Thiruvananthapuram: Fiscal consolidation will be the specialty of Pinarayi government's third budget vis-a-vis the previous ones, state finance minister Thomas Isaac told Onmanorama in an exclusive pre-budget chat.
"This budget will be special in the sense that though the revenue is not increasing the government will bring down fiscal deficit," Isaac explained at the Vizhinjam Guest house overlooking the sea where he customarily prepares the budget.
The state budget would be presented in the assembly on February 2.
"The budget will ensure that we will adhere to fiscal discipline. The government adopted such an approach because we are borrowing outside the confines of the budget to carry out construction activities," said the state finance minister.
In the backdrop of the Adani-backed Rs 7,500-crore Vizhinjam Port where construction is on, Isaac told Onmanorama about the constraints of his government and what it expects from the Union budget.
"The state government has sanctioned construction activities worth Rs 50,000 crore and when such an expense is met by borrowing we have to stick to certain budgetary discipline," he said.
"The government was targeting an increase in revenue and hoped that as a result the fiscal deficit will come down. This did not happen. We cannot wait to increase revenue to clamp down on deficit," he said.
When there is a financial crisis in Kerala and India, the benefits to the people should not be cut down but increased. So practical guidelines to implement various programs, including social security schemes, would be included in the budget.
The budget will also address how the government would be able to attract more funds to new investment avenues and boost growth.
On fiscal crisis
The fiscal crisis is not increasing day by day. Actually, there are no treasury bills pending. All bills are being cleared immediately. For the past two to three months the situation wasn't this. That was because the Union government put curbs on borrowing. The treasury crisis has been resolved.
On mounting pension and salary bill
We cannot cut posts due to the burgeoning pension and salary bills. It is not politically practical. Salary and pension bill rose 25 per cent in the past year. The issue is not the increase. The government wants to have a seamless functioning of all departments. There is no harm giving more salaries. Look at the teachers. They are paid well. What is needed is to ensure that employees function effectively and doctors and nurses provide excellent services. People are disgruntled with the quality of various services provided by government departments. That is the issue. We cannot check increase in salaries. But we need to check the proportion of the rise in salary and pension bills. In the next year also, due to the arrears to be paid as part of the pay revision the increase would be 25 per cent. But this cannot go on forever.
Pension age
There is no move to increase pension age. Only when the economic condition improves and more jobs are created can such a scenario be visualized in Kerala. There are some positive signs emerging. The unemployment rate is actually declining in Kerala though it is still high compared to the national average. But it has declined for the first time in this century. But there is no move to increase pension age.
On KIIFB and lack of investments
Only a year has passed by since KIIFB was announced. Even a project with loans from NABARD would take two years to materialize. The Kerala Infrastructure Investment Fund Board is a new vehicle being set up. There are many new processes to be put in place, including deploying software. KIIFB cannot function in a way that we are all accustomed to in envisaging projects. For projects to materialize, it would need cost benefit analysis, social impact study and environmental appraisal etc. Only then will KIIFB accept projects. There will be resistance. The government did not envisage projects worth Rs 50,000 crore to be rolled out via KIIFB at one go. But this will be implemented during the tenure of this government. This is a well thought out strategy.
On Okchi package
The government has carried out immediate relief measures so far. Now we need long-term measures to protect livelihood of our coastal population. There won't be any large-scale assistance from the center. But we will need to avail money from Cyclone Mitigation Fund. We are preparing projects for that. It is not that we are going to wait for those projects to materialize. We will need large-scale investments for various schemes to be implemented in coastal areas. The budget will have announcements regarding these.
On central budgetary allocation
To be frank we do not have any expectations from the Union budget. No Union government has insulted the states like the present one. Earlier, discussions were held with states before norms were tweaked. Now, there are no such discussions. We got only one third of assistance promised in the budget. The Union government has stopped important social security programs envisaged with central allocation. Most of the central schemes that were rolled out during the UPA government have been called off.
We launched a potable water scheme with an assured Rs 2,000 crore from the Center. Now this is not happening. Funds are not being sanctioned for harbour projects that are backed by center, including the Arathingal project. We don't have much hope from the Center in this budget.
On how GST will impact
GST is a temporary issue. If you ask whether the state will get more money due to GST, I think yes. The system hasn't started functioning even seven months after a nationwide reform has been rolled out. Even now the forms to file returns are being revised. Only about 12 per cent of the industrialists have filed returns last month from Kerala due to lack of clarity on various procedures. This situation can't go on for ever. In 4-5 months, when proper procedures are in place, Kerala's revenue from GST will increase significantly.
The most affected people due to the fallout of GST are small and medium traders and the lay man. Construction sector is the worst hit.
There won't be any drastic changes, but there will be announcements to aid the small and medium size enterprises (SMEs).
On KSRTC's financial crisis
In two, three months, the issue will be settled. Not only pension, but even salaries cannot be paid without government assistance. The final stages of a package to rescue the state-run firm is being drafted. In three months, we hope to put an end to this difficult situation.
On proposed NRI bonds
The software has been readied for this but we have delayed the launch. This is because we hope to roll out Rs 10,000 crore in the first year itself. So we need to ensure total cyber security before launching this. We need to remove the glitches and conduct a security audit. The launch would be held by March-April this year. But we want to ensure that there are fool-proof processes in place.
The government targets to raise Rs 20,000 crore in the second year. We have shown our proposal which envisages investors making more implicit gains than money parked in the banks. There is also an automatic insurance with it.
The scheme is also envisaged as a pension product and hence it is an attractive one. There is also an element of nostalgia for non-resident Keralites.
In a survey conducted by us, 60 per cent of the respondents were open to the idea of investing.
As is his wont, Isaac assures that there will be an icing of poetry in the budget speech, mainly to drive home some key policy approaches, which he says are otherwise a drab affair for most people.
