Speech of

Selvi J JAYALALITHAA

Chief Minister of Tamil Nadu

FIFTY FIRST

NATIONAL DEVELOPMENT

COUNCIL

27-6-2005

New Delhi
Hon'ble Prime Minister,

Hon'ble Deputy Chairman of the

Union Planning Commission,

Hon'ble Union Ministers,

Hon'ble Chief Ministers,

Hon'ble Lieutenant Governors,

Senior Officers of the Union and the States,

It gives me great pleasure to participate in this, the. 51st meeting of the

National Development Council convened mainly to consider the Mid Term
Appraisal of the Tenth Plan. The Mid Term Appraisal document brought out by the
Union Planning Commission is a fresh stocktaking of the state of the economy
and the direction we need to take to ensure higher growth momentum to the
economy. The Hon'ble Prime Minister has flagged certain key issues and sought
the comments of the Chief Ministers at this meeting. 1 welcome this opportunity
for a free and frank exchange of views on what needs to be done in the context of
the experience gained so far during the Tenth Plan period.

We are also meeting against the backdrop of a severe increase in the

prices of petrol and diesel. the foi rth in a row in the last one year. This has no
doubt affected the growth prospects of the economy. , The Appraisal document
recognizes the serious threat posed to the economy. I would
like to earnestly pleadjhat the Union Government desist from
burdening the people with such hikes in the prices of petrol,
diesel, LPG and kerosene.

The main concern is that even though in the 50th meeting of the National
Development Council we .had^et ourselves a growth target of 8,1%, the actual
performance has fallen short. The Appraisal document rightly expresses
concern over the decline in growth in Agriculture. It seems to me that if this
alarming trend has to be reversed there has to be some out of the box thinking,
coming up with fresh ideas. If the objective of growth with equity, with real
meaning to the millions of poor, is to be achieved the focus has to be placed on-
Agriculture, Irrigation and Rural Development. The Appraisal document sets
out a set of measures needed to bring new momentum to this sector. 1 find that
rehabilitation of the existing irrigation systems is given priority. But, in actual
practice, this is grossly neglected. I have been repeatedly insisting that for a
water starved State like Tamil Nadu with no new surface water potential, this is of
highest priority and hence should be included for funding under the Accelerated
Irrigation Benefit Programme. This has not yet happened despite my urging this
repeatedly. I have also sought urgent clearance of our Water Resources
Consolidation Project-II. It is a high priority project as it places focus on efficient
management of water in each river basin. I would like to plead that in consonance
with the statement of intent in the Appraisal dofeument, the Union Government
should give priority to these new initiatives of my Government.

There is mention of certain mega irrigation projects. But, these are State
specific. What is most surprising is the inability to think with a vision of the future.
Why is it that the project for Interlinking of Rivers is being put into cold storage?
The link from the Mahanadi to the Cauvery and thereon to the Gundar river will
bring new life to the'^eritife Peninsula. In my view this is a priority issue and
should be taken up at once without any further loss of time. This alone may
provide new momentum to the growth in Agriculture which we seek. Funding, cost
recovery, and agreement between States are all issues which can be handled if
there is a will,. Mr. Prime Minister, may I appeal to you to lead from the
front in this important initiative?

I entirely agree that there has to be a new thrust to watershed

development. One comprehensive programme merging different programmes has
to be launched. I have set the goal of taking up, work in 1000 micro watersheds in
Tamil Nadu this year. It is most important that we are able to get,the
administrative arrangements and programme design right quickly, so that we can
make rapid progress in watershed development. Liberal funding for this
programme has to be found. Simultaneously, the outlay on drip and sprinkler
irrigation has to be stepped up. Our precision farming pilot project is a big
success. We wish to replicate this. May I request that a, major programme for drip
and sprinkler irrigation be launched?

Agricultural diversification is another key issue. I am glad that the National

Horticulture Mission is, being launched. I have placed the highest emphasis on
crop diversification and launched several programmes. 1 have actively promoted
sugar beet and sweet sorghum cultivation to replace water intensive sugarcane
and jatropha as a versatile crop in rain fed areas. The Comprehensive Wasteland
Development Programme I have launched in Tamil Nadu also places the focils
on-crop diversification. I have written to the Hon'ble Prime Minister on various
issues relating to the promotion of these crops as a crop diversification strategy.
May I request that these suggestions be considered for early implementation?
I welcome the idea of blending of 2% bio-diesel to be raised progressively to
about 15%. It is important that this programme is made commercially sustainable
with the right1 incentives1 and support packages.

I have seen the recommendations on fertilizer pricing and 1 would like to

sound a note of caution. While some minor modification may be necessary to
send the right signals both to the producers and to the farmers who use fertilizers,
the concept of targeting, if applied to fertilizer pricing, will
undoubtedly be perceived as a harsh measure by the farmers.
We need to be very cautious and not jump into this exercise. As part of the crop
diversification strategy, we should also place emphasis on organic farming.

I am greatly pained by the unfeeling recommendations with regard to the

Public Distribution System, which are found in the Appraisal Report. The
suggestion that subsidy in the Public Distribution System, particularly for rice, can
be reduced is unacceptable. The argument that the need for subsidized grain may
arise only in urban areas is also totally unacceptable. I would like to, sound a note
of warning against any move to increase the price of rice in the Public Distribution
System or to curtail the coverage to a particular area. We have a universal system
for all those desirous of availing of rice in the Public Distribution System. In fact
my Government provides the maximum subsidy possible to ensure that rice is
available at the cheapest price possible. It should be remembered that not long
ago, when we were confronted by successive droughts, it was the Public
Distribution System which 'kept starvation away. To suggest its dismantling so
blithely, borders on an insensitive approach, ignorant of ground realities, which
could have tragic consequences.

The Hon'ble Prime Minister has raised a set of issues concerning the
Agriculture sector. I have already dwelt at length on agricultural diversification. In
Tamil Nadu we have already made some corrections in 2003, in levying charges
for irrigation and this has substantially bridged the losses. In the Tamil Nadu
context, I entirely concur-with the view that the Agriculture Extension Services
have to be completely overhauled. The exciting potential offered by Information
Technology has to be fully harnessed in modernizing the Agriculture Extension
Programme. We have made a beginning with the Rural Access Services through
Internet (RASI) to provide connectivity to villages. In addition, a new project to
revamp the Agriculture Extension Programme is being implemented in Tamil
Nadu.

Providing adequate credit to farmers is a major issue. The co-operative

credit institutions have been severely affected, more so in the recent past, due to
the continuous drought. The recommendations of the Task Force which went into
the working of the co-operative credit institutions appear quite harsh. It has to be
noted that the entire relief planned is only for the institutions and there is nothing
in it for the farmers. Farm level debt is the issue which has to be addressed. The
conditibnality imposed, namely, that the State Government should completely exit
from the co-operative credit system by taking back its equity, is unwise. Also,
extremely harsh eligibility conditions have been laid down. Some of the
recommendations on the financial restructuring of these institutions can, be
considered, but phased implementation would seem to be in order. An abrupt
dispensation with the winding up of the majority of the institutions as visualized
will only cause major hardship to farmers, rural artisans and the poor. This needs
detailed discussion in a separate forum. This issue is vital in enabling us to revive
growth in agriculture.

It is noticeable that the Mid-Term Appraisal document, while discussing

inequality and poverty, shies away from designing direct poverty reduction
strategies. In my view, direct poverty reduction interventions are vital with
reference to the goal that poverty should be reduced at an accelerated rate. While
empowerment is a key instrument in our poverty reduction strategy, addressing
livelihood concerns directly has to be accorded topmost priority. This is
particularly true in the context of the observations in the Mid-Term Appraisal
document that employment in the organized sector is declining and it is only in the
unorganized sector that employment growth is seen. I am glad to announce that
my Government has taken up two new poverty reduction programmes in Tamil
Nadu. The ambitious Tamil Nadu Empowerment and Poverty Reduction Project
with an outlay of Rs.717 crores will directly assist the poor families in livelihood
improvement. Another significant programme designed to reach the poorest of the
poor, covering three lakh families in Tamil Nadu has just been launched. This is
an ambitious programme where we would like to give practical shape to
addressing the concerns that Professor Amartya Sen has outlined, namely, "the
capabilities that a person has. that is, the substantive freedoms he or she enjoys,
to lead the kind of life he or she values". I am confident that these two new
programmes will make a significant difference to the quality of life of the poor in
Tamil Nadu and will enable my Government to achieve the goal of
more rapid reduction of poverty.

I welcome the concept of Employment Guarantee enabling every adult

member of each poor rural household to access employment at least for 100 days
in a year. There are certain features in the announced scheme which require
modification. The scheme envisages that the payment of unemployment
allowance shall be the responsibility of the State Government. It is our considered
view that the payment of any such unemployment allowance should also be fully
funded by the Central Government. The scheme announced envisages that 25%
of the cost of the scheme has to be borne by the State Government. This will
constitute a huge financial burden on the State. The contribution by the State
should be reduced to 10%. It should be mandated that women beneficiaries
should constitute at least 50% of those covered under the programme. The nature
of employment should be expanded to include various rural services so that
greater flexibility is available. These are my views which need to be
incorporated in the proposed law on the subject of providing employment
guarantee.

I find the Eiharat Ninnan Programme has been announced with great
fanfare with certain specific goals. For a State tike Tamil Nadu this does not evoke
much response, unless a subset of goals is worked out. For example, instead of a
population of 1000 for forming a proper road, it can be 250 or at least 500.
Irrigation in the Tamil Nadu context, with no available surface water resources, will
require a different treatment. Our coverage under electricity is already very good.
Can we look at a different parameter? I do think all these -issues should be
discussed threadbare before finalising this programme.

Tamil Nadu has an impressive record in human development. The Human

Development Index (HD.I) for Tamil Nadu at 0.531 indicates that Tamil Nadu has
attained the third highest rank in the country. I am also glad to indicate that we are
well on track to attain all the Millennium Development Goals in advance of the
target year. This success has been largely facilitated by the focus on education,
health, sanitation, nutrition and empowerment. The Sarva Shiksha Abhiyan has
led to genuine improvement in enrolment and in reducing the dropout ratio. Tamil
Nadu occupies the Numero Uno position in the implementation of the Sarva
Shiksha Abhiyan. The recommendation that the funding pattern of 75% by the
Centre and 25% by the State shpuld be maintained till, 2010 is welcome and
should be endorsed by this Council. We have addressed the issues of improving
teaching quality and controlling teacher absenteeism with several new measures.
In particular, I firmly believe that training and more intensive training will go a long
way in improving teaching quality and hence we have established the necessary
infrastructure to provide training on a continuing basis. In Tamil Nadu, teacher
vacancies are filled up promptly. The problem of teacher absenteeism can be
tackled by better teacher motivation and intense public participation through the
Village Education Committees.

I also welcome the suggestion for a new programme similar to the Sarva
Shiksha Abhiyan to cover Secondary Education. This is an immediate necessity
as a bulge in the number of Secondary School students is being observed. The
scope for promoting public private partnership in Secondary Education can be
explored. In Tamil Nadu this has already been implemented in the form of aided
schools and nearly 30% of students in Standards IX and X are in such schools. It
is important that we accord top priority to skill development and vocational
education. The programme for development of 100 Industrial Training Institutes is
to be welcomed. I am of the view that this should be expanded immediately,. We
have to infuse new dynamism in the functioning of Industrial Training Institutes
with reference to the market requirements.

We have just launched the Tamil Nadu Health Systems Project with
assistance from the World Bank. This will comprehensively upgrade health
facilities and make them function more efficiently. I wonder whether the National
Rural Health Mission is adequately funded. It is essential that when we talk of a
Mission, it is backed by adequate funds. I am glad that Infant Mortality, after
plateauing for a few years, has again started declining rapidly in Tamil Nadu. I
agree with the suggestion that a National Sanitation Mission should be launched. I
have always placed the highest emphasis on sanitation as a key public health
intervention. In Tamil Nadu, we have achieved great success in recent years,
increasing the level of coverage of sanitation in rural areas from 15% in 2001 to
54% in 2005.

Tamil Nadu of course, has always been in the forefront in women and child
development. We have taken action to comprehensively upgrade nutrition
programmes at the pre-school level and. also in schools. This programme, which
is an investment for the future, should be fully funded by the Government of India.
I agree that we should now place the focus on pre-school education as a key
intervention to further strengthen the school education programme. I also endorse
the suggestion that the centres should function as full day-care centres, enabling
working women to use these centres as creches. In Tamil Nadu, we have already
ensured this.

An interesting development issue is the empowerment of people to have a

greater say in the provision of various services. This is usually the role of
Panchayat Raj Institutions. The question is not one of empowering the Panchayat
Raj Institutions as much as empowering the people. A debate has been raised on
the question of whether the State has transferred more functions, funds and
functionaries to Panchayat Raj Institutions. Unfortunately, those who preach this
mantra do not even believe in adequate powers, functions and finances be'ihg
transferred from the Union to the States. What is most relevant is that the people
should be involved in deciding their lives at the local level. My Government has
launched an innovative new programme called 'Namadhu Gramam' which
empowers Village Panchayats and Gram Sabhas to participate in the holistic
development of the village. This programme incentivises people's participation in
Social Sector programmes by providing untied funds for village
development.

The Mid-Term Appraisal document has also highlighted several issues

relating to infrastructure development. I am glad that these issues have been
examined in some detail. Basically, the Secondary Sector including manufacturing
is critically dependent on efficient infrastructure. With globalization and greater
integration of the world market. India has to compete with other countries. We
have realised this in Tamil Nadu and placed maximum emphasis on the
development of quality infrastructure. We have also put in place new initiatives in
the Public Private Partnership mode. Above all, we have comprehensively
examined all the issues at the State level which can promote growth, particularly
in the Secondary Sector. We have addressed all the State level issues such as
provision of quality infrastructure, adequate energy supply together with a focus
on-its reliability and quality, labour reforms encouraging mobility,* deregulation
and governance reforms to reduce transaction time and cost, and State level tax
reforms. The Central Government should now be in a position to set out the road
map for labour reform. We have taken action to simplify and deregulate processes
required to comply with State level laws. We are conscious that these reforms will
yield better results. The fact that Tamil Nadu is now considered a destination of
choice is largely because of the substantial work done in the State to improve the
business environment.

Infrastructure remains a key concern. In the Power Sector, various policy

issues have been highlighted. It seems to me that there is not much dialogue with
the State on the vision involved in making all these changes in the Power Sector.
May I request the Hon'ble Prime Minister to call for a separate meeting of Chief
Ministers to focus exclusively on this issue, explaining in detail the policy
framework setting out the vision of how the various changes will impact on
different consumers? 1 am greatly concerned by the shortage in coal supply for
the Power Sector. It has become a chronic problem to obtain adequate coal and
our power plants have to exist on a hand to mouth basis. This calls for an action
plan to ensure enhanced production from the coal mines. I do hope corrective
action will be taken.

While dealing with the issues relating to infrastructure, I am glad the

Planning Commission is moving forward with the creation of a Special Purpose
Vehicle to utilize a portion of the foreign exchange reserves for infrastructure
development. I recall I discussed this issue with the Deputy Chairman of the
Union Planning Commission on 30th November, 2004. and even then-1 had
stressed that the States should be entitled to access these funds for building
infrastructure. I do hope this will be kept in mind.

I am extremely keen that Chennai should be the hub of1 the Southern Gas
Grid. I have made this proposal in the Southern Zonal Council. This has to be
based on a Liquefied Natural Gas (LNG) terminal at Ennore. We are willing to go
forward with-this proposal. May I request the intervention of the Hon'ble Prime
Minister to enable us to move forward?

I agree that the Public Private Partnership (PPP) mode offers a method of
moving faster in the provision of infrastructure. Tamil Nadu is the leader in
undertaking such projects. The Tiruppur Water Supply Project which has just
been completed is an outstanding example. We have recognized that a clear
policy frame work has to be evolved to facilitate more investment in the Public
Private Partnership mode, I am glad to indicate that we have taken steps to put
together a policy framework to promote public private partnerships.

While the Mumbai and Delhi International Airports are to be developed, I

would like to insist that, the Chennai International Airport should also be taken up
at once. My Government has already offered the necessary land free of cost to
build the Chennai International Airport. I have written to the Hon'ble Prime
Minister requesting that this project, for which in-principle approval has already
been given, be taken up immediately. I would particularly like to highlight the need
to establish an Aviation University at Madurai in Tamil Nadu. Thes Madurai Airport
is best suited to locate this University, May I request immediate consideration of
this proposal?

The Tuticorin Port has the potential to become a Hub Port with
transhipment facilities. A recent detailed study indicates that the Tuticorin Port can
be a major Hub Port. This would require capital for dredging to obtain the required
draft. This major investment should be approved.

Chennai has verily become the Detroit of South Asia. It has the most
developed automotive industry. I request that the Automobile Testing Facility and
the Automobile Test Track should be established at Chennai.

The situation in Tamil Nadu when my Government assumed office in 2001

is well known. Tamil Nadu was in the throes of a fiscal collapse of an
unprecedented nature, making day to day governance impossible. I am glad to
inform this august assembly that Tamil Nadu is back on the high road of
development, while at the same time extending to the poor and the weaker
section&of the society, the best Social Safety Net in the country. This turnaround
has come about by true' grit, determination and concerted action. Unlike other
States we have not taken an adjustment loan. We have done it entirely on our
own. Today, we are in a better position to increase investment outlays and- seek
a higher trajectory of growth. This is exemplified by the fact that Tamil Nadu has
recorded Gross State Domestic Product (GSDP) growth of 8.73% in 2004-05 as
per the preliminary estimates. We are aware that while this achievement is a
cause for cheer and optimism, we cannot be complacent and will have to work
much harder to sustain this impressive growth performance.

At this meeting of the National Development Council we also have to

consider how the State Plans are being implemented. I am glad to inform this
Council that Tamil Nadu's Tenth Plan outlay of Rs.40.000 crores will be achieved.
Yet, the strain involved in achieving these high performance goals is considerable.
It is here that the Centre should assist the States which are doing well as a reward
for good management and performance.

I am surprised that this year there is no clarity on the usual loan component
of Central Assistance. I insist that the loan component of whatever was indicated
as Central Assistance should be allowed to be raised at least from the market by
a State. The indication that this can be subsumed within some arbitrary borrowing
limit is unacceptable. I strongly urge early resolution of this issue.

I also find that the process of regulating the fiscal deficit of the State has
become arbitrary and irrational. If a State can move faster with a high growth rate
it should be allowed a higher level of debt. The Twelfth Finance Commission has
also pegged back the borrowing capability of States. While some correction in the
increasing debt burden was overdue, it would seem that we have now totally shut
the door on development at the State level. 1 request that this issue may be taken
up in this forum for immediate resolution.

While we should strive for the development of all regions, I do not agree
with the policy of exclusion now being followed by the Central Government. It is a
disappointing, disturbing and distressing trend that a State which does well on its
own will increasingly be shut out and made to lose resources. The Twelfth
Finance Commission has already extended substantial amounts as grants to
certain select States which have not done well. The same exercise is again being
undertaken under different heads by the Union Planning Commission and the
Government of India. This can engender a feeling of alienation and denial, leading
to tension and acrimony.

I would like to refer to the Backward Regions Grant Fund which has been
established with a substantial outlay. While the Appraisal -document indicates that
150 districts will be qualified for support under this programme, 1 wish to point out
that even though Tamil Nadu as a whole may have done well, 13 districts in Tamil
Nadu will qualify for funding if the same criteria as adopted for the Rashtriya Sam
Vikas Yojana (RSVY) are followed for eligibility under the Backward Regions
Grant Fund. This aspect of balanced development within a State should not be
lost sight of.

We are gathered here at the National Development Council to discuss in

detail the growth prospects of the economy. We are assembled here to diagnose
the growth inhibiting factors, and break free of the shackles which prevent the
country from moving forward to a higher growth trajectory. While it is no doubt true
that we seem to be confronted by some seemingly intractable issues, it is my firm
conviction that if there is a will we can make that big push towards a higher growth
path, which then needs to be sustained. I do not even for a moment
underestimate the complexity of the issues which have been set out in the Mid
Term Appraisal document. Even so, it is my unshakable belief that this is the time
that we should move boldly forward, taking new policy initiatives with one clear
goal, namely, to realize higher growth with equity. The equity objective is
paramount as we all wish a better life for the millions of poor. I am confident that
with a collective effort and with a single minded approach we will be able to
realize this mission.