Finance Committee report lauds Tamil Nadu on revenue account shortfall and praises contribution of PSUs


Chennai: The 15th Report of the Finance Committee submitted to Parliament two days ago said that the financial situation of the government of Tamil Nadu has deteriorated over the years and it is time for the government to pull its socks off.

In its report, the commission pointed out that since 2012, the government’s revenue account started facing a deficit and the budget deficit also exceeded the allowed 3% of the GSDP in a few years. Similarly, the total debt also approximates 25% of the GSDP, as permitted by the state FRBM law.

The government implemented its Responsible Fiscal Management (FRBM) law in 2003 and has adhered to its FRBM limit in recent years. It must continue down the path of credible debt and careful spending calibration to generate future revenue streams, the Tamil Nadu commission report said.

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“Tamil Nadu’s debt to GSDP ratio increased from 17.2% in 2012-2013 to 22.6% in 2018-2019. Along with the increase in total debt, which has crossed Rs 4 lakh crore, the cost of servicing (interest) is also increasing. It is high time for the state government to tighten its belt,” said a former finance secretary in the Tamil Nadu government.

On attracting foreign direct investment to the state, the commission said that FDI is necessary for the expansion of airports. “Airports, roads and ports can be expanded to provide necessary logistical support to industries. The state should establish cable landing stations (like those in Vizag and Mumbai) to increase bandwidth for high data speed and create a digital ecosystem for industrial growth. To these ends, Tamil Nadu should strive to attract more FDI. Currently, 7% of total FDI in India is directed to TN,” the commission report states.

In the electricity sector, the commission wants the state government to introduce smart meters to domestic and other consumers. “The state needs to improve its performance in UDAY barometers, smart meters (200-500 kWH), smart meters (above 500 kWH) and distribution transformer meters (urban). Tamil Nadu needs to be aware of its electricity purchase costs which have increased by more than 5% over the past two years,” the commission report states.

The report commends the contribution of state-owned public sector enterprises. “Tamil Nadu has 68 working PSUs, of which 29 had overdue accounts. State PSUs recorded revenue of Rs 1.10 lakh crore according to their latest finalized accounts. This revenue was equal to 8.54% of GSDP, indicating the important role played by state PSUs in the economy,” the report said.

According to the latest finalized accounts, PSUs accrued losses of Rs 78,854.25 crore and overall state budget support to PSUs fell from Rs 13,918 crore in 2012-13 to Rs 46,127 crore in 2016-17 .
“Given the unpaid liabilities and substantial budget support to SPSUs, the state needs to monitor them closely to avoid contingent liabilities imposing additional fiscal burden on the state. A time-limited program of SPSU restructuring should be adopted soon to remove the main obstacles to their performance,” the report states.

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