Amid financial constraints and ahead of the Lok Sabha elections, Tamil Nadu Finance Minister Thangam Thennarasu presented the State Budget for 2024-25. He says the Budget catered to aspirations of every segment, sector and region of Tamil Nadu and also spoke about the ambitious targets. Excerpts from an interview with The Hindu.
This was your first budget — what are the thoughts that went into this Budget while planning?
During the discussions on the Budget Estimates of 1967-68, the then Finance Minister Perarignar Anna had remarked “The lives of 3.5 crore people are determined by the 64 pages in this Budget. We have poured our heart and soul into the Budget. It contains the aspirations and dreams of the people who elected us”.
These profound remarks of Arignar Anna have been the guiding principles for me in this Budget.
With the constant support and guidance of the Hon’ble Chief Minister, I have strived to fulfill the dreams and aspirations of millions of Tamil people, while continuing to tread on the path of fiscal prudence.
Given this is an election year, was the focus on fiscal consolidation or populist measures? Was it a conscious decision not to make any big announcements? Most of the announcements have been extension of existing schemes?
No. This is not actually correct. We have introduced the ‘Kalaignar Kanavu Illam’ to provide safe and permanent concrete houses to eight lakh poor families in rural areas, at a unit cost of ₹3.5 lakh. In its first phase, we have planned to take up one lakh houses, with a financial implication of ₹3,500 crore. This is the largest rural housing programme undertaken by any State in the country, without the support of the Union government.
In this Budget Session, the Chief Minister has also announced the much-needed Housing Repair Scheme, where we will provide ₹2 lakh per household to repair of dilapidated houses constructed with government assistance prior to 2001. This widely-appreciated initiative will be implemented at a cost of ₹2,000 crores.
For the first time in the country, we have introduced a scheme, ‘Tamil Pudhalvan’, for providing financial assistance to boys. Under this scheme, approximately three lakh boys, who are currently pursuing higher education and have studied in government schools from Class 6th to 12th, will be provided ₹1,000 per month for their daily needs.
The list is long and I can go on for some time.
I am proud to inform you that this Budget has catered to the aspirations of every segment, sector and region of our State. This Budget underscores the commitment of this government to deliver on the promises made to the people. At the same time, we have not deviated from the path of fiscal consolidation, in spite of the numerous challenges thrown at us by the Union government. In terms of both the fiscal deficit and the outstanding debt-to-GSDP ratio, we are performing better than the previous year.
The floods have impacted the State’s Own Tax Revenue in 2023-24. You have forecast a 14.71% growth in 2024-25. Given that floods have been a common occurrence and the existence of a global slowdown, don’t you think the estimates are on a higher side?
Considering there has been a revision in taxes on motor vehicles, liquor and registration during the current year (2023-24), and several technological efforts are being undertaken to plug leakages, I believe the growth rate is very reasonable.
How much of revision in taxes got reflected in the revised State’s Own Tax Revenue estimates for 2023-24?
The increase in excise duty on liquor has taken effect in February 2024. So, we only have one month to realise the revenue collection on the new rates in the current year. Taking into account this revision, a growth of 12.38% has been estimated for 2024-25. The revision in motor vehicle taxes was been effected in November 2023. This has resulted in an increase in collections, owing to which there has been an upward revision in the Revised Estimates to ₹9,229 crore from the Budget Estimates of ₹8,782 crore.
You have cited the unprecedented loss funding to Tangedco and funding the metro rail project out of own resources as reasons for increase in revenue deficit to ₹44,907 crore in the revised estimates for 2023-24. In 2024-25 the revenue deficit is estimated to be ₹49,278.73 crore and expected to reduce to ₹18,098 crore in 2025-26? Given the constraints, don’t you think the 2025-26 target is ambitious?
The 2025-26 figure can be found in the Medium-Term Fiscal Plan, which is a statutory document mandated under the Act to lay down the plan and forecast for the coming years. The Total Revenue Receipts are estimated to grow at 14.33% in 2025-26, which is a fair assumption as I have explained earlier.
The committed liabilities including salaries, pension and interest payments have been projected to increase at 9.5%, which is in line with the growth of 9.6% in the last five years. The major decrease can be seen in the expenditure on Subsidies and Transfers because of the reduction in Loss Funding to Tangedco. The condition of gross loss funding to Tangedco is tied to the additional borrowing space of 0.5% provided to State governments. This borrowing window will end in 2024-25 and it will be unfair on the part of the Union government to force us to provide the loss funding even after that. We have also addressed the Union government to exclude loss funding from the calculation of Fiscal Deficit, on lines of the UDAY Scheme.
As I have mentioned several times during my speech and the reply, the government is providing an unprecedented amount of loss funding to Tangedco in the current year. Excluding the loss funding to Tangedco, the Revenue Deficit in the Revised Estimates for 2023-24 will be ₹27,790 crore. This would be a reduction of ₹8,227 crore as compared to the Budget Estimates 23-24, despite the onslaught of two disasters. In the Budget Estimates 2024-25, the Subsidies and Transfers (excluding loss funding to Tangedco) are estimated at ₹1.32 lakh crore. In the year 2025-26, this figure has been estimated at ₹1.40 lakh crore. Given these figures, I am sure you may find the figure of ₹18,098 crore for Revenue Deficit as ambitious but not unachievable.
You also hold the electricity portfolio. One of the reasons for the State’s high debt level is Tangedco. You have kicked off reforms by unbundling and creating a green company. What are the other measures you are looking at?
Apart from unbundling and creation of a new green company, there are a number of reforms that are lined up. We are making a concerted effort to contain our expenditure. At present, 80% of the expenditure comes from power generation and procurement. We plan to commission three new power plants within the next two years so as to reduce our dependence on power purchase from the market. We are also working to improve the efficiency in operations through reduction in the use of imported coal and oil in power plants. We are using technology including Artificial Intelligence and Machine Learning to forecast electricity demand and optimise our power purchase. We are in the process of installing smart meters to plug revenue leakages. We are working towards reduction of AT&C losses by conversion of high loss-making feeders into HVDS (High Voltage Distribution System). We also plan to explore the possibility of debt restructuring so as to swap our high-cost loans with cheaper debt, thereby substantially decreasing our interest payments.
Your expectations from the 16th Finance Commission? The Union Finance Minister Nirmala Sitharaman has claimed the Centre is not discriminating against any southern State in sharing Taxes, following the recommendations of the 15th Finance Commission. She said the State can make its case to the 16th Finance Commission, if it feels aggrieved.
We have made our stance clear on several fora. There has been a systematic attempt to deprive Tamil Nadu from its due share in Central Taxes.
In the most recent release of devolution by the Union government, you will notice that the sum total of the devolution received by all the five southern States combined is ₹22,455 crore. In comparison to this, the devolution to the State of Uttar Pradesh alone is ₹25,495 crore. These figures are for all to see and assess for themselves.
The 16th Finance Commission has been constituted recently under the able leadership of Arvind Panagariya. We are hopeful that the historical injustice meted out to progressive States such as Tamil Nadu will be addressed, and Tamil Nadu will get its legitimate share commensurate to its contribution to the nation. We will present our case, supported by evidence and facts, to the Commission.
How long can you sustain with a revenue deficit situation, given that resources are required for the key welfare schemes and also expenditure required for salary and pension?
The revenue deficit includes the expenditure on salaries, pensions and welfare schemes. The government has, is, and shall continue to fulfil its bounden duty to provide the necessary allocation to fund its committed liabilities.
The capital expenditure for 2023-24 has been revised downwards due to impact of floods and again a higher growth has been projected for 2024-25. But there has been a trend of capital expenditure being revised downwards, whenever there is a higher revenue deficit situation?
I don’t think I can answer for previous years.
In the current year, there has been a reduction in capital expenditure owing to an adverse impact caused by the two calamities. Further, there has been a conscious effort to ensure just-in-time release of funds so that idle cash is not lying in the bank accounts of implementing agencies. This has resulted in a decrease in the amount of capital expenditure being booked in the year.
In the Budget Estimates 2024-25, we have projected a growth of 12.11 % in capital expenditure. We are committed to increasing the capital expenditure in the State as is evident in the large-scale sanctions on metro projects, combined water supply schemes, roads and bridges, and infrastructure for education and health.
The Hut-Free Tamil Nadu scheme by 2030 seems to be an ambitious project. Even though housing board schemes already exist, people don’t move in there and instead let it out for rent. Is there a plan to enforce this? Also, how many people lives in huts across all the districts in Tamil Nadu?
You know that the Tamil Nadu Housing Board and Tamil Nadu Urban Habitat Development Board serve the urban poor. But, ‘Kanavu Illam’ scheme is meant for the rural poor. And the concerned department has conducted a detailed survey across the State to assess the hut dwellers. I can assure you that this also will be a data-driven project.
It has been stated that the government will take proactive steps to ensure that education loans to the tune of ₹2,500 crore are sanctioned and disbursed by various banks to one lakh college students in the coming year. The banks have their own formula for disbursing loans – in this scenario, how is the State government planning to achieve this target?
First of all, I would like to mention that education loans form a part of the priority sector lending targets of the banks, which they are mandated to achieve. We have been constantly reviewing the performance of banks in this regard.
In our experience, the credit disbursement for educational purposes has both demand-side and supply-side constraints. On one hand, the students do not have the adequate information and the means to apply for loans; on the other hand, the banks are not able to give the loans due to lack of proper documents and a lack of adequate incentive mechanism.
In order to address these issues, the government has decided to form a new District Credit and Livelihood Management Agency, under the chairmanship of District Collector, which will act as the nodal agency responsible for coordinating activities between applicants, banks and other developmental agencies. Further, to provide the necessary fillip to banks, the government will link their performance in educational credit to the empanelment for government business. We hope to achieve this target in the coming year.
