//`Kerala being penalised for its success in social services’

`Kerala being penalised for its success in social services’

Financial Express, ECONOMY BUREAU, KOCHI, JAN 16, 2006

Image The 12th Finance Commission award would see Kerala get Rs 6,088 crore less than what it got under the 10th award. The annual loss will be Rs 1,218 crore which will be Rs 240 crore more than the total State’s own non-tax revenue (Rs 978 crore), according to a study undertaken by the Centre for Socio-economic and  Environmental Studies director KK George along with KK Krishnakumar and VK Praveen.

The amount of annual loss would be six times more than the additional Central assistance of Rs 200 crore said to have been committed by the Planning Commission for implementing the agenda suggested by President APJ Abdul Kalam.

The study, `Twelfth Finance Commission Award: What it foretells for Kerala?’finds that the 12th Finance Commission award would only strengthen the trend of decreasing

share of aggregate Central revenue transfers in the total revenue of Kerala which came down steadily from 35.5% in 1990-91 to 25.1% in 2003-04.

In respect of the share of Central transfers in both the total revenue and expenditure, Kerala lagged behind all States. If Kerala was not getting its due share in the Finance Commission’s transfers, the fault lies largely in the criteria used by them in their inter-State distribution of the Centre’s tax shares. Most of the criteria used by the Commission are inappropriate for the State. It also fail to use criteria, which are most relevant to the State.

A point is case is Kerala’s success in controlling population growth which has hit it both directly and indirectly. The Commission has given a weightage of 40% to population  while allocating Rs 25,000 crore grants to local bodies. It has made a deviation from the past and used the 2001 census figures instead of the 1971 figures as enjoined under  their terms of reference. This affects a State like Kerala which had been the most successful State in controlling population growth and tends to inflate the relative position of Kerala.

The world over, regional development is measured not only in terms of per capita income but also in terms of employment which has not been considered for Kerala having  an unemployment rate nearly three times higher than the national average.

Of the grants meant for States "in need of assistance", Kerala received only 0.8% and the Commission provides no grant at all for upgrading the State’s health or education services while giving Rs 16,059 crore to other States.

Kerala’s share in grants for upgradation of all social services put together was just 0.1% of the total upgradation grants of Rs 16,684 crore to all States. This is surely a case

of the State being penalised for its success in attaining above average standards in social services like education and health care, the study adds.

The Commission failed to appreciate the flip side to Kerala’s much lauded achievements; the qualitative and quantitative backwardness of Kerala’s higher education,  technical education and research. The Commission has also failed to take note of the increasing demand for expenditure on health services as a result of the aging of the  State’s population. The diseases of the old, unlike those of children and youth, call for higher investment by the State in diagnostic equipment, hospitalisation, treatment,  recovery and rehabilitation.

Unlike in many other federations, the Commission has failed to compensate the States for their fiscal disabilities resulting from national policies. The cash crop economy of  Kerala is a main victim of national policies aimed at opening up the economy.

The debt relief from the Centre to the State recommended is also disheartening. Kerala with a per capita non-plan revenue surplus (even after devolution of Central taxes) of  only Rs 1,222 got a debt relief of mere Rs 344. But, Andhra Pradesh with a much bigger per capita surplus of Rs 4,958 got a debt relief of Rs 449 and Gujarat with per capita surplus of Rs 7,029 received Rs 530.

The study also finds that that it was not only the Finance Commission but also the other two agencies, the Planning Commission and Union ministries, that had made less  Central transfers to Kerala than to all States.

Tuesday, January 17, 2006