On February 20, after taking over as the Chief Minister of Tamil Nadu for the first time, Edappadi K. Palaniswami's first move was to convince people that he has the welfare of people in mind just like former chief minister late J. Jayalalithaa.
Just ike Jayalalithaa, the first five files cleared by him were all about doles—closure of 500 TASMAC outlets, Amma two-wheeler scheme for working women, doubling the monthly allowance for unemployed youth, hike in maternity assistance given to women and building houses for fishermen.
The election promises made by Jayalalithaa as “essentials” for the people of the state, are now Palaniswami's priorities. She had promised mobiles, set-top-boxes, laptops (with internet) for students, and scooters for working women at half the market price and salaries for state government employees at par with the Seventh Pay Commission recommendations for Central government staff. And on the very first day after taking oath, Palanisami being generous like his leader, would cost the government around Rs. 30,000 crore according to experts.
At a time when the state’s finances are in a mess, these doles will not just be an additional expenditure but will drown the Tamil Nadu deep in debt. With the state's public debt already at over Rs. 200,000 crore in 2016-17, the cost of rolling out freebees and working on a welfare note will put the state exchequer in a quandary.
“The state’s debt would increase by Rs.47,000 crore per year in this fiscal,” revealed a financial analysis report released by DMK MLA P.T.R.P. Thiagarajan. An investment banker turned MLA with an MBA in Finance from MIT Sloan School of Management, Massachusetts, Thiagarajan , in his report titled, “Drowning in debt: And the worst is yet to come” shows how Tamil Nadu’s finance have deteriorated in the last seven years.
Thiyagaarajan said the state failed to achieve budgeted revenue receipts by about 20 per cent each year despite big increase in payments from the union government. “The state’s debt in the current fiscal would increase at a rate of Rs. 6,500 per person,” he pointed out in the report. He, however, noted that the first three years of the 2011-16 AIADMK regime was better at managing funds.
Although Palanisami government’s doles are well-meaning in its intent, like implementing prohibition in a phased manner or giving two-wheelers for women at a subsidised rate, the finances will face a major hit. The closure of 500 TASMAC (government run retail liquor) outlets would lead to a revenue loss of around Rs.300 crore. These outlets are state’s cash cow, earning close to Rs.27,000 crore annually.
The closure of 500 shops, according to sources, will cause a loss of at least one per cent in the total revenue even as the government’s two-wheeler scheme would cost the state exchequer an additional of Rs. 300 crore.
While the politics of freebies have always benefited the DMK and the AIADMK in terms of popularity over the years, the AIADMK government had taken the state’s debt from Rs. 1.05 lakh crore to Rs. 2.18 lakh crore in five years, particularly during the last two years.
While the state’s debt is over Rs.2 lakh core, RBI’s data shows that the state registered the highest gross fiscal deficit among all states in 2015-16 at Rs 31,830 crore. The fiscal deficit for 2016-17 stood at Rs. 40,534 crore, which was 2.96 per cent of GSD.
Though the state has a history of distributing freebies from the time of MGR, the governments in the future may not be able to bank on this populist move.
