Medium Term Fiscal Plan

6. Tamil Nadu’s experience during 1996-2001 shows that unless the Government is committed to proper management of its public finances, the attainment of development goals of the State and welfare of the people will be jeopardized. From being a financially well-managed State till the mid-1990s, Tamil Nadu found itself going down by the end of 2000-2001 mired in a deep-rooted fiscal crisis. It is often thought that a fiscal crisis is nothing new. Unfortunately, this is not true and the crisis we had to face was like something never experienced before. The debt burden was alarmingly high. There was no scope for borrowing more to tide over the crisis. This Government had to act fast and decisively to prevent a total collapse. This was done, intelligently, without burdening the poor.

7. Hon’ble Members of this House may recall that this Government was forced to scale down the annual Plan outlay of 2001-2002 from Rs. 6040 crores to Rs. 5200 crores. We had to reckon with unpaid expenditure liabilities of over Rs. 4000 crores, which the previous Government had failed to meet. In addition, pay and pension arrears of Government employees amounting to about Rs. 1800 crores had been impounded by the previous Government for payment beyond 31st March 2003. The previous Government had drawn in advance, in March 2001, the future revenues upto November 2003 accruing from lignite royalty to Tamil Nadu amounting to Rs. 250 crores. The rationale of governance was lost and the credibility of the State in meeting even the basic development needs of the people was called into question.

8. In less than three years, the Hon’ble Chief Minister has successfully tackled the unprecedented problems witnessed in 2001. An altogether new, bold and visionary development agenda has been forged. This is currently under implementation and is now taking Tamil Nadu forward to its well-deserved numero uno position. This turnaround has been possible only because of the Hon’ble Chief Minister’s commitment to proper management of public finances. I take this opportunity to thank our visionary leader for setting right what was a hopeless situation.

9. Hon'ble Members of the House may recall that this House enacted the Tamil Nadu Fiscal Responsibility Act, 2003, in the last financial year. This legislation, as amended on 10th February, 2004, is a landmark step to ensure fiscal transparency and accountability. It enjoins upon the Government to prepare and present to the Legislative Assembly a Medium Term Fiscal Plan outlining a roadmap of reforms and development of Tamil Nadu.

10. In pursuance of the aforesaid obligation, a Medium Term Fiscal Plan has been prepared and is appended to the Budget Speech. This Budget is based on the reform and development targets enumerated in the Medium Term Fiscal Plan. Its salient features are as follows:

11. During the year 2002-2003, the Indian economy and the Tamil Nadu economy were severely affected by drought. The economic growth in Tamil Nadu was 3.46% in 2002-2003 over that in 2001-2002 at current prices. The reason for this slowdown in the State's economy was the sharp decline in the output of the primary sector affected by the drought and Karnataka's intransigence in not releasing our legitimate share of water in the Cauvery and the global economic downturn affecting all sectors.

12. The growth prospects in 2003-2004 are encouraging. It is now expected that Gross State Domestic Product (GSDP) in 2003-2004 will grow at 7.17% over that in 2002-2003 at current prices. Clearly, the economy is now recovering from the debilitating effects of the drought in 2002-2003. Even though the seasonal conditions in 2003 have not been entirely satisfactory, the economy has revived due to deft handling of major issues.

Development Imperatives for 2004-2005

13. The Hon’ble Chief Minister’s commitment to provide "opportunities for healthy and productive life for all" to be achieved through the Hon’ble Chief Minister’s 15 point programme forms an integral part of the development agenda for 2004-2005. This development agenda includes:

Annual Plan

14. The Hon’ble Chief Minister, Puratchi Thalaivi J Jayalalithaa, has secured the clearance of the Union Planning Commission for implementing a development Plan outlay of Rs. 40,000 crores during the Tenth Plan Period (2002-2007). This is a splendid achievement given the perilous position of public finances in 2001-2002. This has been followed by the spectacular performance of the Government in obtaining real increases in the annual development Plan outlay from Rs. 5200 crores in 2001-2002 to Rs. 7000 crores in 2003-2004. I am very happy to inform this House that the Plan target of Rs. 7000 crores for 2003-2004 will be fully achieved.

15. This Budget includes a Plan outlay of Rs.8,001 crores which is a record outlay. We will approach the Union Planning Commission for approval to implement this enhanced development Plan outlay of Rs. 8001 crores during 2004-2005. This constitutes a major step-up in the development expenditure of the State Government, when compared to the outlay of Rs. 5200 crores in 2001-2002.

Twelfth Finance Commission

16. The Twelfth Finance Commission has a crucial role to play in recommending the principles that should govern the transfer of Union resources to the States during 2005-2010. Significant changes have taken place in recent years in resource availability and development responsibilities of the Union Government and the States. While there is a pronounced shift towards increased development responsibilities of the State Governments, there has not been a concomitant increase in the resources available with them. The tax on services, which should legitimately come to the States, has been taken to the Union list. We have opposed this. This brings to fore the issue of ensuring a real and substantial enhancement in the size of the divisible pool of Union taxes for transfer to the States. The second issue relates to deciding the principles that should govern the inter se shares of the States in the divisible pool of Union Taxes.

17. Tamil Nadu suffered very badly at the hands of the Eleventh Finance Commission, which reduced the State’s Share in Central taxes from 6.637% to 5.385%. This meant a reduction of 1.252% or a reduction of 18.86% on a year-to-year basis. Consequently, in 2001-2002, Tamil Nadu suffered a loss of Rs. 781 crores. In addition, the actual receipts of the Share of Central taxes in that year were lower by Rs. 512 crores than even the promised reduced share. Totally, the reduction was Rs. 1293 crores. No State can withstand this kind of fiscal shock. We have tried to overcome this major setback.

18. We have furnished a detailed Memorandum, forecasts and other information sought by the Twelfth Finance Commission. We have spelt out the principles that should govern Union resource transfers to States during the period 2005-2010.

19. The meeting between the Government headed by the Hon’ble Chief Minister, Puratchi Thalaivi J Jayalalithaa and the Chairman of the Twelfth Finance Commission, the eminent economist, Dr. C. Rangarajan and other Members, took place on 2^nd February, 2004, at Chennai. The Hon’ble Chief Minister called for a complete restructuring of the principles governing resource sharing between the Union and the States. I take this opportunity to highlight the salient features of the submissions made by this Government to the Twelfth Finance Commission.

20. This Government hopes that the Twelfth Finance Commission will chart a new course in federal fiscal relations and that its recommendations will be in tune with the needs and aspirations of the people of Tamil Nadu.

Drought Relief Measures

21. Notwithstanding the fiscal constraints, this Government headed by the Hon'ble Chief Minister responded to the three years of extremely adverse seasonal conditions leading to the unprecedented drought of 2002-2003 by launching relief measures on a scale never seen before.

22. As soon as this Government assumed office, the Hon'ble Chief Minister announced a scheme of waiver of interest and penal interest dues of farmers amounting to Rs. 310.50 crores. This Government sanctioned income support to 47.83 lakh farmers to the tune of Rs.324.32 crores. This was to enable them to take up planting of the next crop. A scheme of waiver of interest dues of small and marginal farmers on loans obtained from the co-operative banks was implemented at a cost of Rs. 20 crores. A further amount of Rs. 41.05 crores is being provided to meet the requirement.

23. We have ensured food and employment security for the needy households in the rural areas by taking up a massive Food for Work Programme with an outlay of Rs. 341.92 crores. A special programme to ensure food security was implemented where every needy rural household was given 30 Kg rice free of cost every month from February to August 2003. This benefited 9.71 lakh families and was implemented at a cost of Rs. 115.94 crores. During 2002-2003, this Government released Rs. 163.11 crores for taking up water supply works in the drought affected districts. An amount of Rs. 84.48 crores has been sanctioned in 2003-2004 to ensure provision of drinking water in the affected districts including Chennai.

24. The Monsoon in 2003 has been better than the previous year but again, not quite satisfactory. Some districts have again been affected and a detailed assessment has been made. This Government has given a detailed Memorandum to the Government of India. It includes a request for an urgent sanction of Rs. 1584 crores from the National Calamity Contingency Fund and also 10.8 lakh MT of rice for the Food for Work Programme. We have sanctioned Rs. 50 crores to provide drinking water supply in various districts to mitigate the problem of water scarcity that may arise in the summer. A Central team has been constituted and this team will visit the State shortly. Based on their detailed assessment, further relief measures will be sanctioned.

25. Chennai City has been in the grip of chronic water scarcity. This year the position is even more serious. The storage levels in the City’s reservoirs are the lowest in the last 55 years for which recorded data is available. We have launched a massive programme to ameliorate Chennai's immediate water scarcity problems. Supply of water is being made by tapping water from acquifers in Araniar-Koratalliyar and hiring private agricultural wells in Poondhamalli, Mamandur and Palur. Nearly 8500 lorry loads of water are being supplied to meet the City's needs everyday. Expenditure of Rs. 80 lakhs is being incurred daily to meet the water supply needs of Chennai city. A sanction of Rs. 700 crores from the National Calamity Contingency Fund has been sought to help tide over the immediate water crisis. An immediate release of Rs.50 crores has been made from this Fund pending assessment by the Central team.

26. The Chennai Water Supply Augmentation Project-I (New Veeranam Project) being implemented at a cost of about Rs. 720 crores is making rapid headway and will be completed by May 2004. We believe that a long-term durable solution to recurrent water shortages in Chennai lies in setting up desalination plants. An initial provision of Rs. 10 crores has been made in the Budget Estimates for this purpose. We welcome the recent announcement in the Union Budget to implement a comprehensive drinking water supply scheme for megacities including Chennai. We shall utilize this to find comprehensive long-term solutions to Chennai's chronic water scarcity problem.

27. I would like to assure this House that this Government will spare no effort in tackling the situation posed by the failure of the North East Monsoon. A provision of Rs. 200.98 crores has been made in the Budget to enable the State Government to continue with various relief measures in the next financial year.

Police

28. Professional crime prevention, effective law enforcement, prison reforms, proper prisoner rehabilitation and a speedy judicial process are critical inputs in the perfect maintenance of law and order. This Government has comprehensively tackled all these issues.

29. The provision for the Police Department for 2004-2005 is being enhanced to Rs. 1327.15 crores as against Rs. 1262.60 crores provided in the Revised Estimates. It includes a provision of Rs. 112 crores for Modernization of the Police Force. A provision of Rs. 20 crores has also been made for the construction of a new office complex for the Director General of Police at an estimated cost of Rs.30 crores.

Prisons

30. A provision of Rs. 117.05 crores has been made for the Prisons Department in 2004-2005 as against Rs. 76.80 crores provided in the Revised Estimates.

31. The construction of a new prison complex at Puzhal at a cost of Rs. 77.09 crores is making rapid progress. A provision of Rs. 47.09 crores has been made for this purpose. The scheme for Modernization of Prison Administration would be continued in 2004-2005 and a provision of Rs. 11.19 crores has been made for this purpose.

Judiciary

32. There has been a substantial step-up in the outlay for Administration of Justice during the tenure of this Government. From Rs. 140.99 crores provided in 2001-2002, the provisions have been increased to Rs. 171.89 crores in 2004-2005.

33. We have made available, resources for computerization of the High Court and provision of basic infrastructure in other Courts. This Government has implemented the revision in the scales of pay of the subordinate judiciary in Tamil Nadu based on the directives of the Supreme Court. The High Court Bench at Madurai will be inaugurated on 13th April, 2004.

Towards a Resurgent Primary Sector Agriculture

34. This Government is implementing a bold multi-pronged development strategy that aims at infusing a new growth momentum to the primary sector. This strategy comprises:

35. This Government is making a major effort in encouraging farmers to shift from environmentally unsustainable water-intensive cultivation to high value/ low-water consuming crops. Horticulture and floriculture are being popularized in a big way. Emphasis is being given to cultivation of hybrid vegetables, biofuel trees and medicinal plants. Model Horticultural Villages will be established in the next financial year to provide on-field training to farmers in the adoption of precision farming and latest agronomic practices.

36. This Government is setting up Agri-Export Zones (AEZ) across the State. An AEZ for cut flowers is being established at Hosur at a cost of Rs. 25 crores. Another AEZ for flowers is coming up at The Nilgiris at a total cost of Rs.16 crores. A Mango AEZ is being set up at Theni covering six Southern districts at a cost of Rs. 25 crores. A Food Park will be established in Nilakkotai, Dindigul district, at a cost of Rs.13 crores. A turmeric marketing complex will be set up at a total outlay of Rs. 36.32 crores near Erode. The total provision for agriculture in the Budget Estimates 2004-2005 has been fixed at Rs. 882.41 crores as against a Revised Estimate of Rs. 707.95 crores in 2003-2004.

37. The Comprehensive Wasteland Development Programme is progressing well. In the coming agricultural season, it is proposed to take up 1.50 lakh acres of new planting with tree crops and fodder. The outlay for this programme is
Rs. 34 crores in 2004-2005.

38. This Government will implement an efficient water-use strategy, including the use of drip and sprinkler irrigation, with an outlay of Rs.57 crores in 2004-2005 with funding support from NABARD. In addition, a pilot programme will be implemented covering farm pumpset owners with a focus on crop diversification, installation of drip and sprinkler systems, energy efficient pumpsets, and precision farming. This will ensure better incomes for pumpset owning farmers. This will be implemented in 2004-2005 with an outlay of Rs. 50 crores.

39. This Government will ensure that 45,000 farm pumpsets will be provided with electricity connections in 2004-2005. This will include a special quota of 15,000 connections for farmers in the districts of the Cauvery delta region with a special emphasis on the tail-end districts of Nagapattinam, Tiruvarur, Cuddalore and Thanjavur. This programme will provide a fresh impetus for new irrigation and also in tiding over the problems posed by not getting our legitimate share of water in the Cauvery.