'I want to show that good politics is also good economics'

Interview Deputy chief minister & finance minister Siddaramaiah defends his budget

, deputy chief minister and finance minister.

He began his education in his village school and then went on to Mysore where he became a lawyer. He came into politics through the farmers' movement during the emergency days and became an MLA for the first time in 1983.

In 1999 he joined Deve Gowda's political outfit and is its senior representative in the state government. Known for his financial prudence and straight forward views, he was true to his character when he presented a budget with a revenue surplus. Excerpts from his conversation with Business Standard:

You have made Karnataka an exception by presenting a surplus budget. How did you manage to do this?

I have presented a budget with a revenue surplus. We will make a small contribution to additional asset generation through the small revenue balance.

Karnataka is not new to revenue surpluses. I have built upon the fiscal reform measures already adopted by the state government over the last few years.

Of course I have also been lucky to take up the reins of managing the state's finances in a year when taxes are buoyant and the spectre of drought has receded.

Some say the revenue projections are over optimistic.

I accept that revenue estimation and projection methodology is still at a primitive stage in state governments. However, revenue estimation in the last few years has improved considerably and, except for the drought years of 2001-03, it has approximated 98 to 99 per cent of budgeted estimates. On this ground alone I am optimistic about achieving my targets.

Also, I have taken care to cushion possible shortfalls in devolution from government of India or in certain inelastic commercial taxes by not factoring in the additional revenues expected out of excise reforms.

The macroeconomic fundamentals of the state's economy are back on track and I expect a net additional revenue generation from the rationalisation measures announced.

Without power sector reforms, fiscal correction is impossible. What is this government's action plan in this regard?

I could not agree more with the observation. No other expenditure bleeds the budget more than the power sector. What is even worse is that despite considerable additional support to the power sector, they have actually been performing at lower levels than before.

The collection efficiency ahs gone down from the levels achieved in the nineties, power theft ahs increased, T&D losses have remained unchecked, all without significant improvement in quality of supply and with large ill directed subsidy payouts.

All power utilities will be expected to shed their inefficiencies and become contributors to the exchequer. I will enforce ruthlessly the targets on metering, collection efficiency, theft control and reduction in T&D losses for all power utilities.

What is your plan to better target subsidies?

You can't cut subsidies totally. It is also not possible. There are so many programmes for poverty alleviation.

No, the issue of ill-directed subsidies...

That is there. You can't just stop it tomorrow or day after tomorrow. Slowly you have to give the subsidy to the deserving areas and people. We are seriously pursuing that.

For example, we are giving subsidy to the power sector. The losses of the energy department are around Rs 3,000 crore every year. The government cannot continuously bear these losses or meet the expenditures incurred by the energy department. For this it has to take some drastic decisions to cut down the losses in transmission and distribution, theft and in other areas.

We are seriously thinking about that. We have to go for metering, give quality power and at the same time there should be accountability. We have taken up energy audit in order to check the losses in the power department and other areas. The department should know where every unit of power should go, whether we are getting a return for it or not. We don't have records and accounts for all these things.

Just before the elections, the pervious government totally waived power dues of farmers.

Not all dues. That is only because of the two pervious years' serious drought.

Dues of everybody.

Only so far as pumpsets are concerned. Farmers have faced such serious drought, the government cannot keep quiet. We can't say we have introduced reforms and can't come to the rescue of the people.

There is aperception thatmost of your time is going into managing the coalition.

That is not true. Survival is not taking up most of our time. The coalition was mainly to prevent BJP coming into power in Karnataka and the South. This was a policy decision taken at the higher level.

We may have got defeated in the last elections. But if you look at the people's mandate, we got 36 per cent votes, whereas BJP got only 29 per cent. Together, with our allies, we have got 56 per cent votes. Basically Karnataka has always favoured a Congress government.

There is a talk that Mr Deve Gowda is putting a lot of pressure on you.

Deve Gowda is a serious politician. He speaks about the problems when he hears about them from the people. Till date, he has given maximum support. He had himself told me that BJP should not take advantage of the situation and had asked me to do the right thing. He has not created any problem. All these talks that are doing the rounds are completely wrong.

I am also in the Assembly since the last 33 years. I am very much aware of everything that is going on and know how to tackle them. There will always be differences within in a party. Naturally, this is bound to occur even if a single party had come to power. Do you think Rajashekar Reddy, who is the chief minister of Andhra Pradesh, does not have any problem despite heading the single largest party?

What are your plans for the industrial sector?

We are having a meeting with officials from ONGC. They have told me that they are ready to spend Rs 20,000 crore in Karnataka state for oil exploration. The recent announcement by Toyota (where they opened the Toyota Kirloskar Autoparts' transmission unit), which was attended by Union finance minister P Chidambaram, is yet another milestone for Karnataka.

What are the new projects you will bring?

Power projects are being given focus. The Ambanis have expressed interest on this front. Whenever they have visited Karnataka, the previous government also took a lot of interest. Now that we have come to power, I wish to say that there are no more hurdles.

What are the power projects that the Ambanis are interested in?

When we personally met, he told me that he has a good rapport with Mr Mulayam Singh. He said that the UP government had already given land and project implementation had started. He added that similar co-operation and support was expected from the state government.

I have told him that we are now free after the elections. You can come and discuss it with our officers. If the project is viable, then the Karnataka government is going to support it.

On power, the updated medium-term fiscal policy has focused on the subsidy given to the power sector. How do you propose to tackle problems like recovery of dues, transmission and distribution losses, theft and starting metering?

Since it is only a little over two months since we have come to power, we need to examine these things. We will have to look at our financial position and then hold a discussion before taking any decision.

Recent reports say that you are trying to revive the Bangalore Agenda Task Force.

Yes, BATF is not being neglected. In fact, nothing is being ignored. There has been an impression and that BATF is shifting to Mumbai. Also, when I met Mr Azim Premji during the President's recent visit to Bangalore, I told him that the state government was ready to offer help, now that we have come to power. I told him not to be upset.

Can you give us an update on the Bangalore IT Corridor and the much-awaited Bangalore international airport?

I was there is New Delhi when the MoU for the airport was signed. In November this year, work will definitely commence on the Bangalore International Airport. We are going to complete the project in 2007. This is one of our big achievements.

At one time, the IT Corridor was projected as an example of planned development. What is the status now?

I am yet to examine this.

The Opposition has been critical of the Bangalore-Mysore Infrastructure Corridor project in the Assembly. What is your stand on the allegations?

Work on this project started in 1995 when Deve Gowda was the chief minister. I pursued it well when I was the minister for the public works department under the leadership of S M Krishna.

We have had several meetings on this. Today, work has already begun on the 41-km peripheral area and will be completed soon. On the allegations of land grabbing, we will definitely verify and take necessary action.

The total land acquisition cost is Rs 450 crore. Also, ICICI Bank has given the money and it has been deposited with the government. We are working in a manner so as to attract investments and create a friendly atmosphere.

There was a lot of shouting in the assembly on denotification of acquired land.

In the Assembly and the Parliament, people say many different things. We have to run a government. The only thing that I can share is that wherever there are irregularities, I will examine and take action.

Now that the Assembly session is over, will you finally consider a Cabinet expansion?

Yes, yes. We will expand the Cabinet in this month.

How will you choose between deserving and better off farmers?

After the implementation of land reforms, I don't find any better off farmers in the rural areas. Karnataka particularly. The land reforms act was strictly enforced in this state. I don't think those who have 50 acres of dry land is a big or better off farmer. You can't distinguish like that.

Mandya is not dry.

In Mandya also, after partitioning and division in families, the holdings are becoming small. According to me, since I am from rural areas, the better off farmers are a negligible number, even in Mysore-Mandya.

What is your plan to again get the restructuring loan from the World Bank, which has been stopped?

World Bank people are coming to Karnataka for discussion. They have shown indications that they want to give loans to the agriculture sector also.

I am going to Washington next month and will meet the officers of the bank Around 15 days back the World Bank representative in the country had come to Bangalore and met me and the chief minister. He has shown an inclination to fund the agriculture sector. The World Bank people have been explained the reality of farmers' condition and they are convinced.

You have raised taxes on computer software and hardware when it is felt that the domestic software and hardware sectors are nascent and need nurturing. Also, a PC is not a luxury item and more like an educational tool.

The consumer is not buying a computer everyday. Once you buy a computer, it lasts two to three years. The principle is, those who can afford to pay tax, have to pay some tax. There are a lot of programmes for the poorer sections of society. In order to fund those programmes, we have to collect taxes from people who can afford to pay taxes.

What is your game plan for improving the city's infrastructure?

While I agree that Bangalore's infrastructure is stretched, this is as much because of improper planning and inefficient execution of schemes. The method of funding infrastructure itself has to change.

Because of the direct link between improved infrastructure and economic growth, particularly in the secondary and tertiary sectors, it would be in the interest of the private sector to come forward and contribute to infrastructure provision in partnership with government.

The private sector needs to be more venturesome in this area. The government's own participation in Bangalore's infrastructure will of course continue through a $ 250 million Karnataka municipal reforms project, the state of the art international airport, the metro rail, etc.

You are a believer and practioner of financial prudence. Most politicians think this is not good for their careers. What is your strategy for political survival?

It is an unconfirmed assumption that success or survival in any field if there is a disjunct between belief and practice. It is also a falacy that fiscal imprudence can ensure political survival. While I do not want to quote examples, I believe that the contrary is true.

Over the medium to long term, good policies cannot survive on bad economics and vice versa. My objective is to demonstrate that good politics is also economics.