Finance Minister of Kerala TM Thomas Isaac on Thursday said that while formulating the state budget for 2019-20, he had to address two disasters — the August 2018 floods that devastated nearly the entire state as well as the violence triggered by the Supreme Court’s September verdict on Sabarimala lifting the ban on the entry women of child-bearing age in the Sabarimala temple.
Critics of the budget that Isaac presented in the state Assembly on 31 January feel that he has given more priority to Sabarimala than mitigating the hardships of thousands of people who have been rendered homeless and deprived of their livelihood by the flood. They have questioned the motive of the minister on the basis of his decision to allocate Rs 739 crore for creating facilities at the hill shrine and another Rs 100 crore to the Travancore Devaswom Board (TDB) that administers the temple.
The decision has come as a surprise to even the TDB, which had sought assistance of only Rs 250 crore to rebuild the pilgrim centre that suffered a loss of Rs 100 crore in the flood. TDB chairman A Padma Kumar pointed out that this was the largest assistance that Sabarimala has received from any government in its history.
Economists are also surprised by the largesse given to Sabarimala at a time when the government is struggling hard to raise resources for rehabilitating the flood victims and rebuilding the lost assets. BA Prakash, former professor and head of the department of economics in Kerala University, views it as a political move influenced by external pressures.
Political analysts believe that the special treatment that finance minister has given to Sabarimala in his budget could be part of the government’s strategy to retrieve the political ground it has lost to right-wing outfits, which accused the government of trying to destroy Sabarimala as per the atheistic agenda of the ruling Communist parties. Isaac has sought to counter the allegation by funding an ambitious project to develop the hill shrine on the Tirupathi model.
The government had tried to contain the damage by rallying women against the conservatives. It had hoped that the progressive stand that it took on Sabarimala will act as a bulwark against the BJP’s attempt to consolidate the Hindu votes by opposing the entry of women in the hill shrine. However, couple of recent opinion poll surveys predicting electoral gains to the Congress-led opposition United Democratic Front and the BJP have upset its calculations. Political analysts, therefore, see the largesse to Sabarimala as a damage control measure.
Opposition leaders say this will backfire since the budget has no concrete proposal to provide relief to the flood-hit people. VD Satheeshan, Congress legislator from Paravur in Ernakulam district, one of the worst flood-hit areas, said that budget had no clear proposal to help people who lost their houses, properties and livelihoods or to the trade and commerce, which suffered huge losses in the devastating floods.
Over 13,000 houses were fully damaged and about 1.1 lakh houses partially damaged in the flood, according to the government estimates. The MLA said that the actual number of fully damaged houses would be more than 20,000 according to the information his gathered. A few months ago the government had put the number of fully damaged houses at 16,000.
“Even five months after the flood, the government has not been able to complete construction of even one house. The people who have lost their houses are living in rented houses or in the houses of their friends and relatives. How long they will continue like this?” asks Satheesan.
He said that the condition of people already rehabilitated was pathetic as most of them have not been able to regain their lost livelihood. “Shops in most affected places are lying closed. There is absolutely no economic activity in such areas. We were expecting a stimulus package in the budget to revive the economy of the affected areas. The budget is totally silent on this,” he added.
On the contrary, the flood cess of one percent imposed by the finance minister on the basic price of goods in the GST tax brackets of 12 percent, 18 percent and 28 percent may push prices and add additional burden to the flood hit people and the businesses struggling hard to survive the crisis. The income loss from the flood is estimated to be about Rs 25,000 crore.
None of the projects proposed by the finance minister under the Rebuild Kerala initiative are expected to bring immediate relief to the flood victims. Most of the 25 projects he has unveiled under the initiative are extensions of older projects that will not even indirectly help the flood victims and require huge funds for implementation while others will take a long time to yield results.
Interestingly, he relies on the Kerala Infrastructure Investment Fund Board (KIIFB), which many consider as an unreliable source of funds, to execute these projects.
Economists consider KIIFB unreliable as it is highly dependent on market, petrol cess, government grants and pravasi chit funds. There is no mention in the budget on the total amount that KIIFB has garnered from market and Pravasi Chitty so far. However, sources said that the government could net only Rs five crore from the Pravasi Chitty while the masala bond proposed for raising resources from the market is yet to take off.
Although KIIFB has cleared projects worth Rs 40,000 crore since its inception in 2016, none of these projects have taken off the ground. With the Rebuild Kerala initiative projects imposing an additional burden of another Rs 11,000 crore on the KIIFB, how it will implement them remains to be seen.
Economists are also doubtful about the fate of the new projects announced by Isaac with budgetary allocation since its implementation hinges on the achievement of the minister’s estimate that GST collections in the next fiscal will rise to 30 percent from the current 10 percent. VK Vijayakumar, an investment strategist, feels this is unrealistic considering the post-flood gloomy economic and business scenario in the state and the dip in flow of foreign remittances from non-resident Keralites due to the worsening economic environment in West Asia.
State finances are already in bad shape with the gap between revenue receipts and expenditure rising continuously. While the tax revenue grew by around 10 percent, the expenditure is estimated to grow by 13.9 percent. The state has been meeting the deficit by borrowing funds from the market. However, the scope for further market borrowing is very limited with the state having already reached the maximum limit and the Centre refusing to increase the borrowing limit.
Economists, therefore, feel Isaac’s 10th budget will remain as a castle in the air unless he shows the political will to cut down the growing revenue expenditure and raise resources from non-tax sources.