TN finance minister vows reforms as debt hits Rs 5.7 trn this fiscal

This is an over 4-fold rise from Rs 1.32 trillion in 2013-14, and nearly 10-fold over Rs 60,170 cr in 2006-07

Tamil Nadu finance minister Palanivel Thiagarajan said on Monday that the state will kick off its reform drive starting from the upcoming Budget. Coming out with a White Paper on the state’s finances, he indicated that the state's overall debt has increased three-fold in the last ten years.

The state's estimated debt outstanding for the current financial year was Rs 5.7 trillion, up from Rs 1.32 trillion in 2012-13 and a mere Rs 60,170 crore in 2006-07. "We will do the reforms step by step. In the upcoming Budget, we will take some initial steps and major changes can be expected in the Budget next February, if our moves are successful," Thiagarajan said.

During the financial year 2020-21, the total outstanding debt of the state was around 25 per cent of the Gross State Domestic Product (GSDP), which was the limit prescribed by the 14th Finance Commission. The visible debt for per citizen in Tamil Nadu comes to around Rs 70,000, while invisible and PSU debts added will increase this figure to Rs 1,10,000 per person, the report said.

The minister blamed the poor financial mismanagement and lack of proper governance, especially in the last seven years. The White Paper indicated that overall guarantees provided by the government increased by 94 per cent in a span of one year from Rs 47,319 crore in 2019-20 to Rs 91,818 crore in 2020-21, owing to the adverse financial situation in the power and transport sector. Out of this, Rs 82,917 crore is for the power sector only.

The total revenue receipts of the state  that peaked at 13.35 per cent of the GSDP in 2008-09 has declined to 8.70 per cent in 2020-21, the report said. As a proportion of the GSDP, state own tax revenue (SOTR) also dipped from 8.48 per cent in 2006-07 to 5.46 per cent in 2020-21. The decline of 3 per cent of GSDP represents over Rs 60,000 crore of revenue forgone at current GSDP levels. Development expenditure in Tamil Nadu, which was 62.9 per cent in 2011-12, roughly equal to the average of 63.1 per cent for all states, has declined to 57.5 per cent in 2018-19, substantially below the average of 62.69 per cent for all the states. Interestingly, subsidies too have increased considerably to 27.06 per cent of the total revenue expenditure and 3.21 per cent of the GSDP in 2020-21, the report added.

"If you look at SOTR, it was 70 per cent of the total revenues in 2013-14, which declined to 62.82 per cent in 2020-21. Borrowing for the right reason is not a problem, but when you borrow with no increase in revenue, it causes serious trouble," he added. The report also highlighted the financial trouble that the state public sector undertakings are facing, which shows that the accumulated debt of the power and transport sector PSUs alone comes to around Rs 1.99 trillion as on March 2021.