Wish lists for Finance minister

Ahead of the Kerala budget today, economists and public policy experts sound their suggestions about sectors KN Balagopal should focus on.
Kerala Finance Minister K N Balagopal.
Kerala Finance Minister K N Balagopal.File | B P Deepu, EPS)

Collection of tax arrears, Mobilisation of resources, assets

Resource mobilisation

Must initiate drastic steps of expenditure restructuring along with additional resource mobilisation (ARM).

Pension reform

The state can no longer continue with the statutory pension burden which gobbles up 23% of total revenue. The FM should mention in his budget speech the policy imperative of reforming the pension system.

Hike electricity duty

The electricity duty can be raised straight away to mobilise an additional Rs 1,000 crore. It will serve as a disincentive mechanism akin to a high rate of tax on liquor to reduce consumption.

Raise fee on social services

Kerala’s expense on social services via fee and user charges fell from 5.5% of revenue expenditure in 1972-73 to 1.63% in 2022-23. The FM can raise the fee to mobilise an amount equivalent to 6.61% of revenue expenditure.

Asset mobilisation

The FM should put forward an asset monetisation plan and mobilise from the public Rs 25,000 crore and invest in infrastructure development.

Purchase vouchers

To give a boost to locally produced agricultural and industrial products, the FM should announce a scheme wherein 20% of salary and 10% of pension will be paid in the form of purchase vouchers.

New liquor policy

The FM can announce a new liquor policy. The ban on arrack should be lifted forthwith. A system of smart card should be introduced wherein all those who want to consume liquor will be supplied a medically acceptable quantity of quality liquor at subsidised rates.

Hike lease rates on govt land

Lease rent rates on government land and mining royalty should be raised. The FM should announce that the government will not construct any building during the remaining period of its term.

Jose Sebastian

(Former faculty of T’Puram-based think tank Gulati Institute of Finance and Taxation)

Jose Sebastian
Jose Sebastian

Collection of tax arrears

Revise salary/pension once in 10 yrs

While the Centre and most of the states are revising salaries and pension only once in ten years, Kerala is doing it once every five years. This is the root cause of the state’s fiscal crisis.

Pay welfare pension arrears

The top priority of the government should be to pay the welfare pension with arrears to the suffering elderly.

Revenue mobilisation plan

The unprecedented financial crisis requires unprecedented crisis management. The government should implement a two-pronged strategy: short-term crisis management measures and medium to long-term revenue raising measures.

Collect tax arrears

Prioritise collection of the tax arrears due to the state, which according to the CAG is Rs 28,258 crore.

Stop life-long pension for mins’ staff

The government will have to initiate drastic expenditure reduction, especially by discontinuing existing unjustifiable schemes like life-long pensions to personal staff of the ministers who have completed two years of service.

Short-term crisis mgmt

The government may even temporarily freeze a part of the increased salary caused by the last pay revision with a promise to repay this as soon as the fiscal situation improves. This should be the short-term crisis management measure. The medium to long-term initiatives should focus on raising revenue, mainly non-tax revenue.

Attract private investment

Attracting massive private investment to the state should be part of the medium to long-term measures. Only massive investment can lead to high economic growth and revenue buoyancy.

Sell PSUs that don’t serve social cause

As per Kerala Budget 2023 documents, there are 134 PSUs in the state, with a return of Rs 62,261 crore and accumulated losses of Rs 33,112 crore. Some of these PSUs that don’t serve any social cause may be sold/ privatised.

V K Vijayakumar

(Chief investment strategist, Geojit Financial Services)

V K Vijayakumar
V K Vijayakumar

Raise retirement age of govt staff

The Government of Kerala has been continuously violating the norms prescribed in the Fiscal Responsibility Act. The Act prescribed 3% of GDP as the limit to resort to fiscal deficit. Instead, they were incurring fiscal deficits beyond the limit with impunity and adopting unsound fiscal policies for years.

The current crisis, which cannot be resolved easily, is the cumulative effect of such unsound policies. In this context, the finance minister should consider the following steps:

  •  Raise the retirement age of government employees to 60 years, as is the case with Centre and most other states

  •  Stop the free supply of 30kg rice to yellow ration card holders and 5kg per member of pink card holders. When a casual labourer gets a daily wage of Rs 1,000 per day, there is no justification for the free supply

  •  It is worth examining whether cess can be collected from the 36 lakh school children. Free school education was mooted when a majority of Keralites were living below the poverty line. At present, the incidence of poverty ratio in the state stands at 7% of the population. Similarly, bus ticket concession to students can be withdrawn

  •  Property tax can be raised at a flat rate of 5% of the current rate every year, instead of reassessing it with elaborate survey as is being contemplated at present

  •  A donation of one month’s salary can be thought of to tide over the current crisis as was done at the time of the Covid outbreak.

Dr Joseph K V

(Director of International Institute of Migration and Development, ex-member of Kerala Public Expenditure Review Committee)

Dr Joseph K V
Dr Joseph K V

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