Previous UDF government had failed to control avoidable non-plan expenditure

Kerala is facing an alarming financial crisis and the government is striving hard to meet its daily expenditure, a White Paper on State finances issued by the government, has said.

According to the White Paper tabled in the Assembly on Thursday, the closing balance of the State on March 31 was pegged at Rs.1,643.99 crore, but payments to the tune of Rs.1,800 crore were blocked at the treasury. This resulted in the State maintaining a negative cash balance of Rs.173.46 crore.

The State has to discharge immediate liabilities amounting to Rs.6,302 crore and major unbudgeted short-term liabilities of Rs.4,326 crore. Given the negative cash balance, it is a challenge to take on the total liabilities amounting to Rs.10,628 crore.

The White Paper says this points to the fact that the previous government has bequeathed a list of unsupported promises which had to be borne by the new government. Other than salaries, pensions and interest, the other revenue expenditure burden has been consistently growing during the past five years. The expenditure on this score which stood at Rs.12,139.29 crore in 2011, mounted to Rs.29,665.63 crore in five years. In comparison it remained bridled during the five years between 2006 and 2011.

‘Avoidable expenditure’

The crisis was aggravated by the government’s failure to control avoidable non-plan revenue expenditure. There were no curbs on the avoidable expenditure, particularly during the last three years. The paper says that the budgets were grossly unrealistic during the past three years as there were not adequate resources to finance the schemes announced.

Additional resource mobilisation (ARM) measures were mooted for bridging the gap between budgeted figures and the projects announced, but tax and non-tax efforts were not stepped up to match the announcements, the paper said.

Political document

Responding to the White Paper, former Finance Minister K.M. Mani said it was a political document, intended to show the development and social measures taken by the previous UDF government in a bad light. Responding to the White Paper point by point on Thursday, Mr. Mani said Dr. Isaac’s contention that tax collection had come down did not hold water because the government had to dole out concessions for various categories in view of the global recession. “The UDF government had put up its best possible performance within the constraints it faced at that time,” Mr. Mani said.

He said the UDF government had to face various problems which were unique to that period. It had to implement two pay revisions, leading to a huge outflow, not to mention the tax concessions for various categories. It had to dole out huge amounts to meet its social security commitments, which came as a cushion for the ordinary people.

Despite this, the UDF government was able to take up several landmark projects for implementation. Mr. Mani said tax collections were much better than during Dr. Isaac’s first term as Finance Minister. Some of Dr. Isaac’s revenue mobilisation themes such as monetising sand and silt from dams were non-starters, he pointed out.