As the spillover of Jayalalithaa’s one-year-in-office media-blitzkrieg continued to fill newspaper pages for the third day today, the bleak audit picture painted by the CAG raises serious concerns on the state’s fiscal health as well as administrative pitfalls.
Although seriously bothersome, the same text also gives Jayalalithaa a convenient handle to beat her predecessor Karunanidhi, because almost all that the CAG has said pertains to the previous DMK regime.
The annual CAG report tabled in the assembly shows mounting debt burden, galloping losses of PSUs during the five years, large-scale diversion of PDS supplies, poor implementation of centrally founded groundwater scheme, and dwindling forest cover among others.
The highlight of the report, that the state’s fiscal health is precariously bad, is what Jayalalithaa has been maintaining ever since she assumed office. It has been sort of a caveat for her. She had claimed that the state had a debt of Rs 100,000 crore.
The CAG actually pegs the figure higher: the report says that the fiscal liabilities of the state totalled Rs 111,657 crore by the 2010-11, 10 percent more than what Jaya claimed. During the last four years of the DMK regime, it rose by nearly Rs 50,000 crore.
Despite the rising revenue receipts, the burden of debt and interest liabilities could push the state into bankruptcy.
Experts immediately point attention to the freebie-spree that the DMK and the AIADMK have indulged in, despite the early warning signs, although the reasons are far more fundamental. While many attribute part of the fiscal ill-health to Karunanidhi’s largesse, many others wonder how Jaya will fund her pet schemes and its possible impact on the state’s deficit.
The CAG is quite critical of the revenue expenditure which gives very little room for the state to improve its fiscal health. It says that 71% of the revenue receipts go towards payment of salaries, subsidies and interests. The only operable area here is subsidies, which is electorally sensitive and hence can at best be tweaked by improved targetting and avoiding pilferage.
The CAG’s finding on bogus ration cards is startling. It has reported that the number of people with ration cards exceeds the state’s population!
The state has 8.31 crore ration cards as against a population of 7.21 crore; or 195.83 lakh cards against a total number of households of 167.77 lakhs. The state government says it has weeded out a large number of cards. The government’s Citizen’s Charter says continuous inspection and correction of records will weed out bogus cards and multiple entries.
The bogus cards naturally leads to the diversion of PDS supplies, increasing the state’s subsidy burden.
The combined losses of Rs 33,621 crore by the state’s 67 PSUs, an average of Rs 5000 crore per PSU, is indeed worrying. And it has risen five-fold during the DMK regime indicating either mismanagement or the government’s inability to check the slide.
During the last year, 40 PSUs did well in earning profits (Rs 592 crore) while 29 made a loss of more than Rs 11,000 crores. However, when viewed against public welfare, these are not bad losses: the Tamil Nadu Electricity Board (TNEB) and the transport corporations accounted for bulk of this. They should be considered public services, but the state needs to cut unwanted expenditure and find resources to subsidise them.
It found fault with the TNEB for not raising power capacity commensurate with increasing demand. This again is something that Jaya, faced with one of the worst power crises that the state has faced, has been maintaining.
As regards the PSUs, the auditors said that some of the losses could have been avoided. It also highlighted some infructuous investments.
The CAG has found serious faults with the state’s desalination project, particularly improper planning, implementation and purchase agreements; and has also found the RTOs issuing licenses to 75 persons under 18 years of age.
Tamil Nadu is now among the five states that have a debt of Rs 100,000 crore or more. The worst in the list is West Bengal which has accumulated a debt twice as that of TN. Andhra Pradesh and Gujarat are quite close while Maharashtra is pushing the Rs 200,000 crore mark.
Times are indeed going to be tough for Jaya and the people of the state – this is the first time the state has crossed a debt-burden of 100,000 crore and it is likely to rise by a quarter by the end of the year.
On the one hand, she will be compelled to take tough fiscal decision to stem the tide, but on the other, compulsions of social-welfare will restrict her fiscal space, that too with a crucial parliament elections due in 2014.
Although she will be ill-advised to cut on subsidies and welfare of the poor and the marginalised, even at the cost of rising fiscal deficit, what she should immediately do is to skim off the frivolous expenditure on meaningless populist schemes and streamline systems for effective targetting.
Strengthening revenue receipts is, of course, a standard prescription. Maybe a little bit of Robinhood politics will help.