Tamil Nadu’s fiscal turnaround will be driven by cleaner governance, transparent procurement and stronger tax administration, says finance secretary M A Siddique. In an interview, the additional chief secretary (finance) discusses the state’s reform agenda, plans for an Economic Advisory Committee, PSU restructuring and the strategy to create fiscal space for higher capital expenditure. Excerpts: Following the White Paper on TN’s fiscal management, what are the new govt’s immediate priorities? What early gains are visible from its promise of clean governance?The White Paper was comprehensive and correctly identified key structural issues. Some can be addressed in the short term, others will require deeper structural reforms over time. Under Chief Minister C Joseph Vijay’s vision of clean governance, the state govt’s transparent procurement framework will strengthen public trust and generate greater public interest in govt processes. We expect to achieve savings of at least 10% in the procurement of materials, services, and other govt purchases by ensuring greater transparency and promoting healthy competition. Several restrictive clauses in the procurement process have been removed, enabling wider participation and helping the government secure more competitive and efficient bids. We have already begun to see some positives. We hope that enhanced transparency and accountability will encourage citizens and businesses to make timely tax payments, and that public participation in the state’s clean governance initiative will continue to gain momentum, ultimately bringing in positive results. What are govt’s priorities to improve revenue collections?The state’s taxation powers are limited. Our major sources of revenue are GST, petroleum taxes, excise on liquor, stamp duty and registration, and motor vehicle taxes. There is little scope to increase tax rates, particularly on petroleum products, which are heavily taxed. The real opportunity lies in improving tax administration. Around 80% of GST revenues flow automatically through return filings. The remaining 20% depends on scrutiny, audits and enforcement, which unfortunately did not receive adequate attention in the past. The state govt is strengthening audit and scrutiny mechanisms and also working to restore the faceless assessment system that was discontinued earlier. These reforms have the potential to improve revenue collections, although benefits will take about a year to materialise.Why is the faceless assessment system so important?Faceless assessment reduces discretion and opportunities for corruption. In a face-to-face system, there is always the possibility of collusion between taxpayers and officials, potentially resulting in significant revenue losses for the govt. A faceless system ensures uniform and transparent assessments, regardless of who the taxpayer is. GOI witnessed substantial gains in tax collections after introducing faceless income-tax assessments, and we expect similar improvements.The White Paper identified mining as a major untapped source of revenue. Is the govt working on a new policy?The issue is not the policy itself; the policy framework is adequate. The challenge lies in implementation. Our focus is on ensuring that mining licences are processed faster without delays. Faster approvals and smoother administrative processes will help unlock the sector’s revenue potential. Mining resources are finite, so timely allocation and operational efficiency are critical. We have already indicated this direction in the Governor’s Address. Our objective is to double mining revenues, and we believe there is potential to achieve that.Is the new govt considering appointing an economic or expert advisory committee to guide its reform agenda?Yes, one of the immediate priorities of the TVK govt is the formation of an economic advisory committee. The govt is currently working on it and expects it to provide valuable guidance on economic and fiscal reforms. The composition is still being finalised, and the govt is considering various options, including experts with rich experience in public finance and economics. The state govt is evaluating several senior names. The committee should comprise economists and professionals with deep expertise in public finance and fiscal management.Is there a plan to address mounting debt burden of state-owned entities?Yes. Each public sector undertaking has been asked to prepare its own restructuring plan through its respective board. The larger concerns remain in the power and transport sectors. Internal reforms are already underway, and each organisation is being evaluated individually before a broader strategy is finalised.Will that include debt restructuring for state-owned entities?Debt restructuring is certainly required. However, this requires the approval of the Union govt because it involves transferring liabilities to the state govt’s books. Schemes such as UDAY addressed similar issues in the power sector. Any future restructuring would need a comparable framework with support from the Centre.NITI Aayog recently ranked TN relatively low on the quality of public expenditure. How do you respond?The concern is not about welfare expenditure. Welfare spending is important and serves a legitimate purpose. However, capital expenditure also needs to increase simultaneously. Over the past few years, capital spending was squeezed because revenues did not grow adequately. This was due not only to structural issues but also to implementation deficiencies highlighted in the White Paper. There is nothing inherently wrong with borrowing, provided revenues grow proportionately. The concern arises when debt accumulates much faster than the state’s revenue capacity. Today, the state’s total debt stock exceeds three times its annual revenue. Ideally, it should be much lower. The only sustainable solution is to increase revenues and gradually improve fiscal capacity.
