Kerala would find it impossible to tackle its revenue deficit in the coming years now that the 13th Finance Commission has pegged the state’s share of the divisible pool of taxes to 2.34 per cent, the Finance Minister T. M. Thomas Isaac has said.
He was chairing a pre-budget discussion with academics organised here on Tuesday by the Gulati Institute of Finance and Taxation (GIFT). The 12th Finance Commission had fixed Kerala’s share of the divisible pool at 2.67 per cent. This reduction would result in a loss of Rs. 1,000 crore per year to Kerala.
“The Finance Commission appears to have become an instrument for the Government of India to thrust its economic policies on unwilling states. With such reduction in tax share from the Centre, Kerala would not be able to implement the provisions of the FRBM Act,” Dr. Isaac said. The State is not willing to cut spending on its welfare measures and on core sectors including education so that it can somehow narrow or eliminate its fiscal deficit.
The Finance minister said he is also apprehensive about other possible conditions that the 13th Commission may impose on states. “This move by the Finance Commission could well open up a war front between the States and the Centre,” he added.
The Rs. 10,000 crore additional funding announced in last year’s budget as a stimulus to a recession-hit economy may not be continued this year. Many of the programmes announced last year are being implemented now and it would be the government’s priority to make sure that sufficient funds are made available for these programmes. One area where the government is looking at to raise additional funds is the surplus money that many public sector undertakings in the State - “parastatals”- have with them. Such funds would be ploughed into welfare schemes, he said.
The financial problems that plague the higher education sector in the stem from the fact that budgetary allocation to this sector remained stagnant for the first four years of the previous UDF government’s rule. Only during the last year was higher education allocated more money. The universities should put in place a medium-term plan to absorb additional funding, indicating how much money they would be able to raise on their own. The varsities should also draw up a time-bound plan to balance their income and expenditure.
While drawing up the next budget the government’s focus would be on finding resources for ensuring social security and food security in Kerala. Such efforts would almost wholly be on the non-tax front, he added.
The honorary director of GIFT, A. V. Jose was among those who spoke on the occasion.
