4 states, a UT will go to polls in 2021: What do they expect from Budget?

West Bengal, Assam, Tamil Nadu, Kerala and Poducherry will go to the polls in April-May this year

West Bengal

The rallying cry of state Finance Minister Amit Mitra is: Bengal needs more money. In a letter to Finance Minister N Sitharaman, he argued between April and December 2020, the state government received only Rs 27,944 crore as tax devolution, against Rs 37,905 crore due, a 26% shortfall. The lower devolution to the state has caused severe strain on its finances at a critical time when Covid-19-induced lockdown already resulted in shrinking state revenues and increasing expenditure on health care and welfare schemes to provide relief to the poor, he said.

Mitra has also criticised the restructuring of centrally sponsored schemes and reduction of funds to them. He said what the government gave as an increased proportion of devolution of finances, it took away by restructuring centrally sponsored schemes like the National Health Mission and Sarva Shiksha Abhiyan. Bengal’s finances have suffered a grievous blow as a result, he claimed.

Assam

Himanta Biswa Sarma pointed out he is the first finance minister of the state to present five full Budgets. In his speech, while tabling the state Budget for 2020-21 in March 2020, he said the state government had increased expenditure by nearly Rs 30,000 crore from 2015-16, crossing Rs 70,000 crore in 2018-19 (provisional estimates). With this order of expenditure, the state will need more money in an election year to fund several schemes.

The state will also incur unforeseen expenditure. Assam plans to increase its stake in the Numaligarh Refinery from the current 12.3 per cent to 26 per cent. This will cost at least Rs 1,500 crore. Its ‘people-friendly’ schemes in an election year include funding free rice to 5.7 million families (Rs 472 crore), free electricity to households consuming less than 30 units a month, with a Rs 400-crore subsidy to the state-owned power utility to protect consumers from a price hike shock (Rs 935 crore ), and scores of allowances and pension schemes for low-income groups. Higher devolution of funds from the Centre would not go amiss.

Tamil Nadu

Deputy Chief Minister and Finance Minister O Panneerselvam has already warned the Union government against any abrupt fiscal correction in 2021-22, while seeking more taxation powers to state governments. In a pre-Budget interaction with the Union finance minister, Panneerselvam told the Union government it must relax fiscal target. It must allow all state governments to borrow up to 5 per cent of the GDP and must support capital spending and on Covid-19 prevention. Tamil Nadu was also feeling betrayed. “States joined the GST reform on the assurance that the reforms would be revenue-neutral in the long run. They gave up their autonomy on their main source of revenue based on this understanding.”

Tamil Nadu has seen sub-par revenue growth. “The reasons for this tepid revenue growth have to be analysed in detail. State governments will need to have their revenues protected, particularly in these difficult times,” Panneerselvam said. He warned that the state wouldn’t support the Union government if any more cesses or surcharges were levied in the Union Budget. 

Puducherry

Not surprisingly, the chief minister, V Narayanasamy, has blamed the tardy growth of welfare and other schemes on the lieutenant governor (Lt Gov).

The utilisation of budgetary allocation has been low because it is subject to approval by the representative of the Union government in the form of the Lt gov (Puducherry is a Union territory). The Local Administration Department (LAD), for instance, has been able to utilise only 32 per cent of the Rs 50-crore set aside for MLA Local Area Development Fund for each MLA, because it has been awaiting expenditure sanction from the lieutenant governor for allocation of works, the source said.

The Union Budget had set aside Rs 1,703 crore under the Ministry of Home Affairs head as central assistance for 2020-21. Naryanasamy has demanded that this amount be increased and the government also have the autonomy to spend it in the way it thinks fit.

Kerala

Kerala Finance Minister Thomas Isaac presented a state Budget for 2021-22 days ago. The Budget clearly shows the imprimatur of Covid-19 on state finances that the finance minister says are parlous.

The Budget provides for additional expenditure of Rs 1,164 crore and tax concessions of Rs 191 crore, against additional revenue mobilisation of just Rs 200 crore, leaving a cumulative deficit of Rs 1,306.69 crore. This is the last Budget of the current Left Democratic Front (LDF) government, led by Pinarayi Vijayan. The Budget had the clear ring of jobs, welfare and doles.

The impact of Covid-19 can be seen in the revised Budget estimates of 2020-21. There is a fall of 18.77 per cent in revenue income than the Budget estimates. There was only a marginal dip of 9.64 per cent in revenue expenditure, increasing the revenue deficit to 2.94 per cent. The additional expenditure was met by availing of more loans, inflating the fiscal deficit to 4.25 per cent.

Kerala, Isaac says, expects “at least what is due to us, like the GST compensation cess. It should permit states to borrow an additional 1 per cent of GDP”, adding that state governments have had to bear 60 per cent of the expenditure in the fight against Covid-19. Revenue had fallen by a third. He says he expects the Centre to address this issue in the Union Budget 2021-22.