The Kalaignar Magalir Urimai Thogai (women’s basic income) scheme, to be rolled out from September 15, is a massive data-driven scheme and one of its kind in the country, Tamil Nadu Finance Minister Thangam Thennarasu said. In an interview with The Hindu, he spoke about issues related to GST, and managing revenue deficit and borrowings. Excerpts:
It’s been over 100 days since you became the Finance Minister of Tamil Nadu. How has the journey been? What are the learnings and challenges?
Hundred days as Finance Minister has been both a learning as well as challenge. Finance is always a portfolio of challenges as this department plays a pivotal role in shaping the policies in the government, and I thank the Chief Minister for giving me this opportunity.
After you took charge, have you interacted with the Chief Minister’s Economic Advisory Council? If yes, what were the key points of discussion?
Yes, our government is particular about getting counsel from the experts of the Economic Advisory Council (EAC) at every step, from conceptualisation to the execution of our flagship schemes. For example, Illam Thedi Kalvi, Makkalai Thedi Maruthuvam, property tax, and energy sector reforms, to name a few. After I took over as Finance Minister, I got an opportunity to interact with the members of the EAC in August. During the interaction we discussed the modalities and implementation of Kalaignar Magalir Urimai Thogai scheme. The members were appreciative of the efforts of the government in launching such a massive data-driven scheme, which is one of its kind in the country. Their inputs, particularly on ensuring continuous feedback loop [from the public] and effective grievance redressal, were useful. They advised us to be sensitive when it comes to single women who are eligible for the scheme. And ensure that it goes to the people who are in need.
The Kalaignar Magalir Urimai Thogai scheme will be rolled out this week. A huge sum has been allocated for it in the run-up to the Lok Sabha elections. How confident are you about bringing down the revenue deficit further?
Our government believes in the Dravidian model of governance, which is founded on the principles of development and social justice for all. The Kalaignar Magalir Urimai Thogai (KNMUT) scheme will make a significant impact on the lives of every eligible woman household.
Coming to the question of revenue deficit, the revenue deficit in 2022-2023 has been ₹36,215 crore as per the provisional accounts, as against the estimated ₹30,476 crore. This year, taking into account the expenditure for KNMUT, the revenue deficit was estimated at ₹37,540 crore in Budget estimates. While the revenue realisation is moderate in comparison to the budgetary estimates, owing to the broad-based reforms that we have undertaken, both on the receipts and expenditure front, we hope to manage the revenue deficit.
In terms of release of pending dues from the Centre, has there been any improvement? Are issues relating to GST settled?
The GST compensation regime came to an end on June 30, 2022. In the current year, we have received a provisional amount from the government to the tune of ₹3,500 crore. The final settlement will be made after the submission of audited accounts of fiscal year 2022-2023. As the audit of the year takes pace only at the fag end of the subsequent financial year, I personally requested the Union Finance Minister for facilitating a separate audit for the receipts of the first quarter so as to enable the State to claim the compensation amount at the earliest. However, I would say the GST compensation is still far from settled. Despite our repeated requests, the Union government has not agreed to extending the GST compensation beyond June 30, 2022. The States had come onboard and agreed to forego their fiscal autonomy with the understanding that it will be a revenue neutral tax and their revenues will be protected. Tamil Nadu is now seeing a revenue shortfall of almost ₹20,000 crore because of this.
What have been the key focus areas for you in interactions with the State Level Bankers Committee?
This year, we have focused more on the credit economy of the State, which, if you see in terms of size, is more than thrice the annual Budget of the State. We have set an ambitious but achievable priority sector lending target of ₹7 lakh crore for the banks in the financial year 2023-2024, with a 32% increase over the last year. We have been conducting regular meetings with all the stakeholders at both the district and State-level to ensure that affordable loans for weaker sections, loans for education and towards MSMEs (micro, small and medium enterprises) are disbursed in a timely manner.
Tamil Nadu has remained a top borrower among States in recent years. Another concern is that most borrowing going towards funding revenue expenditure than capital expenditure. How do you plan to change this?
I would like to clarify on this aspect. State’s borrowing should not be seen as a standalone indicator for the evaluation of fiscal performance. In this aspect, instead, the Debt/GSDP ratio reflects the State’s true performance. Tamil Nadu’s debt to GSDP is estimated at 25.63% in 2023-2024, which is well within the limits indicated by the Finance Commission. Further, borrowing is not necessarily bad. What matters is the debt sustainability of a State. The State should be able to service the debt that it has taken and therefore, focus on the growth of the economy and the tax to GSDP ratio are essential. Consequently, the State has been focusing on increasing its revenues and improving its quality of expenditure as is evident in the push to allocation of capital expenditure by providing a growth of 12.23% in 2023-2024 compared to last year.
In the first quarter of 2024, the State’s own tax revenue collection has seen only a marginal increase from last year. State GST has grown well, while other components have been flattish. Any particular reasons, and how does the revenue buoyancy look for the entire year?
The State’s own tax revenues, which were around 8% of the Gross State Domestic Product (GSDP) during 2006-2011, have seen a fall to around 5.58% in 2020-21. While it has been increasing since this government has taken over, we have taken significant steps to increase it further. In the first quarter, the revenues have seen a marginal increase in some components. But we have been taking concerted efforts to ensure revenue augmentation, including monthly review by me and a quarterly review by the Chief Minister. We have focused on rationalisation of rates, formulation of amnesty schemes, improvement in collection efficiency and technological measures such as end-to-end computerisation among others in this short time. As a result of our efforts, we have witnessed a substantial increase in the months of July and August.
We have been trying to plug leakages across sectors, including collection of GST, sale of liquor, registration of documents, mining, among others.
During an interview with The Hindu, when you took charge as Finance Minister, you said: ‘Public-private partnership projects will be given priority. As announced in the Budget session of the Assembly, we are drafting a public-private partnership policy that would guide government agencies and encourage investors to take part in these projects.’ What has been the update on this?
Public Private Partnerships are critical for infrastructure development. Wide deliberation has been done with all the stakeholders and will be released shortly.
You are also in charge of the Electricity portfolio. With the power demand in the State increasing, what coping measures have been put in place?
With the upcoming monsoon season as well, I have instructed the officials to ensure uninterrupted power supply and also have sufficient coal stock in place. I have also told them to ensure the readiness of ports and ships to handle the coal.
