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Challenges await Jayalalithaa as Tamil Nadu chief minister

Enormous challenges lay ahead for the third-time chief minister, as the DMK government ensures near-empty state coffers for AIADMK. Will Jayalalithaa be able to turn around things?

Tamil Nadu chief minister J Jayalalithaa

Residents of Thandikudi, a village 42 km east of Kodaikanal, nestled deep in the Western Ghats, erupted with joy as they watched the poll results on their TV sets announcing the rout of the ruling Dravida Munnetra Kazhagam, or DMK. They had all voted against the DMK.

Five years ago they were far less politically aware . But the free TV sets distributed among them by the DMK government, as part of its 2006 election promise, had ironically served to keep them very well informed about the 2G spectrum scam and the DMK's role in it. "Such corruption is unbearable. They had to go,'' says P. Muthu Kumar, a local farmer. Earlier, the villagers' only sources of information had been a state-run radio station and a few copies of a vernacular daily.

Mithun

We will think twice about new investments in Tamil Nadu. Our rivals have plants in places, where they get cheap power supply: Mithun Chittilappilly


Free TV sets were only one of the many freebies doled out by the outgoing government. It also provided rice at Rs 1 per kg, other subsidised food items, a free gas stove per family with an LPG connection, free clothes for festivals, free health insurance and a grant of Rs 75,000 to convert mud houses to pucca houses.

 State of distress

  • Fiscal deficit will be Rs 13,507 crore in 2011/12
  • Fiscal deficit will be Rs 13,507 crore in 2011/12
  • Economic growth has slumped almost by half
  • Massive subsidies have left the exchequer deep in debt
  • Public debt set to cross Rs 1 lakh crore in 2011/12
  • Crippling power shortage
Shortage of labour

  • Rising liquor sales/consumption hitting productivity
  • Many industries have stopped expanding
  •  
  • Jayalalithaa's promised freebies
  • Free fans, mixers and grinders
  • Free laptops for all students from 11th standard
  • Rs 25,000 and four grams of gold as marriage assistance
  • Free houses to 300,000 BPL families
  • Six months of maternity leave plus Rs 12,000 aid
  • Free bus passes for all senior citizens
  • 20 litres of potable water per day to BPL families

These sops were meant to ensure DMK's re-election, which they have not. But what they ensured is near-empty state coffers for J. Jayalalithaa's AIADMK government. Once an economic power house, Tamil Nadu's growth declined during the DMK rule from 20.66 per cent in 2006/07 to 11.76 per cent in 2010/11. A revenue surplus of Rs 4,545 crore in 2007/08 has been transformed into a revenue deficit of Rs 3,129 crore in 2010/11, while public debt has risen from Rs 57,610 crore in 2005/06 to cross Rs 1 trillion (1 trillion = 100,000 crore) today.

Worse, the welfare measures, coupled with the Mahatma Gandhi National Rural Employment Guarantee Scheme, have reduced the need for unskilled and semi-skilled workers to hunt for jobs, resulting in a serious labour shortage, especially in the villages.

"Agriculture here is in a state of crisis," says M.R. Sivaraman, former Union revenue secretary.

The power situation, too, is precarious. From being power surplus state until three years ago, Tamil Nadu now holds the dubious distinction of the state with the maximum amount of load shedding in the country. Latest data from the Central Electricity Authority shows the state shed 2,414 MW of peakhour load in March 2011 - the highest in the country.

Not surprisingly, industries are scaling down. V-Guard Industries, which has a plant at Coimbatore with a capacity to manufacture 125,000 coils of wire per month, has scaled down production to 35,000 coils due to daily load shedding. "All our rivals have their plants in places where they get good power supply. We will think twice about new investments here," says Mithun Chittilappilly, Executive Director.

Will Jayalalithaa bring change in her third term as chief minister? Her party too promised a fresh lot of freebies, fulfilling which will further deplete the state's finances. The ability to raise further revenues is limited as the state is already heavily taxed.

The Tamil Nadu State Electricity Board is bankrupt and has not paid any of the renewable energy producers for the last six months. The state is also heavily dependent on liquor revenues (Rs 14,033 crore in 2010/11) and the rising per capita alcohol consumption is affecting labour efficiency. But her record stands Jayalalithaa in good stead. The last time she was in power, she inherited a revenue deficit of Rs 2,739 crore (in 2001/02). In 2005/06, before she was voted out, the state had a revenue surplus of Rs 1,951 crore.
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