The “welfare scheme” to provide one-gram gold ring to babies born in government hospitals would cost the exchequer about ₹756 crore annually. File
| Photo Credit: PTI
The Tamilaga Vettri Kazhagam (TVK)-led regime in Tamil Nadu, which assumed office on May 10, 2026, has, so far, brought out two White Papers – one on public finances and the other on power utilities. While the first talked of “deterioration” of the situation in the last five years (2021-26) – when the Dravida Munnetra Kazhagam (DMK) was in power, the second took a longer view of the health of power utilities over the last 25 years. The common thread of the two documents is: the precarious financial condition.
The profligacy of the successive governments has been a key factor that contributed to the very tight fiscal situation in the State. In the name of welfarism, they have been overindulgent in disbursing freebies. Afraid to wound popular political sentiments, the intelligentsia has also kept quiet. But such decisions should have been put to severe critical scrutiny as they reduced the availability of funds for public health, education, agriculture, and infrastructure – all of which come under development expenditure.
One classic example is the cash dole to ration card holders for the Pongal festival. What was started with ₹100 in 2009 rose to ₹2,500 in 2021 and ₹3,000 in 2026, the last two instances of which totalled to ₹12,300 crore. Despite distributing the largesse, the incumbent regimes were voted out in 2021 and 2026. Scrapping the scheme would not have made any difference to those who have been celebrating the festival with usual gaiety.
Unfortunately, the TVK too does not seem to have learnt any lesson from the experiences of its predecessors as its leader C. Joseph Vijay, immediately after being sworn in as Chief Minister, cleared a proposal for providing 100 more units of electricity free to those who consumed up to 500 units bimonthly. This was done as part of his fulfilling an electoral assurance regarding 200 units free every month to “eligible” domestic consumers. With this, the government added ₹1,730 crore to its tariff subsidy being provided to the State discom. The subsidy in 2025-26, under the DMK regime, was close to ₹17,000 crore. If the present government had, instead, begun cracking down on the parallel system of houseowners collecting from their tenants electricity charges that are far in excess of the official tariff slabs, the lower strata of society, which has been at the receiving end and which was said to have supported Mr. Vijay during the poll, would have got some relief on its power bill. Or, had it restored monthly billing for the domestic category, it would have made around 2.5 crore consumers happy. The government’s payment of tariff subsidy to the discom is in addition to 100% funding of revenue loss and equity share capital contribution. In total, the State provided nearly ₹33,400 crore last year just for maintaining “normalcy” in only one segment of the economy. In 2016-17, this was about ₹10,835 crore.
It is no wonder why the State government’s revenue deficit is always on the rise, especially after 2022-23, when the practice of 100% loss funding came into vogue. Power Minister R. Nirmalkumar, while presenting a few weeks ago the White Paper on the power utilities, stated that there would be no tariff revision this year. Maintaining the status quo appears to be the government’s approach in other revenue- earning areas. Another “welfare scheme” announced by this regime is the provision of one-gram gold ring to babies born in government hospitals. This would cost the exchequer about ₹756 crore annually and this will be implemented from September 15. As of now, the new government has not made any attempt to prune the welfare schemes.
Under such circumstances, it is unfathomable how the new government can continue with “key welfare schemes” of the previous governments as revenue deficit is estimated to cross the ₹90,000-crore mark in 2026-27. Given the present climate of political instability internationally, Tamil Nadu, whose industrial and services sectors are deeply integrated with the global economy, is likely to experience greater volatility than many other States. After allowing 12% growth in the State’s Own Tax Revenue, the government’s White Paper on public finances has scaled down this year’s total revenue receipts (TRR) by ₹14,000 crore – to around ₹2,15,000 crore. As the committed expenditure – pension, salaries, and interest payments – accounts for around 65% of TRR, this coupled with freebies virtually erodes fiscal space for capital expenditure and investment.
Barring Mr. Vijay, who, at the NITI Aayog meeting three weeks ago, outlined his ambition of turning Tamil Nadu into a $1.5-trillion economy by 2036, his government and Ministers have not spoken of grand plans for the State. Perhaps, this marks the realisation on the part of the ruling party about the government’s finances. Their enthusiasm in plugging leakages and tackling corruption is understandable, but one has to be realistic in accomplishing tangible results at a short time in a well-entrenched system. So, it is time the TVK regime made it clear to the public that it does not have money to implement universally applicable welfare schemes, old or new. In the process of ensuring targeted delivery of welfare measures, it may earn the wrath of certain sections of society. Still, this should not deter it from cleansing the system. As Mr. Vijay and most of his Cabinet colleagues do not carry any political baggage, they are well-placed to take radical measures to make the government’s finances healthy. Otherwise, the TVK’s promise of transforming Tamil Nadu into a “financially self-sufficient State” will remain just that – a promise.
Published – July 14, 2026 12:49 am IST
