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This article was first published 2 years ago  » Business » TN's Technocrat Finance Minister Faces First Test

TN's Technocrat Finance Minister Faces First Test

August 12, 2021 15:57 IST
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P T R Palanivel Thiagarajan has proclaimed his determination to set Tamil Nadu's fiscal house in order in five years, and Friday will reveal how he plans to go about it when he rises to present the Stalin government's maiden budget, says N Sathiya Moorthy.

IMAGE: Tamil Nadu Finance Minister Palanivel Thiagarajan releases a white paper on the state's finances in Chennai, August 9, 2021. Photograph: ANI Photo

Consolidating traditional underdog and pan-Tamil voters the way the party did to capture power in the 1960s seems to be the new mantra for the ruling Dravida Munnetra Kazhagam in Tamil Nadu.

It may be old wine in new bottle for discerning critics of the party and Chief Minister M K Stalin. Or, it is the belated acknowledgement of the incomplete nature of the political clan's economic and fiscal initiatives aimed at ensuring that their famed 'social justice' platform prevailed -- and continued to triumph.

Translated, it means 'focused' tax plans and subsidies, aimed at making the affordable to pay, for the government to support the demands and aspirations of those needing and deserving fiscal stimulus to take them out of the quagmire that they continue to find themselves.

Will it mean that the subsidies too would be scaled down to cover only the basic requirements of life and living, or would they continue to be scaled up to meet what all have become the 'legitimate aspirations' of upwardly mobile lower segments of the larger society?

There are no answers just now, but only broad hints about options and possibilities. But technocrat Finance Minister P T R Palanivel Thiagarajan has proclaimed his determination to set the state's fiscal house in order in these five years, before the next assembly elections that are due by 2026.

The current mess, he acknowledges frankly and attributes it to fiscal profligacy and 'missing numbers' during the last seven years -- but mostly of the rival All India Anna DMK rule in the state.

To the extent that he gives credit to the late AIADMK chief minister Jayalalithaa for following certain prudence in fiscal borrowings and management as much as he credits his mentor, the late DMK supremo M Karunanidhi, during the party's last innings in power (2006-2011), he sounds serious and sincere.

'Political will, administrative skill' is thus Thiagarajan's one-liner for ensuring fiscal stability first, and economic growth, next.

There is good news and bad news for the state's population, from what Thiagarajan spread out for them in the white paper on the state earlier in the week -- to be followed by his maiden budget on Friday.

It is also the maiden budget of what seems to be the 'new DMK' under Stalin, tuned to the 21st century realities.

For the DMK, it is the first budget after a 10-year gap, when it had to sit out the state assembly's two terms, 2011-2021, in the Opposition. The white paper, the party promised even while in the Opposition, and also followed it up in the poll manifesto this year.

Politically, the white paper targets the AIADMK duo that preceded Stalin's ascension in the April elections, yes. But structurally, it seeks to address the inherent cobwebs that have pulled down the state's fiscal position and economic growth considerably.

Thiagarajan says much of the mess happened under the watch of Jaya's AIADMK successor, Edappadi K Palaniswami (EPS), since 2017, and his deputy, O Panneerselvam (OPS), who had remained finance minister from 2011.

That way, the good news is that Tamil Nadu is actually a wealthy state compared to similarly sized others, in terms of economy, assets and opportunities, which include skilled labour -- which he, like others, attributes to the Dravidian 'social justice' initiatives over the past hundred years. He and his party only needed time to fix it, and put the economy back on the rails, for a fast movement, forward.

What is the bad news, then?

Thiagarajan points out how electricity and vehicle tax, for instance, have remained static for years now compared to other states -- and how the benefits thereof have an universal application, as against focused/targeted beneficiary scheme.

'Why and how can I get a 100-unit free-power every month? It is because the rules say so. Even if I offer to pay for it, officials can only enter it only 'excess payment to be adjusted against future bill'.'

Implied is the minister's ongoing efforts at 'target-driven' taxation and subsidies policies, what is academic parlance is known as 'rationalisation' of both.

As an example, the minister indicated that the owner of a Rs 1 crore luxury car would be paying a proportionately higher road tax to the state government.

Implied also is the possibility that the owner of a 100-cc two-wheeler will be paying less, even when compared to those who own high-end motor-bikes that cost in multiple lakhs.

The same yardstick may apply even to property tax, being charged by civic bodies.

Minister Thiagarajan points out how in the absence of elected councils empowered to re-fix property tax and other levies, civic bodies in the state had lost Rs 2,000 crores (Rs 20 billion) in performance-linked central funding.

The AIADMK government, which had delayed civic polls by generating court cases and citing them as the reason, finally commenced the process. It is now for the DMK successor to complete the process. Thiagarajan explains how and why the polls could not be delayed any further.

In the same vein, Thiagarajan is also critical of the EPS-OPS dispensation, especially for the 'missing monies', and also for the state living beyond its means.

He quickly clarifies that he did not say all the monies had been pumped out of the system, and points out how in the absence of adequate infrastructure, these monies could not be tracked down and traced.

However, he also cites CAG reports, which the previous government shrewdly avoided presenting to the state assembly, to argue that there was high-end corruption at all levels.

Thiagarajan has spread out the impression that his job is cut out, and his long years in international banking and finances would help set the TN house in order. He implicitly and impliedly indicates that his boss the chief minister is with him on fiscal reforms, accountability and transparency that he intends introducing and taking forward.

Indications are that Thiagarajan was working as much on Stalin through their years in the Opposition as the latter too was seeking out inputs, advice and suggestion for making Tamil Nadu not only a modernised state in terms of physical and social infrastructure but also a 'modern state' as far as IT-aided transparency, evaluation and accountability processes went.

It is thus that despite the Covid pandemic being at its worst when the new government took over, both Stalin and Thiagarajan slipped smoothly into the jobs they both seemed to have concluded long earlier was for the latter.

Yet, the aim was and will continue to remain as clearing the cobwebs that owed to decades of tradition, which heightened political and bureaucratic corruption in the past five years, as never before even in 'Dravidian' administrative history.

Yet, the taste of the pudding is in the eating. There was this confidence in the DMK leadership even post-poll that they would not only win this year's election but also the one that would follow. As Thiagarajan pointed out in his white paper news conference, the DMK's poll manifesto aims at the current five years, but the party's 'Vision Statement', released at the pre-poll state conference at Tiruchi, covers a 10-year period.

Translated, the Stalin leadership has this pre-conceived notion that its governance will ensure an elected second term for them. That includes economic and fiscal reforms, where Thiagarajan stridently declared that in the past five years, the government was borrowing even to service previous loans.

The minister's message was/is clear. The current state of affairs cannot continue for too long, and that this problem can be fixed, through the 'rationalisation' processes he has begun rolling out.

Throughout the news conference, however, he was clear not to step on others toes by insisting that revised taxes and tariffs were in the domain of his ministerial colleagues -- and they would put it out when the assembly debated departmental allocations, rather than he listing them all out in the budget proper.

Incidentally, this is the first time the state will have a separate agriculture budget -- yet another poll-promise of the DMK. That would be presented a day after the main budget, and all eyes are glued to know how it could make a difference.

It is especially so when the Centre under Prime Minister Narendra Modi, merged the voluminous Railway Budget with the main Budget -- without noticeable administrative benefits or actual improvements.

Minister Thiagarajan's is still an expression of intent, both of self and his chief minister. Neither Stalin, nor any of his senior colleagues, either in the government or the party, have said or done anything to change or challenge the view.

Yet, as the finance minister himself hinted, his budget may reveal only the tip of the iceberg, which he intends uncovering when he presents his first full-budget in the next fiscal.

There is thus no denying the candidness and straightforwardness in Thiagarajan's pronouncements thus far. It's next only to the approach of finance ministers Manmohan Singh, and to a lesser extent P Chidambaram, in the early years of economic reforms. However, they related to the Union of India, not any state.

If there are issues with the finance minister's oral presentation and press conference based on an assemblage of facts and figures, and also the analyses based on them, it stopped with his mastery over spoken Tamil. Having spent 20 years of his professional life overseas, the scion of one of the famed 'Dravidian' families speaks the mother tongue haltingly.

Visibly, Thiagarajan is still thinking in English and speaking in Tamil, often groping for a technical word in the language, which too has evolved into a pure, puritanical format when he was away. Yet, the way he went about it, he was clearly a basic classroom lecture on macro-economics, comprehensible even to mean/modest intelligence.

The real, snowballing problem may not be before the FM, at least as yet. It is also not fiscal in nature. Sooner than later, CM Stalin will be forced to decide on the continuance of the all-important energy and excise minister, V Senthil Balaji, who is facing corruption/money-laundering charges, dating back to his days in the Jayalalithaa ministry for a period since 2021.

With the state anti-corruption agency commencing anti-graft investigations against the EPS-OPS team, by raiding their ministerial colleague, S P Velumani, for starters, the Opposition AIADMK is sure to create a ruckus through the budget session by constantly referring to the case against Senthil Balaji, being investigated by central agencies. They would not give up until the CM asks Senthil Balaji to step aside -- at least for the time being.

If it happened, that too during his government's maiden budget session, Stalin would be massively embarrassed. What more, he would have to hurriedly find replacement(s) for Senthil Balaji during the current session itself, or take on the additional responsibilities himself, pending the conclusion of the budget session.

N Sathiya Moorthy, veteran journalist, political analyst and author, is Distinguished Fellow and Head-Chennai Initiative, Observer Research Foundation.

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