Tamilnadu Economy

Tamil Nadu losing out by not nurturing startup ecosystem Tamil Nadu losing out by not nurturing startup ecosystem Chandrasekaran Balakrishnan January 3, 2023 Tamilnadu Economy                                                                                   Read in : தமிழ் amil Nadu is known for its highly-skilled manpower in the information and communication technology sector produced by several institutions of technological excellence. According to Tamil Nadu Industrial Policy 2021, the state’s “talent pool adds over a million graduates every year and has the largest annual turnout of skilled workforce in India” catering to various sectors across the world. The state also has over 70 Fortune 500 companies. And yet its startup ecosystem remains in a fledgling state. The new industrial policy supersedes the Tamil Nadu Industrial Policy 2014 and will be effective up to 2025. The state has been known for its “self-sustained and self-propelled industrial growth process” for a very long time. Tamil Nadu’s manufacturing share in the regional economy is double that of the national economy. This showcases the dynamic diversification that the sector has undergone in Tamil Nadu, which is the second-largest regional economy in the country after Maharashtra, though Uttar Pradesh is fast catching up. Tamil Nadu startup and Innovation Mission (TANSIM) has set an ambitious target to establish approximately 10,000 startups in Tamil Nadu by 2026. Alas, the performance achieved so far is way behind the target of its own policy, as well in comparison with other states New startups bring new investment for higher economic growth. At present, Maharashtra with a USD 350-billion economy is the largest regional economy, Tamil Nadu follows at USD 230 billion and UP a close third with USD 210 billion. The difference between TN and UP is a mere USD 20 billion. If Tamil Nadu does not give due importance to nurturing its startup sector, its performance will suffer and UP could end up snatching the spot of the second largest regional economy in the country. In fact, Karnataka and Gujarat too, which have been improving their startup infrastructure, and thus expanding their economy, are also vying for the number 2 spot. Startup India, a flagship initiative launched in 2015 by the Government of India aims “to catalyse startup culture and build a strong and inclusive ecosystem for innovation and entrepreneurship in India”. This initiative is a boon for millennials to test their skills at becoming successful entrepreneurs who can potentially provide jobs to millions of people. Also Read: Who can invest in startups? In order to utilise the talent pool of the state, Tamil Nadu Startup and Innovation Policy 2018-2023 aims to provide “an enabling, innovative ecosystem in the state”. The state startup policy aims to: Encourage, facilitate and support the emergence of at least 5,000 technology startups in the State. Collaborate with educational institutions to promote entrepreneurship among the youth. Partner with reputed investors across India and the Globe to invest in Tamil Nadu startups. Provide adequate incentives and resources to startups, facilitators, mentors, and investors to promote startup culture in the State Tamil Nadu startup and Innovation Mission (TANSIM) has set an ambitious target to establish approximately 10,000 startups in Tamil Nadu by 2026. Alas, the performance achieved so far is way behind the target of its own policy, as well in comparison with other states. As the startup ecosystem did not improve for many years even after the announcement of the state policy, none of the key objectives mentioned were achieved.   The state’s apex institution for anchoring the startup ecosystem is the Entrepreneurship Development and Innovation Institute of Tamil Nadu (EDII-TN), an autonomous institution under the Ministry of MSMEs that was established two decades ago in 2001. It did not take adequate proactive steps to build partnerships with industries, successful entrepreneurs, and industry chambers. One of the systemic fault lines observed in the state is the structure of higher education institutions, which “has limited the scope for self-employment or being an entrepreneur. Many youth expect to get government jobs and salaried jobs” (Tamil Nadu State Youth Policy, 2014). Thus, the aptitude towards innovation, out-of-the-box thinking, raising of self-esteem, risk-taking and urge for awareness about entrepreneurial ventures, etc., are still not a focus in the learning processes. There is hardly any correlation between startups and industrialisation and urbanisation in Tamil Nadu. The startup initiatives should ideally provide ideas for large-scale industrialisation and urbanisation, networking of businesses with best practices, access to finance, etc., but it’s not so. It is strange that Tamil Nadu’s startup ecosystem governance is getting worse compared to other leading states in the country. As on November 30, 2022, there are 84,012 recognised startups in India since Startup India was launched in 2015.  TANSIM has been set up with a slew of incentives which include seed funds, grants, equity, tax exemptions, etc., for youngsters starting new entrepreneurial ventures in the state. The total fund allocated by the Union Government for startups in Tamil Nadu was Rs 450 crore. Out of Rs 34 crore provided, only Rs 18.70 crore was utilised as on November 30, 2022. It is interesting to see the startup initiatives among major states. Till November 30, 2022, the total number of startups created in Tamil Nadu was only 4,704 (6%), which is significantly lower than Maharashtra (15,571 or 19%), Karnataka (9,904 or 12%), Delhi (9,588 or 11%), Uttar Pradesh (7,719 or 9%) and Gujarat (5,877 or 7%). About 64% of startups are located in these six states. At all-India levels, startups have gone up from 452 in 2016 to 5,147 in 2017, 8,689 in 2018, 11,328 in 2019, 14,534 in 2020, 20,089 in 2021, and 23,773 in 2022 up to November. During the same period, the total number of startups in Tamil Nadu was 43 in 2016, 252 in 2017, 448 in 2018, 602 in 2019, 755 in 2020, 1,103 in 2021,

TN must fix economy before LS polls, not blame Centre TN must fix economy before LS polls, not blame Centre Chandrasekaran Balakrishnan December 29, 2022 Tamilnadu Economy                                                                                  Read in : தமிழ் News stories are floating on social media claiming that Tamil Nadu’s economy is improving ever since the current ruling DMK government assumed power. Also, India Today magazine’s high ranking of Tamil Nadu has further fuelled the story in print and electronic media. However, the overall ranking of any parameters whether it’s social or economic or combined would give a picture that does not necessarily reflect the sector-specific actual ground realities. In fact, Tamil Nadu’s poor financial health continues to daunt the state economy.   Delhi-based public policy think tank PRS has released a report on December, 12, 2022 on the analysis of state finances in India, which is also equally worthy of debate along the India Today rankings. Also, the RBI released its report on municipalities’ finances on November 10, 2022, urging states to reform and streamline the already deteriorating financial health of urban local bodies. Many in public debates underestimate the poor financial health of Tamil Nadu’s economy. Merely reducing some percentages of loan borrowings as compared to the previous year, does not help in any way without addressing critical issues. Massive outstanding payments, liabilities and irrational subsidies of the power sector, several loss-making state-owned enterprises (PSUs), public distribution system leakages, the alarming increase of pension and retirement benefits, and the free transportation for women when the Tamil Nadu transport corporations are already making losses put the health of the state’s economy in a poor condition. Massive outstanding payments, liabilities and irrational subsidies of the power sector, several loss-making state-owned enterprises (PSUs), public distribution system leakages, the alarming increase of pension and retirement benefits, and the free transportation for women when the Tamil Nadu transport corporations are already making losses put the health of the state’s economy in a poor condition   Tamil Nadu’s power sector has a revenue deficit of Rs 4,184.10 crore and fiscal deficit of Rs 18,726.32 crore in the current year, which are foremost indicators of the actual financial health of the state. In Tamil Nadu, the share of own tax revenue has been estimated to have declined to 7.9% in financial year 2021-2022 from 8.8% in 2019-2020. Indeed, Tamil Nadu’s debt is higher than the average of all states with 7.2% GSDP, ranked 3rd among states in India. Alas, in these areas the state government has not undertaken any significant reforms. The state’s outstanding liabilities were 32% of GSDP for 2021-2022. Similarly, outstanding guarantees of the state government were 4.8% of GSDP for 2020-21. State governments guarantee loan borrowings for State Public Sector Enterprises (SPSEs) from financial institutions, as most of them are loss-making and have poor credit ratings. Also Read: ‘Dravidian model created disparities in districts’ growth’ Even before the COVID pandemic struck, Tamil Nadu had faced a revenue deficit continuously from 2015-2016 to 2019-2020. If the state performs poorly in revenue generation, the state would be knocking on the doors for the bailout either from the union government or as loan borrowings from the open market via RBI. Revenue expenditure includes expenditure on salaries, pension, interest, and subsidy. A revenue deficit implies that borrowings of loans are the only way to fund those expenses which do not lead to the creation of assets or reduction of liabilities. The union government provides grants to states for meeting revenue deficits based on the recommendations of the Union Finance Commission. Tamil Nadu had received Rs 2,204 crore as a revenue deficit grant from the union government for the year 2021-2022 but not beyond that. Continuous and affordable clean energy and power distribution are a major backbone on which the modern economy can utilise the full capacity of production and services available in the state. Alas, the power sector in Tamil Nadu has been facing several structural and institutional challenges for decades. The power sector subsidies have been a legacy issue since the 1960s. Now, Tamil Nadu power distribution agencies are the highest loss-making distribution utilities in the country, 7.6% of GSDP among states. Although the state government had taken over the debt of TANGEDCO worth Rs 22,815 crore between 2015-16 and 2016-17 under the UDAY scheme of the union government, TANGEDCO accumulated losses worth Rs 48,491 crore between 2016-17 and 2020-21. The outstanding debt of Tamil Nadu is estimated to be 26.3% of GSDP at the end of the current financial year -2022-23. Even before the COVID pandemic struck, Tamil Nadu had faced a revenue deficit continuously from 2015-2016 to 2019-2020. If the state performs poorly in revenue generation, the state would be knocking on the doors for the bailout either from the union government or as loan borrowings from the open market via RBI The PRS report highlights that in 2021, TANGEDCO took market loans of Rs 30,230 crore, with a guarantee from the government of Tamil Nadu to clear its dues to generators and transmission companies (1.2% of 2022-23 GSDP). The total outstanding guarantee of the Tamil Nadu government was estimated at 4.8% of GSDP as of 2020-21. The state government is estimated to provide Rs 28,589 crore between 2020-21 and 2022-23 as grants to compensate for losses of TANGEDCO. Without this grant, the state’s revenue deficit in 2022-23 would be about 25% lower. The state government has also provided loans worth Rs 1,984 crore during this period from the budget. Also Read: Tamil Nadu’s power tariff hike is long overdue after a decade of official mismanagement Thus, during the current financial year, the grant provided for funding losses of TANGEDCO is Rs 13,108 crore (budget estimate), and subsidies for affordable power are Rs 9,379 crore which have increased from Rs 8,414 crore in

High time Kovai’s Achankulam tank gets a fresh lease of life High time Kovai’s Achankulam tank gets a fresh lease of life Chandrasekaran Balakrishnan December 6, 2022 Tamilnadu Economy                                                                                  Read in : தமிழ் Achankulam tank on the outskirts of Coimbatore city has never gone dry in all these decades, even in times of drought. Being a large source of water for agriculture, manufacturing, and the services sector, it is important to keep the resource clean and flowing. But with growing urbanisation in Coimbatore — the second largest city in the state after Chennai — water bodies, including Achankulam tank, are getting more and more polluted. Dumping of municipal solid waste and drainage of domestic sewage and untreated industrial effluents directly into the water bodies have become a major threat to the water resources. Though some of the water bodies in the main city area of Coimbatore were restored and rejuvenated through the smart city mission scheme recently, much more needs to be done. The groundwater level in the area near Anchankulam — Sulur — is already overexploited,  standing at 108 per cent, according to the National Water Mission Report on Coimbatore, perhaps because the airport and the upcoming National Defence Corridor Project are located close by Coimbatore city is situated on the banks of the river Noyyal, which had 34 streams that perennially supplied water for drinking and other purposes. But now only four of the streams remain. Having 28 lakes, the city can be called a lake town. But now the lakes are a shade of their glorious past. Sewage, solid waste, encroachment, and silt buildup have degraded them. Achankulam is one of the tanks of the Noyyal river basin, along with 24 lakes in and around Coimbatore. It is located near Neelambur village in Sulur Taluk on the outskirts of the city, just two kilometres from the national highway. The groundwater level in the area near Anchankulam — Sulur — is already overexploited,  standing at 108 per cent, according to the National Water Mission Report on Coimbatore, perhaps because the airport and the upcoming National Defence Corridor Project are located close by. All the more reason to clean up and recharge a large waterbody like the Achankulam tank, so that it can replenish the groundwater table of the area. Also Read: Rs 217 crore — the yearly loss from degrading Pallikaranai marsh The tank which was spread over 396 acres is down to 265.11 acres as per the present boundaries. The tank has three inlets through which it receives water from various sources and three outlets through which it feeds water for irrigation and other purposes.   The Irugur channel measuring more than a kilometre that carries surplus flow from the Irugur Tank, the Anaivari Pallam that carries the runoff water from near the airport and Kovai Medical Centre and Hospital, and another canal that people locally refer to as the KMG Pallam are connected to Achankulam tank. Being one of the biggest tanks in the district, Achankulam Tank provides water for farmers and residents covering a 20-km radius. It has an ayacut for agricultural land which irrigates 334 acres. Villages that receive Achankulam water include Muthugounden Pudur, Rasipalayam, Karavali Madhapur, Kaniyur, Semmandampalayam, Thekkalur, Mangalam, and also parts of Avinashi Taluk. Being one of the biggest tanks in the district, Achankulam Tank provides water for farmers and residents covering a 20-km radius. It has an ayacut for agricultural land which irrigates 334 acres Despite having lost a major portion of its shores to development works, Achankulam continues to attract a variety of migratory birds. Birdwatchers recently spotted two unusual visitors in the tank — Lesser Crested tern and Sanderling — both long-distance migrants that are primarily spotted in coastal areas. Birds have also been spotted at the Achankulam wetland and Muthugoundanpudur Kulam, near Sulur. Achankulam Lake was also in the news recently as it attracted more birds in the current wintering and migratory season. Achankulam tank can be considered a biodiversity hotspot of sorts as about 200 species of birds visit every year, particularly between February and May. The tank can be filled to up to 14 feet and has a minimum storage capacity of 4.707 tmc ft. Also Read: Infrastructure in Chennai: Here’s why ‘high roads’ were laid If the government and the people cooperate, Achankulam can be made into a tourist spot, with walkways, cycling, boating, fishing, bird watching and other activities in a pristine area surrounded by dense forest. This can only come about if awareness is created among the local community, students, farmers, and self-help groups, so that they can take responsibility as a community for the protection of Achankulam from solid waste and sewage pollution. Additionally, the quality of the communities and the real estate around the lake is highly dependent on the condition and the natural beauty of the water body and the lakeshore. The ecological, social, and economic benefits of a well-managed tank can extend to generations of people. Achankulam tank can be considered a biodiversity hotspot of sorts as about 200 species of birds visit every year, particularly between February and May      The local governments along with the district administration should take steps to prevent the dumping of untreated sewage and industrial effluents into Achankulam Tank. The main polluters are large public sector enterprises like IOCL, major private hospitals like Kovai Medical Centre and Hospitals and Royal Care hospital, MSMEs. A multipronged approach is needed to rejuvenate and nurture sustainable solutions with livelihood opportunities for the local community. Local bodies must adopt technological solutions that are not just sustainable but are also efficient, take ground realities into account and fix key challenges without much manual interference. Installation of DRDO Bio Sewage Treatment Plants with decentralised solutions would be very

Neera good for health, and farmers’ wealth, if govt permits Neera good for health, and farmers’ wealth, if govt permits Chandrasekaran Balakrishnan November 29, 2022 Tamilnadu Economy                                                                            Read in : தமிழ் “If one drinks a glass of neera in the morning instead of tea, etc., he should not need anything else for breakfast,” Gandhi once said. Yet, the health food, neera, is not freely available to the hordes of fitness and wellness enthusiasts around, simply because of some archaic government rules that prevent coconut farmers from tapping the non-alcoholic drink. Neera is the sap of the inflorescence of the coconut tree, which unlike toddy is consumed fresh and not fermented. While Tamil Nadu is the second largest of coconut farming states in the country after Kerala, the state government’s time-worn rules about tapping neera are depriving coconut farmers of a good source of income. As much as 4.44 lakh hectares of land in Tamil Nadu is devoted to coconut farming, producing 52,140 lakh coconuts, marking a productivity of 11,560 nuts per hectare per year, according to official 2020-2021 figures. But the real value of this produce is not being realised because of a licence raj in neera tapping. Tamil Nadu has issued as few as 13 licences for neera tapping compared to 204 licences in Kerala. Karnataka too has more flexible rules on neera tapping. Coconut farmers in Tamil Nadu who possess the licence to tap have produced around 9 lakh litres of neera, which earned revenue of Rs 13 Crore. But there is scope for so much more. Tamil Nadu has 7,230 Coconut Producers Societies, 467 Coconut Producers Federations, and 29 Coconut Producers Companies registered with the Coconut Development Board. There are 5 crore Palmyra trees (including coconut palms) in the state, and about 3 lakh families depend on them for their livelihood, weaving baskets, mats, and ropes with the leaves and fibres. Of these, 11,000 people are engaged in harvesting and selling nungu (palm fruit) and neera. Neera is the sap of the inflorescence of the coconut tree, which unlike toddy is consumed fresh and not fermented Not just locally, even in the international market, there is great demand for coconut products. Countries like Indonesia and the Philippines, which are leaders in this competitive market, promote a variety of coconut-based products, whereas India is still in the early stages of coconut processing. Despite being a major coconut grower, India is losing out on an opportunity to be a significant player in the international market. Coconut neera has been one of the traditional nutritional drinks and a part of the food culture of India for several centuries. But over the last seven decades, controls have been imposed on neera tapping, because it is being confused with toddy, which is also extracted from the coconut tree and contains some amount of alcohol. Also Read: Palm products: The cultural pilgrimage of a priest The state government, however, has recently clarified that “neera is a non-alcoholic nutritious drink drawn from the unopened inflorescence of coconut trees by using Anti Fermentation Technology to arrest the fermentation.” The Government has also issued the “Tamil Nadu Neera Rules” permitting the tapping of neera from coconut trees, as well as the manufacture of other products from neera. Coconut farming supports millions of farmers by providing food, nutrition, and livelihood. Coconut, a perennial crop, cultivated in Tamil Nadu is one of the major non-food crops in the country. Coconut farming is also one of the major agricultural activities in India, especially in southern states where it accounts for over 90%. However, the stringent licence system and neera tapping rules enacted in 2017 are holding back the coconut farmers. They are unable to take advantage of new modern technologies that enable the tapping of neera while preventing fermentation. According to the Coconut Development Board, India imports around 20,000 tonnes of coconut palm sugar annually. If the cumbersome rules on neera tapping were eased, India could completely avoid this particular import as Indian coconut farmers can produce it domestically and even export it to other countries. The Neera Rules, 2017 restricts the tapping of neera to a mere 5% of coconut trees. Only once a year do inspectors from the government department mark coconut trees for tapping of neera. In no way is this a sustainable practice. It only lets the untapped wealth of neera go to waste. A stringent licence system and the neera tapping rules enacted in 2017 are holding back the coconut farmers Interestingly, the Coconut Development Board, which falls under the Ministry of Agriculture of the union government, has advocated the need for removing the anomalies and issuing an amendment to the Tamil Nadu Prohibition Act 1937 to exclude neera from the definition of toddy. The CDB has said that it is “illogical and irrational” to include neera under Section 19 of the Act, explaining that Neera or Padani as stated in Section 11-B means juice drawn from a coconut, palmyra, date palm, or any other kind of palm tree into receptacles treated to prevent any fermentation. It therefore should not be categorised as Toddy under Section 19, as it contains “no alcohol”. “It is a health drink. This simple amendment would help create around 2.40 lakh ‘Green Collar jobs’ and increase the State’s revenue by Rs 47,500 crore,” an official was quoted as saying by The Business Line newspaper in 2018. Also Read: Aspiring 3D animator takes up farming, turns into an expert in organic methods The rules should indeed be amended, and this should be classified as a “nutritious health drink”. Also, separate Rules for further processing neera into jaggery, syrup, and sugar should be added. Importantly, the ceiling fixed in the rules on the number of coconut trees that can be tapped needs to be removed. The percentage

Legacy of delays hampers biomining, reclamation of waste dumps Legacy of delays hampers biomining, reclamation of waste dumps Chandrasekaran Balakrishnan August 5, 2022 Tamilnadu Economy                                                                             Read in : தமிழ் The contemporary focal debate around the issues of urban development and protection of the environment has been given close attention by most stakeholders. There are several challenges in the area of waste management, especially what is called legacy waste, or waste accumulated at dumpyards over decades, across every city, town, small town, and even villages now. Legacy waste was, however, never taken seriously by governments, policymakers, academia, industries, and local bodies’ administrations, responsible for its presence. Of late, the impact of such waste mountains and lakes has become stark as they have severely contaminated the water and air around them even as recent smart city initiatives sought to reduce environmental degradation and recover land for alternative uses. India has a total of 3,075 such dumpsites. Policy action plans were mooted to clean up these dumpsites at the earliest to prevent environmental degradation through circular economy action plans. The solid waste generated is two types — one is a fresh waste, generated on a daily basis and either processed or dumped in landfills; the second is the dumpyards themselves which have been used for many years for simply dumping the solid waste without any processing systems. As per a report by the Centre for Science and Environment (2020), Tamil Nadu is the fourth biggest state in India which dumps more than 2 lakhs tonnes of municipal solid waste without processing or treatment in 140 dumpsites every year. During the last few years, as part of the smart city missions or sanitation drives under the Clean India mission, a few measures were undertaken in states like Tamil Nadu which is the among the most urbanised in the country, to prevent or reduce the degradation of the environment due to air, land, water, waterbodies and groundwater pollution caused by the legacy waste. As per the latest report (22.06.2022) submitted by Tamil Nadu government to the National Green Tribunal (NGT), there are 271 dumpsites in the state with an estimated quantity of legacy waste of 207 lakh cubic meters. Biomining projects were initiated for 269 sites consisting of 19 city corporations, 95 municipalities, and 121 town panchayats. As per the report, 69 dumpsites were cleared of 32 cubic meters of legacy waste, and a total of 360 acres of land was reclaimed. Several thousands of crores were spent on these biomining projects. As per a report by the Centre for Science and Environment (2020), Tamil Nadu is the fourth biggest state in India which dumps more than 2 lakhs tonnes of municipal solid waste without processing or treatment in 140 dumpsites every year However, there are several smaller dumpsites spread across cities, towns, and small towns which have not been included in the government’s official data. Also, the field-level observations across the state noted that there was no proper project management system in Tamil Nadu to effectively monitor the expenditure and timely completion of the reclamation projects and measure the outcomes. Gross mismanagement of funds approved and delays have been reported by the media. The NGT has penalised local bodies, especially 15 city corporations of Tamil Nadu for violation of environmental protection provisions and failure to implement various environmental safeguards envisaged in the Environmental Protection Act, 1986. The quantum of environmental compensation imposed by the NGT (2020) was Rs.5.86 crores. Several municipalities were also given showcase notices for non-compliance with the Municipal Solid Waste Management Rule, 2016.   According to the Annual Report (2021) of the Tamil Nadu Pollution Control Board (TNPCB), 6.81 lakh cubic meters of legacy solid waste were processed through biomining projects in 23 dumpsites covering 14 districts in Tamil Nadu. Of this Thanjavur district’s share is highest at 30%, Chengalpattu has 17%, Cuddalore has 8%, Salem has 7%, Chennai and Tiruvalluvar each have 6%, Erode, Tirupur, and Coimbatore has each 5% (data source: TNPCB Annual Report, 2021). Also Read:  What the Perungudi fire says about our garbage system  Ramsar recognition may help revive devastated Pallikaranai marsh Further, biomining to reclaim land is underway at 129 dumpsites and 58 dumpsites were proposed to be covered under the initiative. Biomining is the treatment of solid waste material with microbial activity, essentially segregating the waste to reuse wherever is possible and using the remaining waste as landfill. The major issues involved in biomining projects include the method of quantifying the legacy waste, DPR preparation, a centralised project approval system, and strict timeline for implementation, etc. Most of the projects of biomining have either been delayed or remain incomplete for years due include non-compliance in waste stabilisation, inadequate waste screening equipment, and poor method of leachate treatment, etc. For instance, regarding the ongoing 129 biomining projects in local bodies, the implementation status varies from zero progress to 99.90%. There are cases even without any status of progress of project implementation. In the case of 58 proposed biomining projects, in about 10 dumpsites fresh solid waste continues to be dumped alongside the existing legacy waste which will create confusion on the project implementation. It is also likely that the project will be delayed with fresh waste entering every day amid ongoing legacy waste processing and treatment to clean up. Tamil Nadu was the first state to initiate the concept of biomining of legacy waste at Kumbakonam municipality in 2015. The Kumbakonam municipality had faced continuous fire at the three decades old dumpsite spread over 10.5 acres in Thepperumanallur village. The estimated quantity of waste at the site was about 3.5 lakh tonnes, of which 1 lakh were cleared in record time and five acres of land was reclaimed. However, the biomining implementation across the state has been patchy. Some of

Opinion: Freebies flout financial logic Opinion: Freebies flout financial logic Chandrasekaran Balakrishnan August 1, 2022 Tamilnadu Economy                                                                                   Read in : தமிழ் For a long time now, no steps were taken to find a long-term solution for the problem of freebies. It was not the top priority of policymakers, constitutional authorities, or statutory and autonomous bodies — neither the executive nor the judiciary has taken an interest to find an antidote to freebies. However, all responsible politicians and people’s leaders, and policymakers are aware that most freebies given by national and regional political parties have led to financial disaster for the states and the country. The list of freebies includes free electricity, bicycles, two-wheelers, education, LPG cylinders, laptops, travel in public transport, loan waivers, television sets, household appliances, etc. Further, free cash transfers and subsidies have also  been announced and delivered without even assessment of financial risks and checks and balances in place. The culture of “free power, free water, free fertilizers of some kinds — all distract from environmental objectives”, Chairperson of the Fifteenth Finance Commission (latest), N.K. Singh said earlier this year. Though, there is an argument that all freebies are not the same and some promote social welfare and inclusion, state finances are eroded in the process. CAG and RBI reports on states have consistently documented the deleterious impact of freebies on state finances. According to the RBI report (RBI Bulletin June 2022): As per the latest available data from the CAG, the expenditure of state governments  on subsidies has grown by 12.9% and 11.2% during 2020-21 and 2021-22 respectively. Similarly, the share of subsidies in total revenue expenditure by states has also risen to 8.2% in 2021-22 from 7.8% in 2019-20. The culture of “free power, free water, free fertilizers of some kinds — all distract from environmental objectives”, Chairperson of the Fifteenth Finance Commission (latest), N.K. Singh said earlier this year. According to the RBI report, these freebies “potentially undermine credit culture, distort prices through cross-subsidisation eroding incentives for private investment, and dis-incentivise work at the current wage rates leading to a drop in labour force participation.” Among major states in India, Punjab (2.7% GSDP), Andhra Pradesh (2.1% GSDP), Jharkhand (1.7% GSDP), Madhya Pradesh (1.6% GSDP), Rajasthan (0.6% GSDP), West Bengal (1.1% GSDP) and Bihar and Haryana (each 0.1% of GSDP) have announced freebies which are estimated to be significantly higher for the year 2022-23. Also Read:  ‘Tamil Nadu economy: Binging on borrowing’  Why the Dravidian model can’t be quickly scaled up to defeat BJP nationally  Several public interest litigation petitions have been filed urging stringent guidelines to deregister errant political parties and freeze their election symbols. Alas, beyond a few media reports and bites for a day or two, nothing happens. The recent PIL filed in the SC says that political parties — both national and  regional — violate Articles 14, 162, 266(3), and 282 of the Constitution of India by providing freebies to get votes . Further, Article 293(3) of the Constitution says that “a state may not, without the consent of the Government of India, raise any loan if there is any part still outstanding.” So far, there is no process driven policy dialog among states and the Union government on the issue of such give-aways with any kind of committees, commissions, taskforce, detailed studies through experts, etc. Though two recent incidents show some light on the issues of irrational freebies, the conviction and to resolve the problem seem unclear. First, while inaugurating a national highways project in Uttar Pradesh recently, Prime Minister Narendra Modi said, “Rewri (a fried sweetmeat) culture (Hindi for freebie culture) is dangerous for the development of the country. Those with rewri culture will never build new expressways, new airports, or defence corridors for you. Together we have to defeat this mentality, remove rewri culture from the politics of the country.” It is ironic that the Prime Minister  made the comment in UP. And it will be taken as literally not beyond a mere lip service because the ruling party’s government in Uttar Pradesh was giving freebies with some tweaking even through the Direct Beneficiary Transfer (DBT) schemes. More recently, the Supreme Court observed that “God save the Election Commission of India if it’s saying that we can’t do anything when the electorates are sought to be bribed through freebies…We are suggesting that this (freebies) has to be controlled. How it is going to be done needs to be examined.” This too would be big lip service like others because the same SC ruled in 2013 that it could not do anything to control nor permanently restrain political parties from mischievously offering voters with freebies of all kinds. Though it observed, “it shakes the root of free and fair elections to a large degree”, the Court expressed helplessness without a collective effort of all institutional stakeholders concerned. Most states in India pay several thousands of rupees as interest on loans taken by previous governments which spent the loan amounts invariably on freebies, all in the name of social welfare. Further, the SC asking the Union government to check with the Finance Commission on the issue of states being given a carte blanche on freebies is another lacuna in the approach to the issue. The Finance Commission is constituted once every five years by the President of India to look into the tax revenue sharing between the Union government and the states/ UTs for a specified period. It’s not a permanent body  to comment on freebies. However, the Chairperson of the Fifteenth Finance Commission (latest), N.K. Singh has said that, “The economics of freebies is invariably wrong. The economics and politics of freebies are deeply flawed. It is a race to the bottom and it is not the road to efficiency or prosperity, but a

‘How DMK govt is to be blamed for power cuts, not Delhi’ ‘How DMK govt is to be blamed for power cuts, not Delhi’ Chandrasekaran Balakrishnan May 11, 2022 Tamilnadu Economy                                                                    Read in : தமிழ் Rolling power cuts are what many recall about the 2006-11 DMK regime. Eighteen-hour power cuts were not too unusual at that time. Power cuts of April of this year only served to bring back those memories. What happened last month owes to legacy issues in the state but the state government has blamed the Union government without cause. Power sector fundamentals of Tamil Nadu cannot support the state’s vision of 11% growth per annum and becoming trillion-dollar economy by 2030. Below are some of the legacy issues that need to be addressed. Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) is already struggling with debt close to Rs 1.34 lakh crore. Tamil Nadu simply copied from the Congress which first introduced free power supply to farmers back in the 1960s in Andhra Pradesh. Free power to farmers in Tamil Nadu has been the root cause of misuse or power theft. Now Andhra Government has reformed its power scheme. Although farm power is still free, the government meters it so it can track misuse and cut theft. Subsidies to industries are also obstructing fair pricing of power. While globally there has been a revival of interest in hydro power as a means to cut carbon emissions, poor maintenance in the 47 hydro plants of the state is a concern. Maintenance of power plant machines and equipment is a concern. There is a vested interest in drawing from coal plants that involves tendering for coal. Successive state governments have not undertaken bold reforms in production, distribution, and redressal of compliances. Every year, the state government bails out the excess expenditure of Tangedco as its revenue pie does not exceed liabilities. Technological developments such as smart metering, underground cable laying, and modernisation of power distribution system have not been given priority. The state has installed bio-mass plants but these are not producing power. Tangedco has exceeded the annual target set by Central Electricity Authority for hydropower generation in 2021-22. Four units of the Tuticorin thermal power plant are not being operated and the state government is not hastening to make them operational. Tamil Nadu simply copied from the Congress which first introduced free power supply to farmers back in the 1960s in Andhra Pradesh. Free power to farmers in Tamil Nadu has been the root cause of misuse or power theft. Now Andhra Government has reformed its power scheme. Although farm power is still free, the government meters it so it can track misuse and cut theft. Subsidies to industries are also obstructing fair pricing of power. But what has helped Tamil Nadu is that before 2014, the southern grid was not connected to the national grid. Now they are connected. The power outages across witnessed in April, 2022 were the work of all the above factors, with each one playing into the other. The DMK government did not plan for the peak power demand during the heat waves and summer seasons. Coal tendering, which should have closed by December, was delayed and the first batch of coal is arriving only this month. Instead of taking responsibility, the government is blaming the Union government. According to the data available up to March, 2022, the total installed capacity of power was 35,138.98 MWs in Tamil Nadu which is 9% of national capacity. Out of this, 62% of installed capacity is contributed by the private sector in the state. This is a unique situation since the national average of private capacity is 49%. Some 20% comes from the Tamil Nadu government and 18% from Union government. Some 44% of the installed capacity of power in the state is from thermal power plants. Renewable energy accounts for 52% mainly because of private sector contribution which accounts for 98%. Though only 18% of capacity is with Union government, the DMK government blames the center. And it has blamed the Union government for the shortage of power by way of coal supply. New power plants are being planned to increase the installed capacity of power by 6,220 MW over 10 years. It would be up to the government to ensure the tendering processes are transparent and there is no corruption. Some 44% of the installed capacity of power in the state is from thermal power plants. Renewable energy accounts for 52% mainly because of private sector contribution which accounts for 98%. Tamil Nadu has much scope for solar power generation but the current state government is less keen on it. Tamil Nadu should leverage the national “Green Energy Corridor” project. The government should shake off coal import vested interests and back solar power much more. It’s time states like Tamil Nadu look at ways to manage the energy efficiently by involving technological solutions like smart metering to reduce the wasteful expenditures and reduce power theft (T&D losses) which is high in Tamil Nadu as compared to major states like Gujarat, etc. Otherwise, outages will mar state economic development. (The author is an economist and public policy expert) https://inmathi.com/2022/05/11/how-dmk-govt-is-to-be-blamed-for-power-cuts-not-delhi/51349/ Facebook Instagram X-twitter

‘State loses as DMK ideology makes TN invisible in Delhi’ ‘State loses as DMK ideology makes TN invisible in Delhi’ Chandrasekaran Balakrishnan April 29, 2022 Tamilnadu Economy Read in : தமிழ் The DMK has sought to project its ideology in Delhi. The DMK has sought a national profile and opened its Delhi office recently. But the practical side is that the DMK has little heft in the Delhi establishment. Some DMK leaders have personal equations in Delhi but they don’t benefit the state. . It has been a year since the DMK came to power in the state after a decade. So far, the state’s relationships with the Union government and its major departments have not been smooth. Many of the controversies raised by the ruling DMK government were unwarranted. The dubious social welfare politics or the DMK ideology has had several flaws since the beginning. The current DMK government’s scathing criticism of the Narendra Modi government at the national level has been rooted in poor thinking, especially on issues like NEET, sharing of GST to states, hostility to Hindi, lip service to federalism, disrespect of Constitutional posts such as the Governor. The current DMK government leadership has not taken advantage of the national projects for growth and development for state welfare. Instead it has refrained from forging live links with the power structure in Delhi, in the Union government and its departments, think tanks and so on. Even a state like Kerala has been able to achieve much for itself by cultivating links in New Delhi. The current Union cabinet has several ministers and other top policymakers with important portfolios with strong roots in Tamil Nadu. The state can benefit hugely from their role at the national level for the growth and development of the state. However, the DMK ideology makes a virtue of its disconnect with Delhi which will only erode the progress the state has made so far. The current Union government cabinet has several ministers and other top policymakers with important portfolios with strong roots in Tamil Nadu. The state can benefit hugely from their role at the national level for the growth and development of the state. The Union Finance Minister Nirmala Sitharaman, External Affairs Minister S Jaishankar and L Murugan, who is the Minister of State for Fisheries, Animal Husbandry and Dairy, have roots in Tamil Nadu. But the state government is not reaching out to them with the right perspective to get policy support, financial help, and industrial units key to the development of the state. Moreover, there are several top policymakers in the national government such as Chief Economic Advisor V Anantha Nageswaran, Finance Secretary and Secretary for Expenditure T V Somanathan, the Governor of Reserve Bank of India, Shaktikanta Das who is a retired IAS officer of Tamil Nadu cadre, T S Tirumurti who is now Permanent Representative of India to the United Nations, and Brajendra Navnit who is the Ambassador and Permanent Representative of India To WTO. Further, Tamil Nadu cadre IAS officers like B Anand (Secretary for Ex-Servicemen Welfare), Jatindra Nath Swain (Secretary for Fisheries), K Rajaraman (Secretary(T) and Chairman of Digital Communications Commission, Vibhu Nayar (Executive Director at trade promotion), Anita Praveen (Special Secretary at Telecommunications), R Jaya (Additional Secretary, Tribal Affairs) and others have roots in Tamil Nadu. But it doesn’t look like the state government is engaging with them. A couple of years ago, among major states, Tamil Nadu was ranked No.1 in governance. But governance has declined during the DMK government’s tenure. Core infrastructure and development projects have not been given top priority except in the state capital to some extent. Crimes against children, women and the elderly have risen. The DMK government focuses on social welfare measures for votebanks. It cannot attract large investments and business development without improving the law-and-order situation, bringing transformative reforms in core sectors like MSMEs, cracking down on corruption, In the SKOCH Governance Report Card for 2021 that ranks performance of chief ministers and major sectors in the state, Tamil Nadu features nowhere in the best performance rating. Tamil Nadu was ranked 5th only in agriculture. The state has not been ranked in major sectors like health, rural development, police and safety, water, municipal governance, transport, E-governance, district administration, finance, and revenues. The report should serve as a warning and the government should make a course correction. But its ideology may not permit that. The DMK government focuses on social welfare measures for votebanks. It cannot attract large investments and business development without improving the law-and-order situation, bringing transformative reforms in core sectors like MSMEs, cracking down on corruption, Further, the state PSUs are mostly loss-making units and are not given priority to reform to make them profitable. On the other hand, due to the state government’s disconnect from the Delhi establishments, largely arising from DMK ideology, the flagship schemes of the Union Government get diluted by the state government. The classic case is the GAIL pipeline project that is still stuck in Tamil Nadu. Even in Kerala, this project was completed successfully. The impact of the mismanagement has been severe in sectors like electricity, transport, and road and highways development. This has an impact on job opportunities with educated youth migrating to other states/cities. To sum up, the state is failing to leverage potential resources in Delhi. Without linking up with the national government and departments, the state cannot take the economy to the next level.  (The author is an economist and public policy expert) ClickHere:https://inmathi.com/2022/04/29/state-loses-as-dmk-ideology-makes-tn-invisible-in-delhi/50011/ Facebook Instagram X-twitter

Rebuttal: Tamil Nadu is a success story in Mudra loans Rebuttal: Tamil Nadu is a success story in Mudra loans Chandrasekaran Balakrishnan April 8, 2022 Tamilnadu Economy The total share of Mudra loans accounts operated by women entrepreneurs in Tamil Nadu was 65.61%. The total sanctioned loan amount for women entrepreneurs in Tamil Nadu was 48.57% which is 5% higher than all of India’s shares. (Photo Credit: Self Help Group Nursery by Project GreenHands- Flickr) Read in : தமிழ் Mudra loans have been a tremendous success in Tamil Nadu since it fulfills an essential need. People even in relatively developed states like Tamil Nadu still find it difficult to get access to credit for their businesses due to various factors such as lack of collateral. To address these challenges and to help micro, small and medium enterprises (MSMEs) get access to formal credit without collateral backup, the Union government launched the Pradhan Mantri Mudra Yojana (PMMY) or Mudra scheme in 2015. The interest rates are transparent and affordable compared to other modes of loans available in the market. Under the Mudra scheme, three types of loans namely Shishu- up to Rs.50,000, Kishor- Rs. 50,001-Rs. 5 lakh, and Tarun- Rs. 5 lakh to Rs. 10 lakh are provided to help business enterprises in manufacturing, processing, trading, services, and allied activities of agriculture. Lending institutions have been given a clear mandate and thrust to give loans to eligible business enterprises as much as possible. The major lenders are all public and private sector commercial banks, state co-operative banks, regional rural banks, microfinance institutions, NBFC -microfinance institutions, non-banking financial institutions, and small finance banks. During the last seven years, the Mudra loans scheme has been a phenomenal hit among the MSMEs including in Tamil Nadu and played a key role in infusing confidence and lubricating business enterprises of all kinds with working capital backup. About 6,000 products are manufactured by MSMEs and employ several millions of people both directly and indirectly. More than 23.27 crore Mudra loans amounting to Rs 8.10 lakh crore were given to women. This constitutes about 68% of the total number of loans and 44% of the amount of loans provided. According to the latest data available, as of 18.03.2022, under the scheme, cumulatively over 34.28 crore accounts involved a sanctioned amount of Rs. 18.52 lakh crore, out of which Rs.17.99 crore (97.19%) was dispersed across the country. Out of this, more than 23.27 crore loans amounting to Rs 8.10 lakh crore were given to women. This constitutes about 68% of the total number of loans and 44% of the amount of loans provided. As per the Udyog Aadhaar Registration report, a total of 1,105,983 MSMEs were registered in Tamil Nadu, out of which 9,68,497 are micro-enterprises and 1,33,123 are small enterprises, and 4,362 are medium enterprises. Tamil Nadu’s share is 10.81% of such enterprises in India. The percentage share of Tamil Nadu’s micro, small and medium enterprises is 10.81%, 10.91%, and 8.75%, respectively. The Mudra scheme has been the most popular in Tamil Nadu for access to credit for MSMEs. Registration and compliance to loan norms for these MSME units are easy in Mudra. The total number of accounts under the scheme is 4.08 crore or 12% of all-India figures. So far, the total loan amount dispersed to beneficiaries is Rs.1,85,420.03 crore, which is 10.30% of all-India. In a reply to a question raised in Parliament (Rajya Sabha) on 05.04.2022, it was reported that as of 25.02.2022, there was a total of 2,64,46,737 women entrepreneurs in Tamil Nadu which is 11.49% in the country. The total amount of loans dispersed to women entrepreneurs was Rs.89,235.22 crore, which is 11.67% of the country. The total share of Mudra loans accounts operated by women entrepreneurs in Tamil Nadu was 65.61%. The total sanctioned loan amount for women entrepreneurs in Tamil Nadu was 48.57% which is 5% higher than all of India’s shares. Also, the total loan amount dispersed to women entrepreneurs in Tamil Nadu was 48.81% which is 6% higher than all of India’s share of women entrepreneurs. Tamil Nadu has about 5 million MSMEs in the state employing one crore people, which is the 3rd highest in the country. The state government in 2020-21 has arranged loans of Rs 1 lakh crore through its agencies to less than 19 lakh units in the state. Some 3 million units did not get any credit. Mudra scheme is there to bridge such gaps. Tamil Nadu has a total population of about 8 crores, out of which about 6.28 crore are adults aged 18 and above. People ask how for 6.28 crore people in the state, 4.07 crore loan accounts are there under the Mudra scheme in Tamil Nadu? But this is a misunderstanding. The Mudra scheme’s aim is not to give loans to every single individual in the country or state. Mudra scheme is an institutionalized “refinancing” model to bridge the gaps in the lack of continuous access to timely financial support for MSMEs. The scheme is not a typical standard model loan. For instance, Tamil Nadu has about 5 million MSMEs in the state employing one crore people, which is the 3rd highest in the country. Most of them are in the informal sector. The state government in 2020-21 has arranged loans of Rs 1 lakh crore through its agencies to less than 19 lakh units in the state. Some 3 million units did not get any credit. Mudra scheme is there to bridge such gaps. Contrary to what this article says, in business it’s not possible to give one person just one loan when even a tiny business needs continuous cash flow throughout the year. And it is not possible to club all the loans as one account either. Under the Mudra scheme, the beneficiary is allowed to take loan amounts more than once in all three categories after repaying the availed loan with interests in a financial year to help their working capital requirements. Each time the loan beneficiary is counted afresh. It

In Tamil Nadu, MGNREGA is unproductive, old age pension In Tamil Nadu, MGNREGA is unproductive, old age pension Chandrasekaran Balakrishnan April 7, 2022 Tamilnadu Economy Out of a total of 16.88 lakh migrants from other States to Tamil Nadu, 8.48 lakh went to rural areas and 8.20 lakh went to urban areas. More than 50% of migrant labourers went to rural areas seeking employment. Photo Credit: PIB -Chennai. Read in : தமிழ் In a highly developed state such as Tamil Nadu with a developed manufacturing and service sector, urban or rural job schemes such as MGNREGA skew labour markets and impede progress. Corruption is endemic in these schemes that serve largely people who are over 50 years old. Tamil Nadu has achieved poverty eradication successfully, with a 5% poverty rate. The state is highly urbanised with about 60% of people living in urban areas. Out of the total urban population in the country, 11% live in Tamil Nadu. Tamil Nadu is a $248 billion economy. Eleven percent of its GSDP comes from the agriculture sector, 33% from the manufacturing sector, and 54% from the services sector. This indicates the existence of competitive markets requiring a skilled labour force. Tamil Nadu imports lakhs of labourers from north and north-eastern states. Four decades of Census data (1980-2011) analysis on migration patterns reveals that out of a total of 16.88 lakhs migrants from other States to Tamil Nadu, 4.84 lakh migrants came for employment, 40,000 came for business, 20,000 for education. Migration for employment was 4.83 lakh, out of which 2.75 lakh went to rural areas jobs and 1.95 migrants went for jobs in urban areas. Current figures for migrant labour are much higher. Thus, out of a total of 16.88 lakh migrants from other States to Tamil Nadu, 8.48 lakh went to rural areas and 8.20 lakh went to urban areas. More than 50% of migrant labourers went to rural areas seeking employment. Studies indicate that if one northern Indian labourer comes to Tamil Nadu seeking jobs at least two educated people from Tamil Nadu migrate out of home state for jobs. Tamil Nadu state leads with largest share all India for agriculture products like drumstick (98%), tapioca (44.4%), coconut (29.1%), tamarind (25.3%), banana (19.4%), turmeric (15%), floriculture (16.5%), gooseberry (18%), ragi (18%) horsegram (18%), sapota (17.4%), etc. In the manufacturing sector, Tamil Nadu is the largest producer of cotton yarn, accounting for 41% of India’s production.The state’s share in electronics and hardware is 16% in all of India. Tamil Nadu is the 4thlargest state in food processing units in the country. An analysis inferred that as compared to Karnataka and Maharashtra “Tamil Nadu has the most balanced growth model with manufacturing and high-tech services each contributing nearly one-fourth of the GVA.” However, major crops in agriculture sectors in the state are struggling with many issues like shortage of labourers, higher input costs like the rise of wages, etc. Similarly, manufacturing and services sectors have also experienced labour shortages. Women’s labour force participation in economic activities is shrinking in the state. One of the major distractions skewing the labour markets is the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA scheme) which provides 100 days of employment for unskilled labour in rural households. This scheme has been implemented as one size fits all model for over a decade and a half since 2006-07. Mostly unskilled labourers aged 50 years and above are getting jobs in this scheme. In a highly urbanised state like Tamil Nadu, this scheme does not create many productive activities. They promote corruption among middlemen who distribute the wages. Mostly unskilled labourers aged 50 years and above are getting jobs in this scheme. In a highly urbanised state like Tamil Nadu, this scheme does not create many productive activities. They promote corruption among middlemen who distribute the wages. MGNREGA scheme is “fodder for fraudsters”. Moreover, auditing agencies like CAG have time and again warned the government authorities to set right the financial malpractices but none has bothered. Most NGOs have been largely silent on this anomaly. The MGNREGA scheme has already created irreversible negative changes in a state like Tamil Nadu in several sub-sectors by creating labour shortages, a many-fold increase in wages, etc. Several studies have pointed to the unproductive works done under the MGNREGA scheme in Tamil Nadu and its negative impacts on farming activities. It must, however, be said these studies have ignored the premise that the scheme helps poor people to get purchasing power and provides a society security net. In other words, elderly care has been centralised by this scheme with wages. Maheshwari, M. Selva, and Gangwar, L.S (2011) study on dairy farmers in Thanjavur district found that farmers faced an acute shortage of labourers during peak paddy planting and harvesting due to MGNREGA. Labour wages have increased significantly since the implementation of the MGNREGA scheme. It was found that milch animals of some landless/small dairy farmers are being maintained by children or aged family members, a majority of adult family members prefer the MGNREGA jobs to earn wages. Similarly, Carswell, Grace, and De Neve, Geert (2014) study in two different villages in the Tirupur district of Tamil Nadu revealed that waterbodies work completed under MGREGA did not create any “new or durable assets”. The study also concluded that “works are aesthetic rather than productive” under the MGNREGA scheme. While this has been the case with the rural jobs scheme, the present ruling DMK government like other state governments in Odisha, Kerala, Himachal Pradesh, Jharkhand and Madhya Pradesh is implementing the Urban Employment Guarantee scheme for unskilled labour in urban areas. This scheme was recommended by a committee headed by economist and former governor of RBI Dr C Rangarajan. Though, there is no fixed number of days for jobs under the urban jobs scheme, the wages fixed are bound to skew urban labour markets too. This new scheme covers two zones in greater Chennai Corporation, one zone in each of 14 city corporations, 7 municipalities, and 37 town panchayats for the pilot project.These