Kerala’s 1991 moment: An open letter to the FM

Honourable Finance Minister,
Now that the White Paper tabled by you in the Assembly has been discussed in some depth in the public domain, attention naturally shifts to the central question: how will your government mobilise the resources needed to fulfil the five guarantees promised in your election manifesto while also advancing Kerala’s broader growth agenda?

Expectations are understandably high. During the campaign and after the unprecedented mandate, vismayam (wonder) has become a synonym for you. At present, you enjoy the political advantage of a honeymoon period when even the Opposition is benign. As a seasoned media friend covering the Assembly said, the Chief Minister sounds like the Leader of the Opposition, while the Opposition Leader’s voice is still chief ministerial. But this will not last long. You know it better.

Your first budget will be highly consequential, marking a make-or-break moment in Kerala’s political economy. “Taken at the flood”, it can lead Kerala to good fortune.

You are widely regarded as pragmatic, grounded and progressive. Yet the challenge is formidable. Economic reform, growth acceleration, well-monitored expenditure, efficiency in tax and non-tax collection and targeted welfare commitment must form the pillars of your first budget.

Allow me to place ten suggestions for your examination.

First, treat this as Kerala’s 1991 moment. The spirit that informed Dr Manmohan Singh’s historic July 24, 1991 Budget should permeate your maiden budget . We missed the spirit of 1991 as articulated in his remarkable budget speech as we deluded ourselves with a “know-it-all” attitude and a hyped up “Kerala Model”. Anyone suggesting improvement would be shown certificates issued by Amartya Sen or Jean Dreze. We continue with pancha valsara padhathi (Plan) and the Planning Board, very much past its expiry date. So, let’s get out of this rut.

Second, announce a roadmap for divestment in profit-making State public sector enterprises while initially retaining government ownership above 51 per cent. Companies such as KMML, KSFE, KFC, KSIDC and Malabar Cements could be considered. Depending on timing and valuation, even entities such as Bevco and a corporatised lottery business can unlock substantial value. The Kochi airport company can become the darling of the market. All this will generate significant non-tax revenues for our development and welfare.

Third, launch a large-scale asset monetisation programme. Excess land held by PSUs, including KSRTC, KWA and KSEB, can be developed through public-private partnerships for housing and commercial projects. The private partner’s role can be limited to project execution through competitive bidding. Even mortgaged properties can be monetised, with lenders being repaid from the proceeds. KSRTC alone is believed to possess valuable land parcels at prime locales capable of generating hundreds of crores. If we want, we can even restrict buyers in these housing projects to government or public sector staff. This will be a means of onboarding sirkari staff to this idea. Banks will give home loans. This idea will work.

Fourth, encourage local bodies to access market-based financing. Municipal corporations and municipalities raising municipal bonds for infrastructure projects could be provided incentives. Panchayats with stable revenues may be encouraged to utilise overdraft facilities from banks to smooth cash-flow mismatches and undertake capital expenditure when required. Together, municipal bonds and panchayat financing could potentially mobilise around ₹ 1,000 crore. Money is fungible. I need not make it more clear.

Fifth, extend a similar approach to Hospital Development Societies. Banks can provide working-capital-style facilities against escrowed cash flows and government grants. This will ensure timely procurement of medicines and essential equipment while reducing operational disruptions. I speak from experience here. In 2002, when the RCC ran short of money for buying even essential drugs for patients , Dr Rajan the then director raised this with SBT. On cash-flow based credit analysis, a OD limit of ₹ 2.5 cr was extended. It proved to be useful . Aggregate limits of around ₹ 500 crore appear feasible for this idea.

Sixth, consider around a 5 per cent cess on liquor, excluding, if you want, products manufactured by State undertakings (like Jawan XXX rum and lower-end brands) . With annual liquor sales approaching ₹20,000 crore, this levy can generate meaningful additional revenue. This will be win-win. Even if consumption falls, you can view it as a social gain.

Seventh, leverage Kerala’s strong IT infrastructure by launching Infrastructure Investment Trusts (InvITs) backed by assets such as Technopark, Infopark and Cyberpark. InvITs have emerged as an important avenue for infrastructure financing across India. Even a modest mobilisation target of ₹500-750 crore would make a useful beginning.

The next three suggestions relate to reforms that can unleash growth. Discussions on debt and deficits often focus excessively on the numerator. The denominator matters too. Expanding the economy is often the most sustainable path to improving fiscal ratios.

So the eighth idea is to revisit the Land Ceiling Act. If you feel it cannot be repealed, a higher ceiling, introduced on a trial basis for one year, can facilitate land aggregation for industrial and commercial projects. The impact can then be reviewed and course corrections can be made.

Ninth, implement the long-discussed proposal permitting fruit-bearing trees and other complementary agricultural activities in plantation areas. This reform can diversify income streams and provide significant support to plantation owners, both large and small. A growth positive for the agri and allied sectors.

Tenth, position Kerala aggressively to attract Global Capability Centres (GCCs). For every GCC (lowest employment will be 300) the State can offer customised talent pipelines through engineering colleges, ITIs and universities. Courses can be designed jointly with the GCC, utilising existing educational capacity without affecting other courses. Students would acquire recognised diplomas or degrees tailored to meet GCC needs. This can be replicated with all major manufacturing and service sectors where the minimum resource requirement is even a low of 30.

These are just a few. There could be many more. Of the next five years, this is arguably the best moment to undertake bold reforms without being constrained by old shibboleths. You said you felt good that as Leader of the Opposition, you avoided calls for bandhs or shutdowns. Many ordinary citizens hope that you will govern in the same practical spirit in which you conducted politics. As an avid bibliophile, you would be familiar with this theme — If not you, who? If not now, when?

Wishing you success in the interest of Kerala and its people.