State Budget on Feb 5: A quick look at what to expect

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Thiruvananthapuram: Finance Minister KN Balagopal is set to present the state Budget for the financial year 2024-25 in the Kerala Legislative Assembly on Monday, January 5, even as the State has been going through one of its worst financial crises. With the Lok Sabha elections just around the corner, the government will be forced to make populist announcements in the Budget.

However, the State’s finances are not in good health with the disbursal of welfare pensions pending for five months, besides the mounting salary revision and dearness allowance dues.

The revenue has been falling short of implementing the announcements made in the previous Budget. The government itself has admitted to the crisis and added that the coming financial year would be worse.

While making fresh announcements in the election year, Balagopal will have to find new revenue sources, besides finding means to increase the existing revenue. However, there are indications on the new Budget to be tabled in the Assembly.

Increase in welfare pensions: The second Pinarayi Vijayan government has not made any initiative to meet the promise made in the LDF manifesto that the welfare pensions would be increased to Rs 2,500 in a phased manner. The LDF has proposed to add Rs 100 to the existing pension of Rs 1,600. However, the Finance Department has been wondering how to increase the pension by Rs 100, when it can’t disburse even the existing Rs 1,600.

Dues in instalments: The government employees are the worst hit by the government’s inability to provide benefits. It is almost certain that the Budget would allow one or two instalments of the dearness allowance. A favourable decision is certain in the case of salary and pension revision dues. The Budget may also hint about appointing the 12th Salary Revision Commission.

Restrictions on dual pension: The government is mulling over restricting service pensions. In case of death, the deceased person’s spouse is provided a family pension, even if the partner, too, is drawing a pension. The government is viewing this as a dual pension. A recommendation to stop this is under consideration.

Additional Rs 20 support for rubber: The LDF manifesto had promised to hike the support price of rubber to Rs 250. However, the government’s stand is that it requires the Centre’s help to implement the promise. The Budget is likely to propose a hike of Rs 20 in the support price of rubber.

Nava Kerala Sadas: Chief Minister Pinarayi Vijayan had accepted several representations as part of the Nava Kerala Sadas. Of the representations made, those practical are likely to be included in the Budget.

More Cess: The Budget may propose a cess of up to 10 per cent on government services. The government is considering imposing cess on other services, like the one on fuel and liquor. There is also a recommendation to resume appropriating toll so that the revenue thus raised could be used for KIIFB’s projects.

Increase in taxes: The property tax is likely to be increased. However, the tax on buildings will remain untouched since the process to increase it by 5 per cent to take it up to 25 per cent in five years is already on.

Real estate: The real estate sector has been hit by the exponential increase in building construction permit fees and the 20 per cent hike in fair price. The realty sector may get some relaxation in the Budget.

Package to overcome slump: The government is of the view that there has been a slump in several sectors, including construction. The dip in the prices of fuel and cement has been viewed as a reflection of the slump. To tide over the situation, the Budget may include schemes to enhance the people’s purchasing power.

Vizhinjam project: The Budget will project the Vizhinjam port as the biggest project completed by the government. It will also claim credit for the employment and development opportunities the port project will offer.

The government should issue a white paper, objectively explaining the State’s general financial situation in the next three or four months. It should also increase the tax on domestic revenue to 9.4 per cent from 8.4 per cent from the previous year for each Rs 100 earned. In the next two years, it should be hiked to the old 11.5 per cent to Rs 100 ratio. The aim should be to increase the tax revenue to slash the revenue deficit.

The government should also reveal the GST sources. It should make public the goods and services that provide more than 1 per cent of the GST. The salary of government employees should be revised only in 10 years as recommended by the 11th Salary Revision Commission.

The retirement age of government employees should be increased at least by two years from 56. The retirement age of those holding professional designations should be at least 60. There should be a pension cap. The monthly pension should not exceed Rs 50,000, as in the case of MLAs.

The number of personal staff ministers should be brought down to 10 or 15 from the current 25.

The central policies are affecting the State’s tax revenue and the Centre’s shares. The policies also prevent borrowings from turning over the decrease in revenue. The Centre is against KIIFB, established as an alternative to raising funds by borrowing.

The Centre is including the KIIFB and Pension Company’s borrowings to the State’s account, thereby slashing the government’s borrowing limit. If this situation continues, the government should reorganise its expenses. An action plan should be prepared to spend each rupee the most effectively.

Those who receive a central share of housing and social security pensions should be separated as a group to resolve the branding issue. More facilities should be developed, modelled on public sector IT and private sector industrial parks, to attract investors. These institutions could borrow from the market, and it would affect the government’s borrowing limit. 

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