THIRUVANANTHAPURAM: Finance minister Dr T.M. Thomas Isaac’s Rs 12,000-crore Anti-Recession Package seems to suffer from the very same shortcoming he had levelled against various schemes announced by his predecessor K.M. Mani: it looks like it is not backed by sufficient resources. In fact, if the Rs 8,000 crore required for land acquisition in the next year alone is considered, the total package would be Rs 20,000 crore.
With revenue deficit burgeoning, the finance minister had no choice, but to come up with innovative steps to step up development expenditure using off-budget means. But his guarantee to raise the money, which he eventually wants to swell to Rs 1 lakh crore, is the motor vehicles tax (MVT). The problem with MVT is two-fold: it is too meagre a sum, nothing more than Rs 3,500 crore, but more problematic is the fact that it has been falling over the years.
What's more, Dr Isaac has not promised the entire MVT as guarantee; only a part. In the first year, it will be 10 per cent of the MVT or Rs 350 crore. Dr Isaac’s idea is to gradually raise the guarantee amount to 50 per cent of the MVT by five years. Meaning, by the fifth year, when he is aiming for something like '1 lakh crore, the guarantee amount will be at the most Rs 2,000 crore. That MVT as an attractive bait for investors is insufficient is evident. As a consequence, as repayments swell, the state government will be forced to dig into other revenue streams of the state.
New taxes, even tolls, will be imposed to recoup the money. Another danger: this repayment will soon become another committed expenditure, a component that Dr Isaac has vowed to fight. However, it is felt that the mechanism can work if Dr Isaac is less ambitious. It is widely accepted that the maximum the state can mobilise in the remaining eight months of the fiscal is just Rs 2,000 crore. In that case, the state needs to start repaying only from the next fiscal, and for which the MVT and the petrol cess would be adequate.
