Black or white: Pinarayi releases ‘rebel white paper’ to counter Satheesan’s document

Opposition leader Pinarayi Vijayan on Tuesday released a 64-page 'rebel white paper' to take on the 'Status Report' on Kerala's fiscal health unveiled by Chief Minister V D Satheesan on June 4. "The 'white paper' presented by the Chief Minister is stuffed with baseless remarks," Pinarayi said while releasing the LDF counter document titled 'White Paper of Facts: UDF Allegations, Kerala Reality'.

Pinarayi said that the 'white paper' claims on Kerala's liabilities, debt, tax administration and the functioning of KIIFB were mere propaganda. "The 'white paper' prepared the ground for the UDF government to throw open Kerala's mineral sector to private companies," Pinarayi said.

Illegal fund transfer to KIIFB
UDF White Paper: This cardinal principle, laid down in Article 266 of the Constitution, that all revenues and loans of the government should go to the Consolidated Fund, has been breached by earmarking revenue streams, principally 50% of the Motor Vehicle Tax and the entire Petroleum Cess, directly to Kerala Infrastructure Investment Fund Board (KIIFB) year after year.

LDF White paper: There is not a drop of truth in this observation. The motor vehicle tax and petroleum cess are included in the Appropriation Bill, and with the approval of the Assembly, they are made part of the annual Budget and credited to the Consolidated Fund. And it is from there that the funds are transferred to KIIFB.

Dispute over KIIFB debt
UDF WP: The audit of the Comptroller and Auditor General concluded that KIIFB's debt is serviced not from its own revenues but from budgetary allocations. Since KIIFB lacks a sufficient independent revenue base, its debt is effectively state debt. Consequently, the Annual Borrowing Ceiling of the State must be reduced by the amount borrowed by KIIFB and similar institutions.

LDF WP: The CAG finding is not yet final. For this to be final, it has to be endorsed by the Public Accounts Committee of the Kerala Assembly. The Assembly had, in fact, rejected the CAG finding in a resolution passed on January 22, 2021. The opinions passed on the basis of a report that has been rejected by the Assembly do not have legal or administrative validity.

Further, the Kerala government had moved the Supreme Court against the office memorandum issued on March 22, 2022, by the Union Finance Ministry asking that KIIFB's loans be considered as Kerala's debt. And the Supreme Court has transferred the case to a larger constitutional bench.

Tax growth: UDF vs LDF
UDF WP: Kerala's own tax revenue has fallen after 2015-16.

LDF WP: The rate of growth of the state's own tax revenue (SOTR) in 2010-11, when the LDF government left power, was 23 per cent. In the 2006-11 period, the average SOTR growth was over 18 per cent. The UDF government that came to power in 2011 could not sustain this growth after 2013-14. A 23 per cent growth dropped precipitously to 10 per cent. It was below 10 per cent when the first Pinarayi Ministry came to power in 2016. The UDF's 'Status Report' was prepared by masking these facts and refusing to analyse the reasons for such a dramatic fall in SOTR.

KIIFB and municipal bonds
UDF WP: There is a need for a detailed study by a competent agency to expand our tax collection, particularly GST. As municipal and local body bonds are not part of official-budget borrowing, we have to examine whether we can expand the capacity of local bodies to borrow from the market for spending on infrastructure through the issue of bonds and create a mechanism to help them. Perhaps the IFG (internal finance group) in KIIFB could be deployed for this purpose, either within KIIFB or in a separate format, as the government may decide.

LDF WP: Speaking about improving GST collection and municipal bonds in the same breath is both odd and illogical. Both are two different things. Irony is, the very same report that criticised KIIFB for taking loans outside the Budget is saying that KIIFB could be used to secure loans outside the budget.

Size of arrears
UDF WP: The new government inherits a specific set of accumulated payment arrears - obligations already incurred and legally due, but not yet discharged - ₹21,670 crore under Dearness Allowance arrears, and ₹14,387 crore under Dearness Relief. Payments due to banks and contractors on bill discounting add up to ₹3,431 crore. Supplyco dues accumulate to ₹2,893 crore. Together with a few other deferred payments, the total is not less than ₹48,733 crore.

LDF WP: This is a deliberate distortion. Have a close look at the two big items: ₹21,670 crore under Dearness Allowance arrears, and ₹14,387 crore under Dearness Relief owed to serving employees,

teachers, and pensioners. These two, which constitute 74 per cent of the total arrears, are not pulled out of some hidden files by the new UDF government. These arrears were created only because the previous LDF government had issued an order sanctioning the revision of DA and DR.

We declared such a benefit, and we were committed to implementing it. If we were brought back to power, we would have honoured the promise.

The bill discounting amount of ₹3,431 crore should not even be considered as arrears. Bill Discounting System is a disciplined, streamlined system to pay the bills of contractors and banks. The bills submitted during the last stages of a fiscal will enter the discounting cycle and will be honoured in the normal course. As for the Supplyco dues of ₹2,893 crore, the 'white paper' has conveniently ignored that the central share for paddy procurement forms 90 per cent of the unpaid amount.