Former Finance Minister T.M. Thomas Isaac has picked holes in his successor K.M. Mani's claim that the State is in the throes of a financial crisis and cautioned the government that if it did not change its taxation policies, it might become difficult to achieve the State's fiscal responsibility targets.
Speaking on his dissenting note to the subject committee report on the Kerala Fiscal Responsibility (Amendment) Bill, 2011, enacted by the Assembly on Friday, Dr. Isaac said that written answers given by Mr. Mani during the earlier part of the current session would show that there was no fiscal crisis in the State as was sought to be made out in his ‘White Paper'.
The cash balance in the treasury as on April 1 was around Rs.3,800 crore. The ‘White Paper' had claimed that once the revised salaries and pensions were paid, the State would land in a fiscal crisis. However, on September 26, Mr. Mani had said in a written answer that the total commitment for salaries and pensions during the current year would come to only Rs.1,964 crore. Even if the arrears were calculated at double this amount, there would be a sufficient cushion to absorb it.
The actual cash balance after all the expenditure during Onam, according to the Minister, was Rs.1,631 crore and the State had taken only loans totalling Rs.1,500 crore against the permissible Rs.8,138 crore. What was more, the Minister had said in reply to another question on the same day that there was no financial crisis in the State. “This is nothing short of magic. This is clearly a case of the fiscal crisis having evaporated in three months,” Dr. Isaac said.
He, however, warned the Finance Minister that unless the State's tax revenue grew by at least 20 per cent, it might become difficult to achieve the fiscal responsibility targets. He drew Mr. Mani's particular attention to the steady fall in revenue at check points from 21 per cent at the beginning of the current fiscal to 16 per cent by September.
He came down heavily on the provision in the Kerala Finance Bill, adopted by the House amidst noise on Thursday, to exempt sales by police canteens from sales tax. The State, he said, would suffer a revenue loss of at least Rs.500 crore on account of this.
