The Covid-19 nationwide lockdown has hugely affected state finances, jacked-up social expenditure for quarantine measures, amidst a massive drop in key revenue streams such as retail tax on automotive fuel.
The one source of revenue that can yield additional receipts in this hour of need is user charges, to collect which most states have been reluctant. Reckless subsidies and giveaways in sectors like power have simply crowded out spending on both physical and social infrastructure.
Notice that the runaway outstanding dues of state power distribution companies, or discoms, have had to be taken over by state governments under the Ujwal Discom Assurance Yojana, UDAY. And rising interest payments following the debt transfer would pre-empt a large share of the concerned state’s revenue. It is fiscally retrograde.
The political class must drive home the message that reasonable user charges need to be levied for the common good. The subventions must be transparently targeted and budgeted. Open-ended subsides make no sense.
The Tamil Nadu government, notably, has called for Rs 1lakh crore Covid-19 package for all states. It is also a reported fact that the losses of discoms in Tamil Nadu added up to a whopping Rs 1.05 lakh crore as of October last year. Kerala, meanwhile, has announced a sizeable Covid-19 initiative.
But it has reportedly not paid power major NTPC for months. There are very many other examples. Delhi has dished out subsidies on power, water and transport even as the state’s revenue surplus has been frittered away