A few days after the Tamil Nadu Budget was presented, Finance Minister Thangam Thennarasu, who also holds several other portfolios such as Planning, Human Resources Management, Statistics, and Archeology, spoke to TNIE at length about fund allocations, state’s fiscal health, and the ruling DMK government’s plans the for future.
Here are the excerpts:
What was Tamil Nadu government's approach to the 2025-26 budget, considering this was the last full-fledged budget before the 2026 Assembly election?
The mandate given by our chief minister was that it should be in line with our motto of 'Ellorukkum Ellam (Everything for everyone)' and futuristic to ensure the state’s growth in not just 2025-26 but in the years to come.
Tamil language, heritage and civilisation have been a key focus of this government. We have discussed this amply in the first few pages of the budget document. Later, we elaborated plans for widespread infrastructure and industrial growth to make the state future-ready.
Hence, I would say, from archaeology to artificial intelligence, the budget captures the government’s vision of being farsighted while remaining rooted in the rich Dravidian heritage, trying to unearth the missing links of our past.
We have focussed on distributed growth. There is a special emphasis on education, higher education in particular, to meet the aspirations of the younger generation and ensure their employment opportunities.
State’s outstanding debt is expected to touch Rs 9.3 lakh crore by 2025-26…
As we have already made clear, the debt needs to be seen in the context of our Gross State Domestic Product (GSDP). Tamil Nadu’s debt to GSDP ratio is 26.43% as per the revised estimates (RE) for 2024-25 and it will be 26.07% in 2025-26 as per business estimates (BE). This is well within the 28% limit set by the 15th Finance Commission. We certainly want to bring it down further and are making strides in that direction.
Tamil Nadu is going for more debt because our financial autonomy has been clipped by the union government, with the introduction of Goods and Services Tax (GST), Ujwal DISCOM Assurance Yojana (UDAY), and such schemes.
To worsen it further, the union government is not releasing part of our grants-in-aid by imposing unreasonable conditions. Moreover, even though TN accounts for 9% of the country’s GDP, the total funds we receive from the union government, as a share of our GSDP, has come down from 3.41% in 2016-17 to just 1.96% in 2025-26. The ever-increasing cess collected by the Government of India is not shared with the states.
There are now reports that the union government has informally asked the 16th Finance Commission to bring down the devolution of central taxes to states from 41% to 40%.
Many of our project proposals, including metro connectivity for cities like Coimbatore or an elevated highway from Chennai to Tindivanam to ease the traffic on the GST road, have not been approved by the union government.
The shrinking of avenues for states to mobilise funds is forcing us to go for borrowing while trying to maximise our own revenues. It needs to be stressed that even for borrowing, the union government imposes many stringent conditions such as the loss-funding we are mandated to do for the Tamil Nadu Electricity Board. If that burden is not there, our need to go for debt itself will be reduced.
Since you mentioned the loss-funding to TNEB, how are we doing on that front?
We are improving on that front. The loss-funding has come down. The unbundling of the power utility into Tamil Nadu Green Energy
Corporation Limited (TNGECL), Tamil Nadu Power Generation Corporation Limited (TNPGCL) and Tamil Nadu Power Distribution Corporation Limited (TNPGCL) has helped. We now have a director of finance in TNEB to improve the fiscal situation.
A lot of its revenues needs to be reinvested in improving our infrastructure and reducing transmission losses etc. But we are making progress.
The State’s Own Tax Revenue (SoTR), albeit increasing, has not met the target envisaged in the 2024-25 budget. This is despite an increase in excise duty, stamp and registration duties and motor vehicle taxes. Yet, you have estimated a growth of 14.6 % in SoTR for 2025-26...
Although we did not meet the 2024-25 BE (of Rs 1.95 lakh crore), the SoTR has significantly grown to Rs 1.92 lakh crore. In taxes on motor vehicles, we have exceeded our expectations (Rs 11,559 crore in 2024-25 BE to Rs 11,998 crore in 2024-25 RE).
In stamp and registration fees, we did not get the expected revenue (Rs 23,369 crore in 2024-25 BE to Rs 22,814 in 2024-25 RE) because the number of registrations did not go up as expected due to several extraneous factors.
When it comes to excise duty, we recorded an increase (Rs 11,857 crore as per 2024-25 RE) but it fell short of 2024-25 BE (Rs 12,247 crore). This is because the volume of liquor sales did not go up. Our government is clear that we do not want to take any aggressive measures to push the sales, either by opening more retail outlets or by keeping the outlets open for extended hours.
On the other hand, we have done well with the state’s GST collections, where the trend is better than that of the GoI. We have made great strides in plugging leaks in our tax collection by leveraging technology and are improving further.
Moreover, we are expecting growth in many avenues of tax collection. Hence, we are confident about the 14.6 % growth in SoTR.
The government has estimated the fiscal deficit to be 3% of GSDP in 2025-26 (BE), which is a sharp reduction compared to the “glide path” of reduction from 3.44% you spoke about in 2024-25. How confident are you about achieving this?
We have already brought it down to 3.26 % in 2024-25 RE, compared to the 3.44 % in 2024-25 BE. As highlighted earlier, we are also taking several measures to improve our revenue base while fixing leaks.
One huge exercise we undertook in particular was identifying the funds released for works to various line departments but are lying idle in bank accounts for months or, in some cases, even years due to delay in the implementation of works. We identified around Rs 11,000 crore of such funds parked in numerous bank accounts of various departments.
We have taken all this back to the state’s common kitty and have now introduced the concept of 'in-time release'. There will be no delay in the release of funds, but the funds will be released as and when the bill is raised for a particular work and not in advance. This has not only helped us reduce the need for borrowing but also to use the funds more efficiently for other immediate needs.
We are also rolling out end-to-end computerisation in Tasmac. Mines and minerals is an area where there is a lot of scope for improvement to fix leaks. One of the measures we are taking is to do drone surveys.
The union government finally making phase two of the Chennai Metro Rail Project (CMRL) a central sector project has freed up some money for us although it has to be stressed that the direct funding by the GoI for the project will not be significant and they will only facilitate borrowing.
Apart from this, the review mechanisms have been strengthened with periodic meetings with different departments to ensure that we are going in the right direction. Moreover, our GSDP growth is promising. Hence, bringing the FD to 3 % is achievable.
While debt is unavoidable in an economy, a higher revenue deficit (RD) is an unhealthy indicator. Ours is still over Rs 40,000 crore, which is around 46% of our fiscal deficit. How are we going to bring it down?
We have already brought it down from Rs 49,279 crore (2024-25 BE) to Rs 46,467 crore (in 2024-25 RE). In 2025-26, we are expecting it to come down to Rs 41,635 crore. The previous AIADMK government’s borrowings were mainly to bridge the RD. We are not doing that. In terms of GSDP, the RD has come down from 3.16% in 2020-21 to 1.17% in 2025-26.
All the measures I highlighted earlier will help in bringing this down further.
Though the union government did not release the grants-in-aid as expected, especially the Rs 2,152 crore meant for Samagra Shiksha, we are optimistic and are expecting in good faith that this will be released next year without imposing any conditions. That will also help us bring the RD down further.
You have allotted Rs 57,231 crore for capital expenditure (Capex), which is a 22.4% jump from the Rs 46,766 crore in 2024-25 (RE). Are there any special focus areas?
Since we are projecting an increase in our revenue and a reduction in borrowing, we are planning to invest more in capex, which is the right thing to do. There are not going to be any specific focus areas. We want it to be distributed across sectors, such as improving basic infrastructure, drinking water schemes, a new reservoir near Chennai, elevated corridors, funding for new airports etc.
However, there are also a few important projects for which we have earmarked more funds.
There was criticism earlier about the alleged indifference of the government towards the financial woes of the state-run universities. This year, as you said, there is a special focus on higher education, which included the allocation of Rs 700 crore as block grants...
We have always been adequately funding our state-run universities. The government will step in and aid. We will not leave them to starve. As you said, we have allotted Rs 700 crore for block grants.
However, we are very keen that the culture of research in universities should be strengthened. That is what universities are for. We are ready to fund them more, provided they come up with good projects. Anna University is a pride of our education system. That has to become a globally-recognised premier institution.
Although big-ticket populist measures were largely absent in the budget, you have allotted Rs 2,000 crore for providing laptops or tablets to 20 lakh college students over two years. Are you going to impose any eligibility criteria?
This was one of our electoral promises. We did not stop the distribution of free laptops to students as AIADMK alleged. It is the AIADMK that did so, for which one of the reasons was the issues in supply, especially in the chips needed. That is why we have planned it over two years to ensure a steady supply
Importantly, we want to provide the best specifications possible unlike the laptops provided by the previous AIADMK government. We want them to be of real use to college students in their studies and help them learn emerging technologies like AI. Therefore, we have not arrived at any tentative cost per laptop or tablet.
However, with more service providers in the market now, we are hoping to get the best specifications at the best possible price through a competitive and transparent bidding process.
We will, of course, start with students of government colleges. In terms of eligibility criteria, we have not decided about it as of now. However, we will start the preliminary work immediately since it is a project involving huge logistics.
Is there a political angle to this announcement since the beneficiaries will be predominantly first-time voters?
Certainly not. We have introduced the Chief Minister’s Breakfast Scheme, where the direct beneficiaries are children. We have announced schemes for the Sri Lankan repatriates and children who have lost both their parents. They do not even have votes. We have announced initiatives for trans persons, who do not constitute a huge vote bank.
We do not introduce schemes with votes in mind. We look at them as empowering measures in line with the progressive Dravidian ideology. Before Independence, it was the Justice Party that first introduced voting rights for women. In 1989, Kalaignar (late CM M Karunanidhi) brought legislation to secure women’s rights in family-owned properties.
In this budget, we have announced a 1% reduction in the registration fees for properties valued up to Rs 10 lakh if they are registered in the name of women, with the hope that this will increase the share of properties owned by women. Hence, there is an ideological continuity and intent of further empowerment in these initiatives. This is how schemes evolve.
Where is the proposed 2,000-acre ‘Global City’ near Chennai coming up?
It was the DMK government led by Kalaignar that first announced the satellite township project in 2006, but it did not immediately take off due to some opposition. Later, the AIADMK governments also made announcements, but could not implement them.
We are keen on implementing this since we recognise the crucial need for it, considering the explosive growth Chennai is witnessing. We want it to be a futuristic, self-sustained city with all modern facilities and seamless transportation systems integrating it with Chennai.
Land availability will not be a problem. We have not decided about the location, but when it comes to Chennai, there are only three directions we can go (laughs… referring to the Bay of Bengal on the other side). We will decide soon and take the project forward.
The budget has not satisfied majority of the government employees for its alleged failure to fulfil their demands. Moreover, the constitution of another committee to study the pension schemes is blamed as a delaying tactic...
This government, especially our chief minister, has huge respect for government employees. They are the ones who take the schemes to the people. We deeply appreciate their work.
We have, in fact, included a bouquet of measures for the welfare of government employees in the budget. The most important one is the restoration of the earned leave surrender system, as instructed by the CM. Although they had a variety of demands depending on different departments, the restoration of this system and the restoration of the Old Pension Scheme (OPS) are the two key common demands of all government employees.
Regarding OPS, a new dimension has emerged with GoI introducing the Unified Pension Scheme (UPS), which was notified earlier this year. I acknowledge that committees have been formed in the past to study the possibility of reverting to OPS. However, there is a need to study this new dimension and its implications. That is why we have formed a committee headed by senior IAS officer Gagandeep Singh Bedi with well-defined terms of reference.
The government employees expressed concerns that the nine months given to the committee is too long. This has been taken to the knowledge of the CM. He will make an appropriate decision.
Archaeology has been a subject that is closer to your heart. In the budget as well, you have announced expanding excavations and setting up of museums. Will there also be measures to institutionally strengthen the Department of Archaeology or set up a laboratory for testing artefacts?
Establishing the antiquity of the Tamil language and civilisation is a priority for us since the Dravidian identity and its ancientness have always been questioned. However, we are extremely determined that it has to be based on concrete scientific evidence. That is why, when the findings related to the recent announcement of the Iron Age first came up, we did not immediately become euphoric.
We waited for a thorough examination, further laboratory tests and scrutiny by the authorities in the field before making it public. We will continue to proceed in this direction.
Yes, there is a need to strengthen the department, which has not received the attention it deserves in the past. We are taking measures in this direction, not only in archaeology but also in other areas like epigraphy, museology, temple architecture etc. We have recruited more people.
The government also feels the need to have a laboratory, especially for carbon dating. However, we want it to be of the highest international standards so that its findings are considered credible and not seen as supporting the state government’s views.
Is the target of becoming a USD 1 trillion economy by 2030 realistic?
The 1 trillion dollar economy is a goal. I acknowledge that it is ambitious. However, we believe that Tamil Nadu has the potential because of its robust, resilient and strong economy, which recorded a 2.58 % growth even during Covid-19 in 2021 when the economy shrunk in many other states and the country.
Our GSDP is growing at an average rate of 19.9 % (in current prices) from 2021, when GSDP was Rs 20.72 lakh crore, to 2025-26 when it is expected to be Rs 35.67 lakh crore. This is a higher rate than in states like Maharashtra or Karnataka.
Moreover, we have a clear roadmap, which was unveiled during the Global Investors Meet last year. We are consulting with the Economic Advisory Committee, which has eminent economists and are incorporating their feedback.
There are of course global developments, like the Ukraine war, that can have an impact on all of us and are beyond our control. Besides that, we believe in our goal and are sticking to our plan.
Our leader Anna (DMK founder and late CM CN Annadurai), when asked about the state's autonomy, said, “It is enchanting, but it is distant”. On the 1 trillion dollar goal, I am modifying his quote to say, “It is enchanting and achievable”.
