THIRUVANANTHAPURAM: Opposition Leader VD Satheesan is the most authentic voice in the UDF camp to speak about state finances. During the tenure of the previous Pinarayi Vijayan government and the 2006-11 V S Achuthanandan government, Satheesan led the Opposition attack against the then finance minister T M Thomas Isaac. In 2019, Satheesan headed the UDF subcommittee that published a white paper on Kerala’s finances, which raised serious concerns about mounting public debt and falling tax revenue.
Excerpts:
Q.How do you view the overall financial condition of the state?
It is not a secret that our finances are in the doldrums. Several factors have contributed to that. The white paper prepared by us in 2019 had sounded strong caution. The situation has worsened beyond that now. In 2016, the white paper brought out by the then finance minister Thomas Isaac accused the previous government of increasing the state’s debt burden.
The public debt nearly doubled in the five years of the previous LDF government. This year, as per budget estimates, Kerala’s outstanding debt will cross `3.27 lakh crore. The state is compelled to use most of its resources for revenue expenditure and debt servicing. It affects allocation of funds to local self-government institutions, and lead to plan cuts.
Q. Do you think the GST regime affected Kerala badly and hit our tax collection?
The tax administration should understand the nuances of both VAT and GST regimes and use appropriate methods to levy tax. VAT is a tax levied at the production end while GST is a tax levied at the consumer end. While VAT gave an advantage to manufacturing states, GST is advantageous to consumer states. That means, in theory, Kerala should have been the biggest beneficiary of GST. The reason why we have failed is because of the archaic tax administration system. We still maintain the VAT-era administration to levy GST. Most of the other states have overhauled their tax administration.
Q. Are issues regarding tax collection the only problem with GST?
No. There are inherent issues in GST. But many of those are beyond the control of the state. There are a lot of procedures to file returns and other such things. Those need to be simplified. The ongoing debate on rate rationalisation in the group of ministers is expected to reach a conclusion soon. That may give states more advantage.
Q. Have you noticed that tax collection on gold fell to one-third post-GST?
Only strong action can help the state levy tax on gold. It is a fact that large-scale smuggling of gold is happening, and being the largest market of gold, a good share of smuggled gold reaches here. There are illegal manufacturing units where smuggled gold is converted to jewellery and sold in the market. GST empowers tax officials to raid such places and make seizures. Central GST is doing that. But the state GST department maintains that they are not empowered to do that.
Q. Are you worried about the mounting public debt? Can Kerala continue like this?
The real question is how you use the borrowed money. If the borrowed money is used for asset creation, that won’t be much of an issue. But our recent borrowings are all for meeting revenue expenditure and paying interest of the previous loans. This is a bad trend. Also, the figure of outstanding debt in the budget doesn’t include KIIFB debt.
Q. The expenses for salary and pension are too high in Kerala. There was a pay revision in April, despite being a pandemic year. Was that necessary?
The government is bound to provide decent salary to its employees. Periodic salary revision is the right of the employee. But the government can always exert discretion on this. What pay commission submits is a recommendation only. Being a pandemic year, the government could have deferred the pay revision by taking employees into confidence. But they wanted to do that as elections were approaching.
Q. Do you agree to the proposal of tapping non-tax revenue sources more?
I don’t approve of that. If you increase the fair price of land eyeing more stamp duty, what will happen is a sudden reduction in the number of transactions. Being a period of recession, the government should initiate steps that will boost economic activities. For lotteries, instead of increasing the price, there should be steps like making the prize system more attractive.