CHENNAI: Tamil Nadu has been staring at a grave revenue problem for a couple of years. “We are borrowing to pay interest and salaries. We can’t even cover non-discretionary expenses without borrowing. If this is not fixed, you have a broken system, and we will be stuck in a vicious cycle,” State Finance Minister Palanivel Thiaga Rajan told The New Indian Express in an exclusive interview.
“We need to fundamentally rethink,” he said, and proposed an SPV (special purpose vehicle) model for debt-equity raising for revenue-producing assets. “If we were to get the act together on basic balancing, we can fundamentally transform the rate and speed of growth by reimagining the way we manage our assets and invest,” he said.
Rajan further said a lot of TN’s land is unutilised, and can be put to good use without selling it. According to him, 100 per cent equity financing of the capital assets is illogical. Instead, he proposes an SPV model for all future revenue-generating projects.
Rajan said the $1 trillion target for the State economy by 2030 is not unrealistic. “We need to grow at about 12-13 per cent annually in notional terms (including inflation).” Regarding the shift of diesel-petrol into the GST list, Rajan said he would consider it if the Centre is ready to eliminate the cess and surcharge on oil, and move them back to the excise duty structure. “If shifted, we will face a 6 per cent reduction in tax rates. Tamil Nadu can withstand the revenue loss.”
He believes the power of State governments has been steadily reduced and that of the Central government steadily increased. “Whether it’s education, taxation, one-nation one-ration card, or any other policy, the administrative scope of States has dramatically reduced.”
“This is the exact opposite of what the former chief minister of Gujarat, Narendra Modi, argued in favour of, when he was still a CM. Whatever he argued against then is being implemented by his government at the Centre now in a more vigorous manner,” he said.
As per Rajan, the 100 years of social justice in Tamil Nadu have led to a far lower Gini-coefficient (a higher Gini coefficient suggests income is more unevenly distributed) than in any large rich State such as Gujarat, Maharashtra, and Karnataka.