The Tamil Nadu government’s expenditure on subsidies is experiencing a significant upward trend, not only in raw financial figures but also as a proportion of the state’s overall income and spending. This growth is projected to continue in the coming years.
A detailed examination of the Comptroller and Auditor General of India’s (CAG) report on State Finances for the fiscal year 2023-24 reveals a dramatic increase in these subsidies. The amount surged from ₹20,114 crore in 2019-20 (a period influenced by the COVID-19 pandemic) to an impressive ₹37,749 crore by 2023-24. This represents a substantial year-over-year increase of approximately 27%, largely driven by the implementation of new initiatives such as the Kalaignar Magalir Urimai Thogai (KMUT) scheme. The comprehensive CAG report, presented to the Assembly on Friday, meticulously analyzed the state’s financial health over this five-year span.
Looking at the broader financial picture, subsidies as a percentage of revenue receipts (RR) expanded from 11.54% to 14.27% during this five-year period. Similarly, their share in revenue expenditure (RE) climbed from 9.57% to 12.19%. When focusing specifically on non-committed expenditure – which excludes fixed costs like salaries, pensions, and interest payments – subsidies consumed an even larger portion, rising from 35.12% to 38.91%.
The CAG report clarifies that government subsidies are categorized into two main types: explicit and implicit. Explicit subsidies are those clearly recorded under the ‘subsidies’ budget head. Notable examples in Tamil Nadu include the KMUT scheme, support for the public distribution system (PDS), reduced power tariffs for domestic consumers, complimentary bus travel for women, and discounted bus fares for students.
Conversely, implicit subsidies occur when the government provides essential social and economic goods or services at a price below their actual cost. These can take the form of direct benefits, in-kind provisions, or various concessions. For instance, the provision of free bicycles and the subsidized production and distribution of high-quality seeds are considered implicit subsidies, collectively costing the state exchequer ₹801.77 crore in 2023-24 alone. The CAG has urged the state government to develop strategies that ensure adequate returns on its investments and enable it to recover the costs of borrowed funds, rather than continuously absorbing these expenses through implicit subsidies in its budget.