KERALA BUDGET '24

Will poll-struck Balagopal shower mercy on rubber farmers, pensioners and middle class?

As Union Finance Minister Nirmala Sitharaman had not passed the Bishop Pamplany test, it is a near certainty that the Kerala FM, K N Balagopal, will not scale up the support price of rubber to at least 200 per kg, forget Rs 250 as promised in the LDF's manifesto or Rs 300 as demanded by the rubber farmers and the UDF. At the moment it is Rs 170 per kg, under the Rubber Production Incentive Scheme.

Thalassery Bishop Mar Joseph Pamplany had in March 2023 threatened to reset the political equations in Kerala when he hinted that the Syro-Malabar Church would support the BJP if the procurement price of rubber was revised to Rs 300. Sitharaman did not find the Bishop's offer hard to refuse and did not even attempt to address the Kerala rubber sector's nightmare of unrestricted imports of natural rubber.

Even otherwise, the Kerala government is not in a position to offer any sops to rubber farmers. Even a day before the Union Budget, the LDF government had given a fairly straightforward hint that it would not increase the support price of rubber.

"We can do it only if the Centre helps," Kerala Agriculture Minister P Prasad told the Assembly on January 31. He also made it clear that the LDF manifesto had promised Rs 250 only on the condition that the Centre would bear a certain portion of the subsidy. "They have not responded to this," Prasad said.

So on Monday, when Balagopal presents his fourth budget, the most rubber farmers can expect is a Rs 225-crore assistance for rubber replantation, at Rs 75,000 a hectare, under a World Bank scheme. 

Prompt delivery, not hike
A hike in social welfare pension is the other big announcement that Balagopal would probably swallow rather than voice in the Assembly hall. 

Now, it is Rs 1600 a month for 62 lakh beneficiaries. The LDF manifesto has promised to push it up to Rs 2,500 by the end of its present term. Considering that even the existing amount is not being paid promptly, Balagopal might resist the election-eve temptation to announce even a marginal hike. Welfare pensions for five months (September, October, November, December and January 2024) have still not been paid.

Perhaps, Balagopal would declare that the pensions would be paid every month without fail like in 2020, during the COVID-19 pandemic period. Another generous gesture would be the partial release of the Dearness Allowance (DA) dues of government employees, held up for nearly three years. However, it would be too much to expect an increase in DA.  

Two-rupee cess might live on
The Kerala FM, during his pre-budget interaction with the media, did not seem in the mood to withdraw the two-rupee fuel cess or the social security cess on IMFL bottles, introduced in his last budget. He made the political point that the Centre has imposed a cess of Rs 22 per litre of petrol; meaning, Kerala's two-rupee cess is negligible in comparison. 

However, Balagopal is unlikely to tax tipplers any further. The latest CAG figures (December 2023) show that excise duties are not rising as anticipated and might end up falling behind last fiscal's collection.  

Future of KIIFB
A bigger macroeconomic challenge would be the future of KIIFB. The Centre will not go back on its decision to include KIIFB's loans in Kerala's borrowing limit. Therefore, sooner or later, KIIFB's borrowings will have to be included in Kerala's fiscal deficit calculations. 

Balagopal is unlikely to do it this time. He will let the status quo prevail, and keep KIIFB accounts out of Budget estimates, because as former finance minister T M Thomas Isaac told Onmanrama recently: "We are not thinking of a Plan B now. We hope the 2024 elections will throw up a positive result." 
If this optimism is punctured, Kerala's unique infrastructure investment model will have to be reimagined.