The 'white paper' - Kerala's Fiscal Health: A Status Report' - recommends disinvestment, privatisation, or closure of public sector units in non-strategic areas. However, the strategy to transform PSUs with social and welfare obligations, such as KSRTC, KSEB, and Kerala Water Authority, into commercially viable organisations has not been clearly spelt out.

Some superficial mission statements and ideas, like consumption-based subsidies, that have been tried at the national level have been discussed in the 'white paper' for PSUs with social obligations.

"Essential public utility services must continue to remain accessible and affordable to poorer sections of society. However, social responsibilities should not be used to mask operational inefficiencies or financial mismanagement," the report says.

The means to achieve this: "Subsidies intended for deserving beneficiaries should be provided directly to consumers rather than through the continued absorption of enterprise losses by the Government. In other words, the system should shift from production-based subsidies to consumption-based subsidies," the document states, and adds: "Such a transition would make subsidy payments more transparent, improve fiscal accountability, and ensure that support reaches the actual beneficiaries."

It is not clear how such a direct benefit transfer could be implemented in social sectors where there is a government monopoly. Power is distributed by KSEB and water by the KWA. Though there is a private segment in mass transport, the ticket rates are fixed for both public and private buses by the government.

Direct benefit transfer works only if there is a choice for the consumer. The document says that direct money transfer will allow eligible consumers to avail subsidies even when they procure services or goods from alternative providers in areas where public utilities are absent or inadequate. Fact is, in Kerala, KSEB, KSRTC, KWA and even Beverages Corporation are monopolies. There is no alternative.

The document states that the government will not burden a PSU for its welfare policies. "If an entity provides goods or services with the characteristics of a public good and is therefore unable to recover costs through user charges, the government must fully subsidise the activity," it says. Therefore, free bus rides for women would not impose any financial burden on KSRTC.

Nonetheless, there is a hint that the power sector would be privatised. "Without adequate availability of affordable electricity, Kerala risks losing investment and employment opportunities in these future-oriented industries," it says and adds: "The government must therefore adopt a long-term energy strategy aimed at ensuring energy security and reducing the cost of power. This requires actively facilitating and

incentivising investment in diverse energy sources, including solar, hydel and nuclear power, while also strengthening transmission and storage infrastructure."

An out-of-the-box recommendation is the strategy to revive the loss-making Civil Supplies Corporation using the profits of Kerala State Beverages Corporation (BEVCO).

The document recommends merging these two enterprises into a single corporation with separate divisions for liquor distribution and civil supplies/provisions. "Such an institutional restructuring would enable the Government to offset the losses of the civil

supplies division against the profits of the beverages division, thereby substantially reducing the tax outgo and, in turn, lowering the subsidy burden on the Government. This would improve

overall fiscal efficiency without affecting the functional objectives of either activity," it says.