The most serious indictment of the last LDF government in the ‘white paper’ on Kerala’s Fiscal Health is what Chief Minister V D Satheesan called a “shocking” cunningness hidden in the plan outlay of the LDF government’s swan song budget on January 29. In retaliation, former finance minister K N Balagopal gave an equally compelling reason why the last government had to do what Satheesan made out to be a fraud.
The Chief Minister began his accusation in the Assembly with a ‘statutory warning’-like preface: “I am going to give you a very shocking information.” “This Budget has a plan of ₹35,000 crore. When we came to power and looked at the figures, we realised that ₹20,000 crore of the ₹35,000 crore was missing,” the CM said and then gave a slight pause for the ruling party members to let out a sigh of shock.
“All of you, all MLAs, should know. We are facing a grave issue that no other government ever had to,” he said. The cunningness the CM attributed to former finance minister K N Balagopal is this: He made “wild guesses” about the 16th Finance Commission’s allocations for Kerala.
“The 15th Finance Commission had provided Revenue Deficit grants. ₹55,000 crore was given over five years. It was a big gain for the last LDF government,” the CM said.
“Balagopal estimated that the revenue deficit grant for the first year of the 16th Finance Commission period would be ₹14,137 crore. The 16th Finance Commission, instead, stopped revenue deficit grants once and for all,” Satheesan said. “Will anyone prepare the Plan hoping that revenue deficit grants would be received? What sort of a speculation is that,” he asked.
That was not all. The CM said Balagopal speculated that the 16th FC would increase Kerala’s share in the union divisible pool of taxes from 1.92 per cent to 2.8 per cent. “It was a divination, a wild guess. Of course, the share was increased but only up to 2.38 per cent,” he said. “This way we lost ₹5000 crore, too. And there was a further loss of ₹600-odd crore from other expected grants,” he added.
With impressive rhetorical flourish, the CM asked: “Has any government in the history of Kerala ever faced such a situation? ₹20,500 crore missing from the plan estimate of ₹35,000 crore!”
At this point, former finance K N Balagopal, against whom the ridicule was directed, raised his hands to make a point. The CM refused to yield. “Let me complete. I will give you an opportunity,” he said, and continued, “Now, we don’t have ₹20,500 crore. What will we do now? This is the biggest challenge that we are facing while preparing our first budget.”
Balagopal had to call a press conference to make his point.
He quoted the charge made against him by the CM. “What did he say? Through a wild guess, the then finance minister presented a budget by ballooning the income,” Balagopal said, his words dripping with indignation.
“What was the wrong that we committed? We had submitted a memorandum before the Finance Commission detailing what Kerala justly deserved. Earlier, Kerala had received 3.82 per cent as its share of the central taxes. This shrunk to 2.55 per cent, and then to 1.92 per cent. Our proposal, which was drawn up after taking advice from experts, including K M Chandrasekhar, who is behind this ‘white paper’, sought 3 per cent from the Commission. We asked for revenue deficit grants also,” Balagopal said.
Ultimately, Kerala ended up getting 2.38 per cent, a bit more from the existing 1.92 per cent. “Even then, it would mean an additional relief of ₹10,000 crore for the state, and over five years it will be over ₹50,000 crore,” Balagopal said.
“It is also true that we had also expected ₹14,000 crore as revenue deficit grants. Now the CM says that we have lost ₹20,000 crore in total,” he said.
The former finance minister said that his January 29 budget was drawn up before the 16th Finance Commission report was tabled along with the Union Budget presentation on February 1.
“Now if we had estimated a lower amount as revenue deficit grant and a lower percentage of say 2.4 or 2.2 per cent as share in central taxes, won’t it have given the Centre the chance to argue that even Kerala expects only this much? We estimated what Kerala deserved. It is a fiscal decision, and it is a political decision because we have been fighting in the Supreme Court for our rightful share,” Balagopal said.
He also wondered how the CM could speak as if the LDF had committed a fraud on Kerala. “Revenue deficit grants were provided by all finance commissions that were constituted in the country till the 16th one. It is the first time that a finance commission has done away with the revenue deficit grants. Should we have consulted an astrologer to know beforehand that these grants would be stopped,” he said.
Nonetheless, Balagopal noted that the Centre had still not said that revenue deficit grants would not be given. The Centre has not given a formal opinion on the revenue deficit grants part of the 16th FC’s recommendations. “It is perhaps an indication that it could be given. If not revenue deficit grants, the states would get an assistance of at least ₹4-5 lakh crore annually,” Balagopal said.
Moreover, Balagopal said that his Budget already had enough cushion to absorb a shortfall of Rs 20,500 crore, if at all it happened.
