After 10 years of governance by AIADMK, its arch-rival DMK was voted to power in assembly elections in Tamil Nadu, the southern Indian state famous for its exquisite temple architecture, seven months back. Most people voted for DMK and its allies mainly due to the promise that corruption would be rooted out and some new freebies would be given out.

Unfortunately, in the last seven months, the focus has been on politics rather than economics, with no perceptible reduction in corruption. The promised freebies are not being honoured due to the financial crisis. Obviously, promises were made without considering the financial state.

Today, Tamil Nadu is passing through a severe financial crisis, with the total outstanding liabilities of the government expected to increase to about Rs. 6.59 lakh crores in 2020-21. The state development loans (SDL) account for Rs. 4.65 lakh crores. The remaining components of the liabilities include obligations from UDAY bonds and loans from financial institutions and others. Reserve Bank of India data show the Tamil Nadu government raised as loan Rs. 6,2425 crores in 2020-21  and Rs. 39,000 crores in 2021-22 (till September 2021) through market borrowings. 

Grim fiscal situation 

The grim fact is that in the last three to four years, borrowings have been made even for paying salaries, pension and interest payments. Tamil Nadu is expected to spend 20.5 percent of its revenue receipts on interest payments in 2021-22. That would leave little money for development projects. More than 60 percent of the Tamil Nadu government’s revenue are reported to be spent for paying salaries and wages to government employees.

It is difficult to visualize a financial crisis in Tamil Nadu more severe than this.

What the state government has to do is to increase its tax collection, which is not happening due to corruption and inefficiency. Further, it is necessary to get rid of loss-incurring public sector/government-owned undertakings such as TANGEDCO (Tamil Nadu Generation and Distribution Corp Ltd) and State Transport Corp since these have been incurring heavy losses for years. Further, unproductive assets of the government must be sold to reduce the debt. The DMK government has done nothing on this count.

Don’t waste money 

The financial crisis in some state undertakings is becoming more serious due to the government’s populist actions. Despite heavy losses incurred by the state transport corporation, travel has been made free for women in buses. This means the income of the transport corporation has been cut to nearly half of the previous level. 

There is an urgent need to reduce unproductive expenditures such as setting up a public park in Coimbatore, a big library in Madurai, memorial buildings for political leaders and construction of a Tamil Nadu House in Delhi. These can be postponed until the financial conditions improve.

After coming to power, the DMK government has announced various committees to suggest economic reforms and promote industrial growth although the problems are well known. A matter of concern is that there appears to be more politics than economics in Tamil Nadu governance.

Playing with temples 

The DMK government has been focusing on “reforming” Hindu temples under government control. It has appointed priests without observing the traditional practices and rules. Further, the government claims it is recovering the encroached land of Hindu temples. At the same time, it is using the land belonging to Hindu temples to set up colleges when there are no trustees for the temples. The court has stayed the order to use temple land for other purposes.

The DMK government has also taken steps to collect gold, silver and diamonds in possession of temples and melt the gold and silver to augment the state’s financial resources. This step has been challenged in the court, which has passed orders against the melting until it gives a final decision.  

There are other instances of politics in administration such as the insistence that only Tamil prayer songs should be sung in educational institutions, government functions, and public sector undertakings. While the focus should be on economic and industrial development, the discussions in Tamil Nadu political forums now take place only on counter-productive political issues.

(The writer is a Trustee, NGO Nandini Voice for the Deprived, Chennai. The views expressed are personal. He can be contacted at nsvenkatchennai@gmail.com)