White paper war: UDF gives Thomas Isaac a taste of his own medicine

The UDF has finally had its revenge. Nearly four years after finance minister T M Thomas Isaac tabled a white paper on the Kerala's finances, the UDF too has come out with a white paper that hurls back at Isaac virtually all the charges he had thrown at the former UDF government.

On June 30, 2016, Isaac had pointed out three sure-fire signs of fiscal deterioration: negative cash balance in the treasury, alarming neglect of deficit goals, and the desecration of the budget document. The UDF white paper, authored under the leadership of Congress leader V D Satheesan, makes the very same arguments to ridicule Isaac's handling of the economy.

Treasury woes

Here is what Isaac said about the state of the treasury under the UDF. "Nothing conveys the state of finances, and the quality of fiscal management, more vividly than the fact that the treasury did not have money even for day-to-day expenses". This is what the UDF white paper says: "The treasury controls that once was in place only at the time of disbursing salaries is now extended to the whole month. Between April and September this year, the number of bills that were not given 'ways and means' clearance was 1050 and the money locked up in them was Rs 1133.46 crore."

Deficit worries

Isaac had complained in 2016 that the UDF had abandoned the dream of achieving fiscal targets. "Had the UDF government sustained the downward deficit trend during the LDF years between 2006 to 2011, revenue deficit could have been brought down to nearly zero per cent by 2015-16 as proposed by the 14th Finance Commission," he said.

Instead of the zero Isaac was so sure to achieve, the UDF white paper said the revenue deficit was a whopping 2.47 per cent at the end of the 2017-18 fiscal.

Budget sanctity

Over three years ago Isaac had argued that the UDF government had violated the sanctity of the budget document. "For the past three years, budgets placed before the state legislature have not had much of reality with either the resources to finance them or with the actual expenditure incurred at the end of the year," his white paper said.

The UDF white paper has returned the compliment. "The Comptroller and Auditor General has observed that the LDF government had tampered with statistics to mask the fiscal crisis. According to the latest report of the CAG, the LDF government had wrongly shown a reduction of Rs 8892 crore in revenue deficit and Rs 9378 crore in fiscal deficit."

Continuing splurge

Isaac had in his white paper said the financial mess created by the UDF was the result of the failure of both expenditure control and resource mobilisation. The UDF white paper, too, says so.

Isaac's white paper had said the one reliable indicator of expenditure efficiency is the ability of the government to rein in avoidable expenditure or expenditure that can be postponed. Isaac said, the UDF government had fared miserably on this count. He said the non-plan revenue expenditure (NPRE) minus committed historical liabilities like salaries, interest and pension (SIP) had shown an "unsettling" growth during the last five years.

This component (NPRE minus SIP) includes additional unproductive expenses incurred by the state like the sanctioning of new schools and colleges, renovation of ministerial bungalows and even the money spent for former chief minister Oommen Chandy’s mass contact programme.

The UDF white paper, too, has a similar grouse. "One of the main causes for the crisis is the unnecessary expenditure and extravagance of the LDF government," the UDF white paper says. "The government is not able to rein in expenditure even though they have realised that the situation is bad," it adds.

The profligacy was evident right from the swearing in of ministers in 2016 and the appointment of seven advisors for the chief minister to the recent decision to hire helicopters on monthly rent. Nearly Rs 35 crore was spent on celebrating the government's swearing in and anniversaries alone. The other examples of overspending shown in the UDF white paper are: Loka Kerala Sabha Hall inside the Assembly complex (Rs 16.65 crore), e-Assembly (Rs 52 crore), EMS Library after dismantling a children's library (Rs 82.56 lakh), vehicles purchased after the floods (Rs 3.5 crore), Renaissance wall (Rs 50 lakh).

Inefficiency and corruption

Isaac had then offered two main reasons for the state of affairs: one, inefficiency of tax administration, and two, corruption and nepotism in the tax administrative apparatus. The UDF white paper, too, has the same complaint.

"After the GST came into force check posts became a free-for-all. Goods in the high tax brackets were brought into Kerala from other states and sold illegally. This badly affected the tax revenue of the state. No directions were given to the intelligence squad of of the GST department to check such vehicles that come in without valid documents. The department had no database on the GST registered dealers or their GST numbers," the UDF white paper said.

Remedial steps were taken only in August 2018. Mobile squads were formed in Ernakulam, Kozhikode, Thrissur, Kollam and Thiruvananthapuram districts. "But it was stuffed with officials from pro-LDF unions. Officials belonging to such unions were hand-picked and despatched to the border areas. Honest and hard working officials were kept out, leaving the department to the mercy of a caucus controlled by the ruling party," the UDF white paper said.

Poor resource mobilisation

Isaac's white paper had spoken of a fall in tax revenues post 2013. The UDF white paper says Isaac had claimed he would achieve a 30 per cent growth in tax revenue but has ended up with just 14 per cent. "Even this would not have been achieved had it not been for the GST compensation offered by the Centre," the UDF white paper said.

It said that Rs 800 crore could have been easily fetched had the GST department bothered to send notices to traders who had filed only GSTR 1 return without filing the GSTR 3B return. "They are not even attempting to plug tax leakage by comparing the input tax credit reflected in GSTR 2A return with GSTR 3," the UDF white paper said.

The white paper also said the LDF government failed to improve tax revenue despite favourable factors. The state had received an additional Rs 771.96 crore when the Centre repeatedly increased the price of petroleum products, it said. The state received crores as revenue by way of licence fee and excise duties when it opened 565 new bars, it said. The government had also imposed a flood cess to mobilise Rs 1200 crore in two years.