Centre must not micro-manage Finance Commission: Kerala FM Thomas Isaac

Development does not mean that the expenditure requirements have reduced, said Kerala FM

Thomas Isaac, finance minister of Kerala, in an interview with Shreehari Paliath discusses his concerns regarding the details of the Finance Commission, his government’s plan to introduce a health care scheme financed by profits from the state lottery, and a 'budget analysis' for the elderly in Kerala. Edited excerpts:

The details of the 15th Finance Commission stated that the 2011 census would be used to consider allocations. There is a fear that this would affect Kerala and other south Indian states, which have been able to reduce their population shares by achieving replacement-level fertility rates. What do you think?

We are not against the Finance Commission. All we are demanding is that it be allowed to perform its constitutional duty. The Centre must not micro-manage it or the details by adding (clauses) that tax devolution must be curtailed, borrowing power must be made conditional, etc. These are not aspects to be put here.

Every state’s share cannot rise, no matter what formula is used. It will vary. Let us create a rule that this variation is contained in a narrow band such that the finances of the state are not disrupted.

Presently, Kerala receives 2.5 per cent of the central tax revenue. Kerala would receive less than 2 per cent of the share if it is assumed that the 2011 population census is used with the same criteria as the 14th Finance Commission. If there is mechanical acceptance of the details of the commission, there is a danger of (financial) disruption at the state level. We want to avoid it. I want to make it clear that we will not accept any decision to undermine the state’s fiscal domain. We’ve already undergone this due to the GST, now we can’t have the Finance Commission cause further disruptions. But if anything of this nature happens, I am certain there will be a serious political fallout. We are keenly watching the situation. We have demanded of the President that the details be changed. After our discussions with the Finance Commission, I am positive about the changes. Till then we will continue our campaign.

The latest NITI Aayog health index has placed Kerala among the best performers alongside Tamil Nadu and Punjab. If the index is used to fix incentives from the Centre in terms of money, infrastructure, technology and so on to reduce last-mile development problems, do you fear that a top performing state like Kerala would lose out?

Some of the states are (performing) much above the national average. But these achievements have raised many second-generation problems which require expenditure intervention by the government. For example, due to universal education, everyone aspires to receive a quality education which demands huge state resources. We are seeing an increase in lifestyle diseases which require investments in speciality care.

Development does not mean that the expenditure requirements have reduced. At the same time, we must ensure that there is a minimum level of service across the country. No one can deny the need to transfer resources from developed regions to under-developed regions. I accept that. But, it must be done with a sense of proportion and must not disrupt the development process keeping in mind that it needs substantial resources.

In your budget speech, you proposed resource mobilisation for a comprehensive health care scheme using lotteries run by the directorate. The revenue receipt for lotteries is Rs 111.1 billion (budget estimate for 2018-19) and expenditure, Rs 78.74 billion. Will the government utilise the profit to include all beneficiaries in the Rashtriya Swasthya Bima Yojana and the new National Health Protection Scheme (NHPS)?

From what I understand, all households will not be covered in the new NPHS programme. We want to cover those left out too. A proportion of the households in the state are covered by employee and pensioners health programmes, while the rest must be brought under health coverage. We do not want to just use an insurance programme. In Kerala, the public health system’s very important. Unlike the rest of India, we have a wide chain of government-run hospitals where service is provided. We want to link this programme to our public health system to handle the demand.

We are investing close to Rs 50 billion in the health sector, hiring doctors, nurses, and paramedics to handle the demand that we foresee, including speciality health services. We intend to provide people with access and assured treatment at accredited and government hospitals. This would require a substantial amount of premium which will be provided through the lottery. The only justification for the lottery is that the profit will go into a social good. Through the lottery, we are trying to tell people in Kerala that you can try your luck, but if you do not win, consider the investment a donation to the health sector. We expect to roll it out this financial year.

At 13 per cent, Kerala has the highest proportion of people above 60. Despite its strong focus on health, Kerala has only spent 14 per cent of the Rs 241.6 million released by the national programme for the health care of the elderly under the non-communicable diseases flexible pool between 2015 and 2017 (as of December 2017). Considering that nearly 79 per cent of elderly women and 21 per cent of elderly men live alone in Kerala, what did you mean when you stated, during the budget this year, that “budget analysis for old age people will be started next year”?

There must be a focus on providing geriatric health service. The focus has been always on children which will have to change. In Kerala, there has been an emergence of a very active palliative care network which is important for elderly care. Any village in Kerala will have a palliative care unit. This needs to be supported. Nearly 5.2 million people are receiving some sort of pension from the government, although it may not be sufficient. Further, we will also look to involve the elderly in social activities and local level development so that they feel wanted in society. We need to structure and design the system to incorporate this.

Although India continues to lead in receiving remittances in the world, inflows have declined by nearly 8.9 per cent, according to a World Bank report. Remittances contributed to 36 per cent of Kerala’s net state domestic product in 2014, down by 11 per cent between 2014 and 2016. With countries like Saudi Arabia, where nearly 23 per cent of Kerala migrants work, encouraging nitaqat (system to encourage the employment of Saudi nationals in the private sector), how will your government tackle the return of workers and the resulting revenue strain?

Although slowly, the deposits being made are still on the rise. In 2015-16, it went down. Even with return migration, people come back with their savings ensuring buoyancy in remittances. Further, there is a diversification of migration to western countries. There is a deceleration in remittances and there is a possibility that it could decline over time and this can have an adverse effect on Kerala’s economy. Therefore, we have to hurry and diversify our production base to areas of modern industry and competencies. We are creating the infrastructure to attract private capital in the preferred areas of investment.

You announced the formation of a Farmers Welfare Fund Board, which will be funded partly by land tax collections and partly by a contribution to the agricultural worker welfare fund board. This would yield a monthly pension for farmers above 60 years of age. How will this develop?

The tax is estimated to be around Rs 1.5 billion. Every year around Rs 750 million would go into the Farmers Welfare Fund Board, and farmers would also contribute. Over time there will be a substantial corpus for the old-age pension and other social security programmes. The agriculture workers welfare fund board is the largest welfare fund board in Kerala but has insufficient funds as matching grants have not been provided by the government and employers. Now, if half the land tax goes to them, they will be rejuvenated.

Source: IndiaSpend