Vijay govt announces Rs 79,219 crore spending plan amid debt concerns

The Vijay government has announced spending commitments of Rs 79,219.06 crore in its maiden budget and in the debates on demands for grants in the Tamil Nadu Assembly.

The package brings together large infrastructure and power projects, welfare measures and farm relief, even as opposition parties have warned that the scale of spending could worsen the state’s debt and deficit position.

The government has, however, said it remains committed to fiscal prudence and has set up an economic advisory council headed by Montek Singh Ahluwalia to create an additional Rs 15,000 crore this year.

Finance Secretary MA Siddique said Tamil Nadu’s finances remain in a difficult position but are showing signs of recovery, while the government has argued that much of the capital spending will be spread over several years rather than creating an immediate strain on the exchequer.

During the 28-day budget session, which ended on September 8, the government made 17 major announcements under Rule 110 across departments. These included a Rs 33,066 crore power sector and transmission infrastructure scheme, the Rs 20,800 crore Thoothukudi Supercritical Thermal Power Plant, a Rs 11,000 crore infrastructure and roads push, Rs 1,850 crore for urban road repairs and junction modernisation, Rs 1,200 crore for a new Assembly-cum-Secretariat complex, annual schemes including free electricity to people at Rs 10,000 crore, and cooperative crop loan relief expansion of Rs 953.06 crore.

The package also includes plans for a world-class Olympic City and a dedicated MotorSports City capable of hosting international racing events such as Formula 1. The article said the eventual cumulative amount could be higher, though the government has not officially outlined that so far.

The announcements include an integrated Assembly-Secretariat complex at Pattinapakkam in Mylapore and a wider Rs 55,628 crore power sector overhaul. A senior government official said the measures are split between one-time capital spending and recurring operational expenditure.

Of the total, capital and infrastructure investment has been put at Rs 57,703 crore, while the power and energy component includes the Thoothukudi project on a public-private partnership model, Rs 33,066 crore for statewide transmission modernisation and Rs 1,762 crore for urban power grid upgrades in Chennai.

The official said the infrastructure outlay would be phased over three to five years, with Rs 1,500 crore to Rs 2,000 crore in the short term for project reports, land clearances, initial work on the Assembly complex and early tech park developments, Rs 15,000 crore to Rs 20,000 crore in the medium term for Chennai power upgrades and regional transmission lines, and more than Rs 35,000 crore in the longer term for major energy assets.

The recurring expenditure includes welfare measures and rural support. The Annapoorani Super Six free LPG scheme will cost Rs 4,000 crore a year, and the government has currently announced three LPG cylinders. The 200-unit free electricity subsidy will cost Rs 1,730 crore a year.

An official also referred to a Rs 2,044 crore cooperative crop loan debt relief measure, a Rs 720 crore annual subsidy to absorb the Rs 3 per litre increase in procurement price for Aavin milk producers without raising retail prices, and revised allowances for MLAs across 234 constituencies, comprising Rs 75,000 a month for vehicles and Rs 25,000 a month for assistants, adding Rs 28.08 crore annually to the exchequer.

The government has also announced the withdrawal of legal cases against protesting farmers and teachers and confirmed that it is dropping the proposed Parandur greenfield airport. It said allocations for the ‘Annan Seer’ wedding scheme, which provides an 8-gram gold coin and silk saree to brides, along with government-funded gold rings for newborns, would also add to welfare spending.

The government’s White Paper put total outstanding debt at nearly Rs 10.98 lakh crore and projected a fiscal deficit of Rs 1.21 lakh crore. A source said the state’s debt-to-GSDP ratio stands at 27.01 per cent, above the 23 per cent benchmark cited in the article, and Finance Minister N Marie Wilson has announced borrowing of Rs 1,73,445 crore in the current financial year.

The revenue deficit stands at Rs 55,775 crore, while interest payments on past loans amount to Rs 78,683 crore. The article said roughly one-third of state revenues is already being used to service interest, raising concern over recurring expenditure of more than Rs 8,500 crore.

To address this, the Ahluwalia-led council is expected to improve revenue mobilisation in Commercial Taxes, State Excise and Stamps and Registration to create additional fiscal space for FY27, and Siddique said around Rs 2,000 crore of the Rs 15,000 crore target has already been secured.

Siddique said the finances were in a “difficult position” and that the overall debt cannot be reduced immediately, making borrowing unavoidable. “The state’s finances were in poor shape a few months ago, but thanks to aggressive policy changes, stability is returning,” he said, adding that the structural problems cannot be fixed overnight and would take at least two years to improve fully. He also said the key test would be ensuring that income growth outpaces the rise in debt.

The opposition stepped up its attack on the government over both the spending priorities and the state of the finances.

AIADMK general secretary Edappadi K Palaniswami accused Vijay of choosing Pattinapakkam for the new Secretariat-Assembly complex because it is close to his residence and said spending Rs 1,200 crore on it put vanity and “publicity over public welfare”.

He also criticised the loan waivers, which he said were first capped at Rs 50,000 for marginal farmers and later expanded to Rs 75,000, calling them “scientific deception” and a betrayal of trust.

Citing the TVK government’s White Paper on State Finances, he said Tamil Nadu’s total liabilities had reached Rs 13.18 lakh crore and alleged that the administration had borrowed more than Rs 28,000 crore in its first 100 days without trying to consolidate the finances.

Former Finance Minister and DMK legislator Thangam Thennarasu also criticised the budget, saying annual borrowing, which he put at around Rs 1 lakh crore during the DMK’s tenure, had risen to Rs 1.22 lakh crore under the TVK government.

He claimed the budget had cut capital infrastructure expenditure by Rs 3,000 crore and allowed the revenue deficit to widen by Rs 7,000 crore, and said it was silent on major pre-election promises for women, youth and unconditional farm loan waivers.

An official, meanwhile, said the government had intentionally left out big pre-election freebies such as the Rs 2,500 monthly allowance for women and six free LPG cylinders to avoid immediate financial stress.