Kerala and welfare of non-resident Keralites Monday, Dec 22 2008 

Entrance of Kerala Assembly

The Government accorded the high priority to enacting of the welfare legislation for non-resident Keralites last week. Though the Assembly had 21 Bills to replace Ordinances and many other published legislation waiting its consideration, the Kerala Non-Resident Keralites Welfare Bill got priority over Bills to replace six Ordinances. Thus, the House passed Bills to replace 15 of the Ordinances and took up the fresh legislation on NRK welfare. This reflects increasing clout of Non-resident Keralites in the polity.

The NRKs are not a vote bank in Kerala. However, every political party woos them because they are a good source of political contributions, especially in an election year. Note that Kerala is reaching out for welfare of Malayalees gobally when it could not even pay pensions to agriculture workers, widows and the disabled in time.

The Bill nominally differentiates between the non-resident Keralites working in India and abroad. The overseas Keralites would have to pay a contribution of Rs. 300 a month to be a member while those working in other States need pay only Rs. 100. No distinction has been made between those working in the Gulf countries and  United States/Europe.

The government will be providing about two per cent of the total contribution to the Fund as grant to partially meet the administrative expenses. There are also plans to raise funds from other sources including financial institutions for various programmes to be charted out under the Welfare Scheme.

The Government has already enacted welfare legislation for most categories of workers and a few more are on the anvil. So, it could not be faulted for bringing legislation for the welfare of overseas Keralites, spending money from the exchequer. However, the income levels of NRKs vary considerably. But, it can be assumed that the well-to-do would not join the Fund if the government contribution is kept low. (Given the increasing clout of NRKs, government expenditure on them is likely to go up considerably.)

As mentioned earlier, the Bill does not make significant distinction between various NRKs or their job status. However, when it comes to their contribution to the economy, the differences are vast. Welfare legislations are normally aimed at taxpaying citizens and resident citizens. The NRKs do not pay any tax to Kerala Government. Keralites working in other States pay local taxes and income tax. However, no portion of it comes to Kerala Government. (The share in income tax is based on enumerated population of respective States.) So, their welfare is basically the responsibility of the respective State governments and Central government. Kerala is overreaching itself by providing welfare cover for them, especially when its finances are in bad shape.

Keralites working abroad pay no taxes. Those working in the United States and Europe are only occasional visitors to Kerala. The Gulf Malayalees sent in most of their surplus cash to Kerala which is expended in the State (substantially on non-productive purposes). The State government collects value added tax on these expenditures. However, they pay no income tax, except when money is invested in the State.

There are now talks of major rehabilitation programmes for Gulf returnees. Many of them are sure to involve government expenditure. If Malayalees from aboard are returning empty handed, it is time that the government made emigration stricter rather than opening up its already empty coffers. That way, we may not have to import workers from West Bengal, Bihar and other States at levels we are doing now.

By the by, isn’t it time that the State government cared for the welfare of the migrants to Kerala?

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Welfare pensions is just a refund of tax Friday, Mar 7 2008 

Budget SpeechKerala’s Finance Minister Dr. T. M. Thomas Isaac has just announced a hike in welfare pensions in his Budget for 2008-09. With this, the pensions would go up to Rs. 200 a month (Rs. 2400 annually).

He has sought to raise money needed for this (Rs. 1000 millions) by imposing a cess of one per cent on sales and value added taxes. Kerala has over 30 million people. So, on an average, every citizen will be required to pay about Rs. 33 as cess in a year for paying the increased quantum of pension.

The total tax revenue of the State excluding taxes on income and expenditure, property and capital transactions is over Rs. 15000 crores. This works out to be an average tax burden of Rs. 5000 a year on the citizen. This would be the tax someone in the middle-income group actually pays. The poor will be paying much less. However, it would not be much less than the pension amount of Rs. 2400 a year!

The poor contributes a portion of the taxes on property and capital transactions (2600 crores) and non-tax revenues (Rs. 1300 crores). This is not taken into account here.

Budget speech in full (PDF)