a matter of right, the government should allow the privilege of re-employment as an option with the same pay and allowances existing on the date of retirement, the report said.Another recommendation is to increase the tax ceiling of petrol and diesel from the existing 44% and 40% to 55% and 50%, respectively, by bringing an amendment to the KGST Act.
This will help shore up an additional revenue of Rs 2,086 crore. The committee suggested a 50% hike in excise duty and sales tax on liquor, which will help to bring additional revenue of Rs 6,452 crore. The committee recommended a calibrated increase in fair value of land accompanied by a small reduction in stamp duty rates along with e-stamping for all documents. This will help raise an additional Rs 700 crore.
Undeterred by the row over the appointment of consultancy firms, the panel recommended engaging a panel of consultancy organisations with international expertise and track record in human resources management for conducting a functional review of the performance of all government departments. A high-level committee with the chief secretary as chairperson and additional chief secretary (finance) as convenor should be constituted to evaluate the output of the organisation and make recommendations to the government.
The committee proposed an income support fund to meet the Covid-related expenses and relief packages. This can be financed through voluntary interest-bearing deductions from the employees’ salary and pension. Contributions may be deducted for 12 months from September 2020 providing an interest rate of 0.25 per cent more than provident fund rate. This will help raise an additional fund of Rs 675 crore.
The panel found the salary provided to staff of aided educational institutions as a major burden draining the state exchequer. It recommended the appointment of a high-level expert group to study the burden caused by such institutions, the benefits of getting out of it and framing new legislature and administration framework.
Income support fund
The committee proposed an income support fund to meet the Covid-related expenses and relief packages. This can be financed through voluntary interest-bearing deductions from the employees’ salary and pension.