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Wednesday, June 03, 2020

Covid-19 crisis: TN’s austerity measures to save up to Rs 1,000 crore

Among the latest austerity measures declared were restrictions on air travel outside the state. The Leave Travel Concession (LTC) was also "deferred” for all employees until further orders.

Written by Arun Janardhanan | Chennai | Updated: May 23, 2020 1:43:13 pm
Karnataka Cabinet, Karnataka Lockdown Relaxations, BS Yediyurappa The latest order said the government has carried out a detailed study of the current situation and was taking necessary action to minimise fiscal stress. (File)

The Covid-19 crisis has devastated many lives in Tamil Nadu’s manufacturing and unorganised sectors, with thousands losing jobs or wages for the past two months.

As an economic crisis triggered by the lockdown seems to have far-reaching implications on the state economy, the state government has also been forced to take drastic steps, from banning the creation of new government posts to purchase of vehicles to foreign travel of officials to presentation of gift articles. Even official seminars, conferences and dinners have been banned now.

A government order signed by S Krishnan, additional chief secretary, has declared a “total ban on creation of new posts” on Thursday night. Another order signed by K Shanmugam, chief secretary, also had a number of measures to cut expenses across various accounts on a massive scale; ban on foreign travel at the government’s expense; air travel within the state, unless the airfare is lower than or equal to the train fare, and air travel in executive class for officers of any pay grade.

Read| COVID-19 in Tamil Nadu: Govt announces measures to cut expenditure; 2,500 field workers roped in for Chennai slums

A top source in the finance department said these were desperate steps to save money and suggested that states should be allowed to borrow directly from the Reserve Bank of India (RBI) in this huge crisis. “An estimated projection shows that there will be a drastic shrinking of growth rate. But we hope that we can save up to Rs 1000 crore from these austerity measures to run the show. The Centre’s help was very minimal and they did not help clear pending payments. It is a fact that deposits in banks have increased during the lockdown as middle class spending has gone down drastically. Unfortunately there are roadblocks in lending. The states should be allowed to borrow from the Reserve Bank of India (RBI)… Let the states be allowed to sell SLR (Statutory Liquidity Ratio) bonds and borrow money,” the source said.

He said other than borrowing from elsewhere or direct borrowing from RBI, states are left with very few options to generate revenue. “One of the revenue sources such as property registrations have gone down. And we cannot find money by increasing power, water and transport charges during a crisis. Taking the idea of a federal system in true spirit, direct borrowing from RBI should be allowed,” he said.

Among the latest austerity measures declared on Thursday night were restrictions on air travel outside the state. The Leave Travel Concession has also been “deferred” for all employees until further orders.

A flat 20% cut in office expenses, 50% cut in furniture purchases and 25% cut in advertising and publicity were among other decisions. Total ban on official lunches, dinners, other forms of entertainment, purchase of new vehicles except for emergency services and an instruction to avoid training programmes except for essential reasons have also been enforced as part of austerity measures. The order said the training abroad also should be “strictly avoided.” Foreign travel at government cost has been stopped and general transfers also kept on hold for 2020-21 to minimise expenditure on transfer travel expenses.

While the government expects to save Rs 1,000 crore from these austerity measures, the state had suspended encashment of earned leave for one year period and also freezed the Dearness Allowance till July 2021 of state employees last month. It was to save up to Rs 7,300 crore. There are 12 lakh employees and 7.4 lakh service pensioners.

The latest order said the government has carried out a detailed study of the current situation and was taking necessary action to minimise fiscal stress so that expenditure on welfare schemes and capital works are ensured to revive the economy.

The state government had recently borrowed Rs 1,200 crore from the State Bank of India (SBI) for the payment of three months wages of workers in the state transport corporations.

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