Kerala Finance Minister K N Balagopal is busy fine-tuning the 2022-23 State budget which will be presented in the Legislative Assembly on March 11. He has already hinted that taxes are set to go up. He also sounded optimistic while claiming that the State is in a better position to go forward despite the struggle to come out of the COVID-19 slump. In the following interview, he throws light on what all could be expected in the forthcoming budget.
Q: Even though the Goods and Services Tax (GST) has been implemented, yet tax on fuel, motor vehicle, liquor and building comes within the purview of the state government. Can we expect a hike in taxes on the above items?
A: The fuel prices are already high. The existing tax on liquor is also high. However, time-bound reforms need to be implemented in other areas. Restructuring is required in some areas, including fair price of land. So far we have not decided in which all areas the existing tax structure needs to be changed.
We have received a suggestion that changes should be made in land tax in accordance with the use of land. At the moment the same tax is levied on the use of land for commercial and private purposes. We need to examine how far it is to make changes in this area.
Q: The Centre may not continue the compensation after May even if there is a shortfall in GST targets. Kerala has demanded that this be extended. How will you cover this loss ?
A: The revenue to be included in the budget estimates will factor in the GST compensation also. All States in the GST Council have demanded that the compensation should be continued. The Centre should find a way out if it is not continuing with the compensation. The States, including those ruled by the BJP, are standing firm on this demand. We will receive the compensation till June. After that, if it is stopped, then we will have a shortfall of Rs 9,000 crore for the remaining nine months. The States will not be able to continue with the GST regime if the Centre goes ahead without granting the compensation.
Since all States are raising the demand in one voice, we believe the Centre will continue with the compensation in future as well.
Q: The social security pension is considered to be the best social welfare schemes run by the Kerala government. Over 50 lakh beneficiaries hope that the social security pension will be increased by Rs 100 crore every year. Will there be a hike this time?
A: In place of the hundred rupees that the government used to get as income, now the situation has come to such a pass that it receives only Rs 83. There are a lot of problems at present as far as spending is concerned. Officials have warned that it would be very difficult even to continue the disbursement of pension in its present form. But there is definitely a need to increase the pension. When will it be possible? Well, that can be said only when the financial situation in the state improves.
Q: The government expenditure is increasing. You are not able to bring it down. The revenue generation is decreasing, you are not able to increase it. Is there any end to this crisis which has confronted the State for ages?
A: We often say jokingly that we are able to achieve the budgetary targets only in the matter of expenditure. That is true. One of the major reasons for the drop in income is the non-cooperation of the Centre. Of the 3.85 per cent share that we used to get from the Central taxes, now it is just 1.95 per cent. Considering the State’s population, we are supposed to get more than 3 per cent share. By this calculation, the State should have received Rs 32,000 crore additional tax revenue every year. The decrease in population and improvement in the basic infrastructure facilities are often cited as reasons for cutting the Central tax share.
At the moment we are getting only 1 per cent of the allocation for centrally sponsored schemes. But we are eligible for 3 percent. The Congress is not ready to raise its voice for Kerala on such matters.
Q: With a big crisis confronting the State, can one conclude that the forthcoming budget might not hold out any hopes for the people?
A: COVID-19 pandemic arrived before the State could fully overcome the economic crisis triggered in 2008. The Covid-related issues can still recur. We cannot consider the Russia-Ukraine problem as a small issue. The price of petrol and steel have already started increasing. Even though the income of the Kerala government might increase slightly because of the hike in prices of commodities, the cost in the construction sector is likely to go up. Barring the reduction in Central allocation, we are hopeful that we can move forward without much problem. The economic situation will improve once COVID-19 vanishes. There is a 15 percent increase in tax revenue. If tax collection is strictly enforced, the revenue receipts will go up significantly. There will be no compromise with those resorting to tax evasion.
Q: Will you be able to use the announcements made in the Central budget to Kerala’s advantage ?
A: When the Centre distributes Rs 1 lakh crore loan, Kerala would get Rs 2,000 crores only. At least receiving this amount would be beneficial for the State. Though the Centre has announced a host of schemes, it remains to be seen how many of these will be actually implemented on the ground. The truth is that barring announcements of schemes, many of these rarely take off really.
Q: The KIIFB has already taken up schemes worth Rs 70,000 crore. Will the KIIFB be able to take up more schemes?
A: There is a huge participation of KIIFB – Kerala Infrastructure Investment Fund Board – in the development of basic infrastructure facilities in the State. But this cannot be continued every year. We expect the KIIFB to assist in mega projects. We are able to acquire land for the National Highway development only because of the money granted by the KIIFB. But KIIFB has limitations in granting additional loan. The government is granting Rs 2,500 crore additional funds to KIIFB every year. The KIIFB is repaying the loan using these funds. If you take loans more than the limit prescribed, then even this income would not be sufficient for repaying loans.
Pension hike can be considered only when Kerala’s fiscal situation improves
Q: The dues on account of pay and pension revision are yet to be cleared. How will you be able to meet such liabilities in the midst of the current crisis?
A: We will clear the liabilities once the revenue receipts increase. Kerala is one of the best States which pays handsome salaries to its staff. The pay revision was implemented in the midst of COVID-19 pandemic. There is huge expenditure for the health and education sectors currently. We are not able to reduce the expenditures in both these sectors. However, some arrangements are necessary. With the eOffice system coming into being, you may not require the same number of staff that was needed earlier. We will redeploy personnel accordingly. Even though the demand for raising the pension age is justified, the biggest hurdle is the grave unemployment situation.
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