Monday, October 5, 2020

Speech At The Forty-second meeting of the GST Council

ON 5th October, 2020 (Video Conference) 

Hon’ble Union Finance Minister Smt. Nirmala Sitaraman Chairperson of the GST Council, my colleague State Finance Ministers, Officers of the Government of India and State Governments.

 1.  Introduction of GST was the culmination of 14-year-long thought process that began in December, 2002 The Empowered Committee of State Finance Ministers had played an exemplary role in this process, converging diverse views and evolving a suitable model for GST. One of the main concerns of the states was the revenue loss which may occur when the states subsume their taxing powers, and when the taxation system changes from origin based to destination based.

 2.  The issue of GST compensation was discussed in the Empowered Committee meetings held on 14th June and 26th July, 2016. The States had unanimously agreed that the compensation should be paid in full for a period of five years. This sentiment of the said States was shared with the Union Finance Minister who was appreciative of the concerns of the States and he assured the Empowered Committee that the Centre is committed to give full compensation for a period of five years.

 3.  The states were rightfully concerned about the compensation to be made statutory, in view of their sour experience with VAT compensation.  So, they were assured of compensation by the central government and it was incorporated in the Constitutional amendment bill and further to allay the fears it was mandated that “parliament shall, by law” provide for compensation, instead of “may”. The above facts are evident from the words of then Finance minister while replying to the debate in the Rajya Sabha the Constitutional amendment bill was discussed on3rd August, 2016.

 

So when Mr. Derek says, 'Please clear our dues', he is right. This was the pre-condition with this Act. What was the second problem they had? The second problem they had was: If we lose money, how do you compensate us? The 2011 Bill did not mention anything about the compensation. So, today, in the 2014 Bill, when we suggested that we would pay compensation for five years, so distrustful were the States of the Centre — my original proposal was full compensation for three years, thereafter, one half for one year, one fourth for the fifth year — that the States said, "Nothing doing, give us full compensation for five years." So, instead of the word 'may', — it was, earlier, "The Parliament 'may' by law provide for compensation" – they said, "We don't even trust your 'may', make it 'shall' because your intention in the past had never been to pay; CST was not paid." That is how 'may' has become 'shall'. ...(Interruptions)... It is unprecedented, but, that is how ‘may' became 'shall'.

 

It cannot be denied that compensation package and the comfort it provide to the states was the deal breaker in implementing GST across the country.

 4.  Accordingly, while the compensation law was discussed in the Council, in the first instance only the modalities of payment of compensation were discussed.  Funding of compensation through Cess came up subsequently and the States had agreed to the levy of Cess after prolonged discussions.  During the discussions in the 5th GST Council meeting held on 2nd/3rd December, 2016, the 7th GST Council meeting held on 22nd/23rd December, 2016 and the 8th GST Council meeting held on 3rd/4th January 2017, the relationship between compensation and compensation Cess was extensively discussed. Apart from Kerala, the Ministers from Andhra Pradesh, Punjab, Uttar Pradesh, Rajasthan, Telangana, West Bengal, Assam, Gujarat, Kerala and Karnataka had elaborately raised the point that the obligation to give compensation should not be restricted to the amount of compensation Cess and in case of any shortfall, the shortfall should be made good by the Centre. In response to these discussions, the then Hon'ble Chairperson and Union Finance Minister had given the following assurance: -(emphasis added)"The Hon'ble Chairperson assured that compensation to States shall be paid for 5 years in full within the stipulated period of 5 years…” In short, the late Union Finance Minister had given a firm assurance to the States that the compensation shall be paid in full within the stipulated period of five years. He added that“….in case the amount in the GST Compensation Fund fell short of the compensation payable in any bimonthly period, the GST Council shall decide the mode of raising additional resources including borrowing from the market which could be  paid by collection of cess in the sixth ear or further subsequent years".  States were assured that compensation will not be restricted to the compensation Cess collected.  Section 10(i) of the compensation Act reflects this position.

 5.  Further, in the 10th GST Council Meeting held on 18 February 2017 the following decision was made by the council, the following assurance was given by the Central Government:

 

6.3. The Hon'ble Minister from Telangana stated that the Compensation Law should provide that if money fell short in the Compensation Fund, it could be raised from other sources. The Secretary stated that Section 8(1) of the draft Compensation Law provided that cess could be collected for a period of five years or such period as may be prescribed on the recommendation of the Council. He stated that this implied that the Central Government could raise resources by other means for compensation and this could be then recouped by continuation of cess beyond five years. He stated that the other decisions including the possibility of market borrowing for payment of compensation was part of the Minutes of the s" Meeting of the Council (held on 3rd and 4th January, 2017) and need not be incorporated in the Law. The Council agreed to this suggestion.”

 I had narrated the above to unambiguously lay before you the federal decisions taken in the council through consensus regarding compensation, arrived through a democratic deliberative process.

 6.  Even during this pandemic, one has to contemplate on the reasons of the current compensation imbroglio. It was after much deliberation that the 14 per cent growth was guaranteed to the states. But the optimistic mood regarding the buoyancy of GST prevailing then has not been borne out by the actual outcome even after three years. The implementation has been lackluster, with the IT backbone yet to be completed and tax administration handicapped by too many impediments. Further, the pre-election sharp reductions in tax rates without serious examination of the revenue implications have also contributed to the fall in revenue. The current rates are not revenue neutral.

 7. The widening of the Compensation deficit had become evident much before Covid with the sharp decline in GDP growth rate during 2019-20. So much so, the 37th GST Council meeting at Goa witnessed strange spectacle of the Union Finance Commission Chairman addressing the Council to plead to the states to re-visit the Compensation formula. 14 per cent growth was unsustainable in the macro economic scenario that prevailed in the country. State after state, irrespective of political affiliations, had then rejected the proposal and refused to discuss it. This reflects the true feeling of the Council on the issue. In the 39th GST Council meeting at New Delhi it was assured that a special meeting of the Council would be convened to discuss the Compensation issue that had taken as serious turn after the reference in the budget speech that the compensation would be limited to fund availability in the Cess fund. However the issue was not including the Agenda of the Council that met after the budget.

 8.  The matter of compensation was raised by the states in the 40th GST council meeting where it was decided that views of states on how to resolve the compensation deadlock would be gathered and after assimilating the same the centre would do all the due diligence on the mode with which this can be accomplished, get all the opinion, compile and share with the States. But in the 41st council meeting the states presented their views the centre discussed the opinion Attorney General and placed before the states two options of borrowing. It was also unilaterally decided that the states should opt one within 10days.  This, I believe, has been done in a way with scant regard for democratic deliberations.

 There was no consensus. Once again, may revert to the discussions on the constitutional amendment bill for GST, where the then finance minister while replying to the debate dwelled upon the decision making in the empowered committee and the future decision making in the GST council. He said “GST Council will decide by consensus”. 

 9.  However, the functioning of the GST council in last few years has not lived up to these high principles. In the 41st council meeting no agenda note is circulated and not even the AG’s opinion shared with states before the meeting. The presentations are made and at end of the meeting two options are put before states and states are asked to choose one of them within a week. In default the states are threatened that choosing none of the option would mean no compensation.  In the circumstances if the avowed principle of consensus is not being upheld, the legal provisions for Dispute Resolution Mechanism within council should be activated without delay.

 10.  Now if you see the options the option 1 introduced a new concept  of dividing the revenue losses ‘ on account of implementation of GST”( the phrase used article 19 of the Constitutional Amendment Act)” and “due to the pandemic”. The compensation on account of “due to the pandemic” would be deferred to year 2022 with no clarity on whether interest for two years would be paid. Events like, recessions, pandemics, demonetization etc. where never the considerations when Compensation formula was devised.  The Compensation law clearly defines how Compensation is to be calculated and it has no reference what so ever to any conditions whether it be Act of nature, gods or man. The phrase “on account of implementation of GST” would only mean “the loss of state autonomy in taxation where they are deprived of raising resources on their own”. Secondly the centre also argued with the states that AG had opined that the central government is not legally bound to compensate the states from CFI. The centre also put forward the argument that an opposition member’s amendment to compensate the states from CFI, to the constitutional amendment bill was rejected by Lok Sabha by voting. Given the history of the discussions, the consensus reached by the states and centre regarding compensation bringing up these type of arguments to coerce the states to accept one of the two options, is a lowest point in the centre-state fiscal relations.

 11.  These actions cannot be viewed in isolation.  There is significant erosion of trust. Circumstances point to a situation where the center’s actions are constricting the state resources and its financial autonomy. Since cesses are kept outside the divisible pool, the states being given only 32% of the Centre’s resources against the promised 42%. Another issue relates to incorrect management of IGST and compensation accounts.  The Central Government incorrectly appropriated a sum of Rs. 88,344.22 crores in 2017-18 and Rs 13944  in 2018-19 from IGST account by crediting it to the Consolidated Fund of India. As a result of the continued adoption of the erroneous process of devolution of IGST to states and retention of un-apportioned balance in the CFI instead of first apportioning IGST between the Centre and States/UTs and then devolving States’ share from the amount apportioned to the Centre, States had overall received less funds on account of IGST. This also implies that tax receipts of the GoI were overstated to that extent and the revenue deficit understated during the year. To this extent, there was an artificial revenue shortfall in the States and the Central Government used the Compensation Fund to make good the short fall. This did not give the correct picture of revenue. This wrong practice continued in 18-19 also, inspite of the fact that the error was pointed out by Accountant General. The much-required amendment in the CST Act which restricts industries from purchasing petroleum products at 2% from other states despite constant request by all states irrespective of political affiliation has not materialized. This is causing considerable revenue loss to the states, petroleum products, being one of the independent revenue sources to the states after the implementation of GST. Now, the latest one is where the states, with their limited borrowing capacity are required to bear the full burden of GST compensation loans.  The borrowings of the states were independent of GST Compensation. Now it gets tied to the compensation.

 12.   In the circumstances, I would like to put forward two cardinal principles on compensation which are non-negotiable.

 i.)    There can be no bifurcation of revenue shortfall for compensation purposes as due to pandemic and due to implementation of GST. Entire shortfall needs to be compensated. It is the constitutional right of the states.

ii.) Compensation cannot be linked to Normal borrowing or Additional borrowing limits allowed to states.

 Both the options presented by the central government infringe upon the above two cardinal principles and therefore not acceptable. And we would out right reject all notions that refuse to make the choice will lose their Compensation till 2022. It is true that central government presented the two options before the Council like, we the states also presented our options. The issue continues to be open for a decision of the Council.

 13. Once we accept the two basic principles enunciated in the above para then we can discuss and try to arrive at the consensus regarding the following issues.

 i)                   Who borrows-Centre/ State or in what proportion

ii)     What amount to be borrowed this year and what amount to be deferred to 2022?

iii)                Repayment through extension of the Cess beyond five years.

iv)                Or any other relevant matter.

 

14. While we discuss the above issues and try to reach a consensus, what can be tentatively arrived at, may be implemented as an interim measure. It`s important that at least a part of the Compensation to the states be paid immediately given the shortfall in the revenues of the states and the financial crunch. What we states are demanding is not for support for any additional expenditure but to maintain our budgeted expenditure. It is against of all principles of macro -economic to enforce a cut in the expenditure of the states that account for 60 per cent of the total expenditure of governments in India. As is well known India has one of the weakest stimulus packages and the worst economic contraction in the first quarter of FY 21. The present attitude of the central government has pushed the economy to the brink of the disaster.

 15. If there is no consensus in the GST Council on the above negotiable issues, the legal provisions for Dispute Resolution Mechanism within council should be activated without delay. Interim payments towards Compensation shall continue in the interim period. I request that the above matters should be subjected to a proper discussion in the GST council.

 Further, the long standing demand of the States to appoint a Vice-Chairperson to the GST Council shall be considered and implemented at the earliest.

 With this, I conclude. I take this opportunity to express my sincere gratitude to the Honb’le Chairperson and all members of the GST Council.

  

Thank You

Sunday, July 26, 2020

Public Health System and Local Governance in Kerala in the Context of COVID-19 Pandemic

(TM Thomas Isaac[1] and Rajeev Sadanandan2)
EPW article Vol. 55, Issue No. 21, 23 May, 2020

 Introduction

 Since the incidence of AIDS, the first pandemic in the post globalisation era, public health experts in Kerala have been conscious of the vulnerability of the state to epidemics in any part of the world. High level of integration with global economy, large non-resident population living in many parts of the world andreliance of the state economy on international tourism contribute to the relatively high vulnerability of the state. Outbreak of Nipah infection in 2018 heightened the threat perception. Since then Kerala has instituted a surveillance mechanism to actively look for emerging pathogens, including disease X, (WHO’s term for a hitherto unknown pathogen) that may strike the state.[1] So when reports emerged from China about an unknown Coronavirus, Kerala went into alert mode. On January 24th Kerala issued guidelines on managing what was then called the 2019 Novel Coronavirus (2019-nCoV) and later came to be called Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2).

 

Since the epicentre of the disease was known, Kerala focussed on persons who returned from China (or other hotspots as they emerged). Since data on persons whose port of origin fell in China (or in other hotspots) was available with the immigration department, it was possible to identify them and track their contacts and quarantine them. The first three positive cases were from the students who had returned from Wuhan. Since all arrivals from Wuhan had been quarantined, further spread was successfully prevented. All the three recovered by February 20th and the state remained free of active cases till March 9th.

 

The dynamics of tracing and tracking changed when new epicentres opened in Europe, Iran and the GCC countries. Many migrant workers living in these countries returned to Kerala. Kerala continued to track the returnees, now much larger in number, who remained in quarantine and their contacts.  Soon positive cases started emerging from this cohort and Kerala emerged as the state with the largest number of Corona Virus Disease (COVID-19) patients in India in India.

 

Many simulations about the likely spread of the pandemic predicted a dire situation for Kerala. An exercise under taken by Protiviti (2020) for Times Network on April 12, estimated that infections would peak in Kerala on 8th May with 72,057 cases with 22,281 severe cases needing intensive care. However the current scenario is that Kerala`s active cases on that day would likely be around two dozen.

 

What helped Kerala was the aggressive strategy of quarantining / placing under observation everyone arriving from outside hot spots and testing all symptomatic persons and, if proved positive, tracing their contacts and placing them under observation. As can be seen from Table 1 the number of new persons placed in institutional or home quarantine began to sharply increase from 495 cases in the first week of March to 84718 cases in the last week of March. The peak was reached on April 4th when a total of 171355 persons were under observation. There after the number steadily declined reflecting the decline in the new persons put under observation during April.

 

Since adequate testing kits were not available the number of persons tested as a proportion of the persons quarantined remained low till the second week of April with the numbers going up as Kerala started community surveillance. Important point to be noted is that almost all the positive cases were from people under observation. So community spread was effectively prevented, even though the strategy of testing only symptomatic persons from among the contacts would have missed asymptomatic contacts who were on observation. Such asymptomatic cases, even if undetected, would not lead to spread for the simple reason that the quarantine period would have neutralized the infectious period. That the number of positive persons remains low, even after the number of tests of persons who were not contacts was scaled up, is a testimonial to the effective prevention strategy of the state. Kerala’s strategy of quarantining all travellers from epicentres cost the state revenue from tourism but has paid off in the number of potential infections averted. 

 

As can be seen from Chart 1 the COVID Curve continued to gain momentum through the month of March. During April the number of new cases testing positive began to steadily decline and recoveries accelerate. As result the Covid Curve lost momentum and Kerala managed to flatten the curve of COVID-19 infections till now. As on May 1st Kerala has the lowest case fatality rate of 0.8 percent and the highest recovery rate at 78.71 percent. The national averages are 3.23% and 26.52 respectively. Finally by 1st May 2020 Kerala`s doubling time (30 days) is almost thrice that of the national average (11 days).

 

Table 1

Number of persons on home quarantine, hospital isolation, tested, positive and discharged in Kerala [30/01/2020 – 02/05/2020]

 

 

Number of persons

Period

Placed in home quarantine

Under Isolation in hospitals

Tested

Positive and put on treatment

Discharged after being cured

30/01 to 15/02

3430

207

415

3

0

15/02 to 29/02

289

30

70

0

3

01/03 to  07/03

433

62

197

0

0

08/03 to 14/03

6863

549

1215

19

0

15/03 to 21/03

46301

452

1819

30

0

22/03 to 28/03

83792

926

2351

130

13

29/03 to 04/04

52218

1007

3677

124

34

05/04 to 11/04

10160

1090

4419

67

93

12/04 to 18/04

534

725

4611

26

114

19/04 to 25/04

2260

755

3586

58

81

26/04 to 02/05

4424

719

8823

42

62

 

(Source: Kerala Health Department)

 

The first major wave has been effectively controlled. There is a high probability that the epidemic could rebound, as has happened in many other countries that achieved similar success early in the epidemic. The large scale return migration expected from latter half of May will pose a major challenge to keeping the epidemic under control. However the factors that helped Kerala control the first wave and defy dooms day predictions has useful lessons for management of health emergencies in low resource settings.

 

Chart 1

The trends in COVID cases of Confirmed, Active, Recovered and Dead

 

 

Source: https://dashboard.kerala.gov.in/

 

This paper will explore the factors that contributed to Kerala’s successful response to COVID-19. We argue that, in addition to a robust health system and demand for health care, social capital of the state, the trust based social contract between the state and people and the active involvement of the community through local governments have played a significant role in Kerala’s success. We also look at a plausible exit strategy for the state from the current situation.

 

Health Care System in Kerala: Demand and Supply

 

The core element of Kerala’s response to COVID-19 is the strong health system of the state.  Good health indicators achieved by Kerala have been attributed to both supply side interventions by successive governments and other agencies and demand side interventions by social movements. Spread of education, particularly among women, also had a salutary impact on consumption of health services. (Jeffrey, 1992)

 

The establishment of the first public dispensary in 1819 by the Maharaja of Thiruvithamkoor (the princely kingdom in the southern region - the main constituent of the present Kerala state) was the first major intervention in the creation of modern public health system. By 1860 Thiruvithamkoor had seven government medical institutions. Being converts to the western system of medicine themselves, the royal family lent their prestige to promoting health services (Nagam Aiya, 1906). This roused interest in western medicine, while the practice of Ayurveda continued to be popular. Education and medical institutions were a part of the evangelical mission of the Christian Missionaries. (Ramankutty, 2000, Baru, 1999)

 

While underlining the importance of the pioneering efforts of royalty and missionaries in Travancore, it must be also understood that there were similar initiatives from the government and the missionaries in British India. Never the less we find that by 1940 while British India had 6.8 institutions per square kilometre and 21.27 beds per lakh population (Government of India, 1948) Thiruvithamkoor had 22.56 institutions and 46.81 beds respectively (Government of Travancore, 1941).

 

Even within Kerala we find a sharp and growing divergence in health and education facilities between Thiruvithamkoor and Kochi in the South and Centre and Malabar region directly under the British rule in the North. The latter was relatively backward in social indicators when compared to the former and the gap widened during the colonial period. The divergent experience in social development between North and South Kerala has been attributed to the difference in the agrarian structures, the former being dominated by Zamindar like land lords and the latter characterized by their relative absence. It facilitated the emergence of a rich farmer class and, later, the development of agro processing industries in the South and emergence of modern classes. This was the back ground of powerful social reform movements in the different castes and communities in the South generating demand for education and health care which were perceived as ladders in upward social mobility (Tharakan, 1984, 2008). Such social intermediation was relatively weak in the North (Kabir and Krishnan, 1992).

 

Malabar region began to close the gap with rest of Kerala after the unification and formation of Kerala. The first Communist government in 1957 initiated substantial investment in health and education facilities in the North. The popular demand for health and education gained momentum with the movement for land reforms and its implementation. The vital contribution of the demand from below for public health has been dramatically revealed in Mencher`s comparison of the primary health care centre (PHC) in Palakkad in North Kerala and that in Thanjavoor in Tamil Nadu. The demand for health care and awareness of entitlements in Kerala were so high that any denial of services in Kerala would be met with protests. (Mencher, 1980) 

 

Owing to popular pressures from below, successive governments in Kerala have invested substantially more in healthcare and education when compared to the rest of India. The share of health expenditure in total government expenditure for all Indian states in the period 1960 to 1970 was 8.13% while it was 10.43% for Kerala.  However the fiscal crisis of the state government from the 1970s forced cutting back the social expenditure raising questions regarding limits to Kerala Model. (George, 1993)  The health expenditure ratio declined over time shrinking to 7.69% in 1985-86, 6.81% in 1995-96, 5.5% in 1999-00 and 4.5% in 2004-05[2]. When government cut back investments in health, the private sector stepped in to meet the demand supply gap. (Sadanandan, 2001)

 

From the low in 2004-05 the importance of health in Kerala’s budget began to creep up during 2006 – 2011 period touching 5.1% in 2010-11 which was maintained till 2015-16. The government that came to power in 2016 launched the Aardram mission with objective of transforming primary health care and increasing the percentage of population using government hospitals. Under the mission more than 5289 posts of hospital workers were added. In addition to doubling plan investment from Rs 629 crores in 2014-15 to Rs 1419 Crores in 2018-19[3] through budgetary resources, Rs 2266 Crore raised through a special purpose vehicle (Kerala Infrastructure Investment Fund Board) was committed to improving hospital infrastructure and equipment (Government of Kerala, 2020). Results have already become evident: the percentage of persons using government facilities went up from 34% in the 71st round of NSSO [2014] to 48% in the 75th round (2017-18). (NSSO, 2015, 2019)

 

Response of the Health Department to COVID-19.

 

South East Asian countries, like Taiwan, which had very close links to China and were expected to have an epidemic similar to the Chinese one, benefited from their experience of having managed the SARS epidemic which had a similar route of spread as COVID-19[4]. The experience of managing two episodes of Nipah gave Kerala a comparable advantage. Health workers were trained to trace, track and transport persons with symptoms safely, isolation beds and protocols for providing supportive care were in place and people were familiar with the importance of observing house quarantine. Above all people had lived through the terror of an unknown pathogen and never underestimated the threat of the new virus. Kerala had the experience of having managed a comparable threat and had the confidence that they could handle this too.

 

From January 2020 Kerala started preparing systematically to handle a possible outbreak. The standard operating procedures issued by the state covered such areas as infection prevention and control for ambulances, management of bio medical waste, handling spill of body fluids, disinfection and sterilisation, hand washing, management of dead bodies, use of Personal Protection Equipment (PPE) and sample collection and transportation. A set of consolidated guidelines covering testing, quarantine, hospital admissions, treatment and discharge was also issued and revised often to accommodate changed perceptions and strategies. The guidelines were accompanied by training modules.

 

The additional investments in the health sector and the preparedness contributed to high morale of the health workers which is indeed a sharp contrast to the sense of helplessness and unrest among health workers in many of even the elite medical centres in the country. From the beginning health minister of Kerala, who had led the Nipah response from the front, provided strong and visible leadership to the health department. The level of confidence health system displayed in dealing with the epidemic and the trust the people of Kerala had in the government health system rose from their competence demonstrated in handling the Nipah crisis and the aftermath of two floods.

 

Social Foundation of the COVID-19 Response

 

While the health system remains the most significant contributor to Kerala’s health status, demand side factors such as female literacy, empowerment of dalits and other socially disadvantaged groups other than tribals, high levels of political mobilisation, active involvement of panchayats and municipalities, emergence of civil society groups, high salience of health issues in political discourse and an active media have been important ingredients in ensuring that health remained important to the people and government of the state. It has also ensured that epidemic prevention efforts are supported by other actors in Kerala society.

 

The state government also tries to actively tap the synergies springing from coordinated action with the above social actors and tap the abundant social capital in the state. The high density of associational relations like non-government organisations, religious groups, trade unions, libraries, clubs, and professional associations who get involved in social issues have been identified as the source of social capital (Heller, 1996). It has also been linked to reduction of poverty in the state (Morris, 1998). Every political party has to demonstrate their involvement of working with the people to remain relevant and their units involve in activities related to rural poverty, women empowerment and palliative care. These initiatives exist independent of government and complement government’s efforts. They were on the scene during the Nipah crisis and floods and now have mobilised themselves to support the COVID response too.

 

Transparency and Trust in Government

 

Management of health emergencies require active collaboration by the population, who may be required to make unpleasant sacrifices. To achieve such collaboration people must have trust in their government (Scot et al, 2016).  Traditionally trust in government has been high in Kerala. This was augmented by the success in managing many crises in recent years. So messaging on social distancing and self-quarantine were viewed seriously by the people who also exercised peer pressure on errant persons.

 

During times of crisis people value reliable information even if it is bad. Willingness of government to share information with the people constantly increases transparency and generates trust. The Chief Minister of Kerala, after reviewing the data and discussing policy decisions, share the important information with the people every day through a live press conference which has been the most watched event in recent days in Kerala. Constant information, not all of them good, is shared through the mainstream and social media. Government has borne the entire cost of testing and treating COVID-19 in the state.

 

These actions have earned for government the trust of the people, which creates the environment for people to co-operate with government even if the task is difficult. They believe that their government is transparent sharing truthful information, will take care of them should they fall sick and support them if they need it. In return they are prepared to subject themselves to restrictions government has imposed to control the epidemic. It is generally felt that the government has been successful so far. The real test of this trust will come if and when the situation becomes serious and the state’s capacities are in danger of being overwhelmed.

 

Decentralised Participatory Planning

 

The leadership provided at the ground level by local government institutions, who have been empowered with funds, functions and functionaries, played a major role in coordinating activities in other sectors with health interventions and also supporting health initiatives at the level. The year 2020 marks the 25th anniversary of the People’s Plan Campaign for democratic decentralisation that has placed Kerala as the fore runner in decentralisation (Thomas Isaac and Franke, 2000). In addition to investing their own resources in augmenting human resources, drugs and equipment and launching into areas that were ignored by the formal health system such as palliative care and rehabilitation, local governments have been active on prevention and control of infectious diseases and disaster management. Having managed the periodic vector and water borne diseases every year and health consequences of floods in two successive years had prepared them to manage the current health emergency.

 

Disaster Management has been and will continue to be a centralised hierarchical process. But the experience in Kerala demonstrates the importance of local level planning, mobilisation and intervention within the larger macro framework, which ensures equity and access in mitigation efforts. A formal recognition of this new responsibility came with the government order empowering the local governments as the agency to prepare local level disaster management plan. The panchayat/municipal level disaster management reports analyse recent natural disasters particularly floods, and then propose medium term mitigation projects which would be taken up by the local governments or proposed to the higher tiers of government. They would also include an immediate action for response in case such a disaster recurs. The state government has also been organising a volunteer force, with at least one volunteer for 100 people, to be coordinated by the local governments during disasters. Management of COVID-19 fitted in this framework for disaster management of panchayats and municipalities.

 

Local Governments and Health

 

People`s Planning was launched with a declaration to transfer 30-35 % of state plan funds as untied funds to local governments. Health has been a major beneficiary of this financial devolution. Indeed, an important rationale of the large transfer was to improve the quality of government services in education and health. It was expected that the local level plans would reflect people’s priorities more effectively, which in Kerala would definitely benefit the health sector. During the initial years results were mixed. The overall investment in state and local plans for health doubled from 2.2 to 4.5 per cent (Thomas Isaac and Franke, 2000).

 

The efforts were stymied by the reluctance of the major power holders in the health sector, doctors, to engage with local governments. They were also reluctant to shoulder additional duties involved in implementing local health projects, particularly, construction activities. Over time this attitude changed and medical personnel began to be actively involved in the local planning process. They realised that it was much easier to get their priorities accepted by the local elected representatives than the bureaucratic hierarchy. There has been a large body of literature that have attempted to evaluate the impact of decentralization on health care. Though there is always scope for improvement the studies, by and large, support the thesis of positive impact (Elamon et al2004, Chathukulam 2016, Azeez 2015, John and Jacob 2016, Chandran and Pankaj 2014, Abdul Azeez 2015).

 

The involvement of the local governments in health care at the primary level has witnessed the dramatic improvement after the launch of Aadram Mission. Local governments contribute to improvement and maintenance of the buildings of primary health centres and sub centres, purchase of drugs and medical equipment, employ doctors, nurses and paramedical staff on contract and supplement the honorarium of ASHA (Accredited Social Health Activist) workers. They also provide the bridge between health department and civil society organisations such as palliative organisations, voluntary food programs and kudumbasree health volunteers. They have an important role in geriatric care, support for differently abled and finance the special schools for children with cognitive disabilities. They are in charge of prevention of vector and waterborne infectious diseases. Given the high level of involvement of local governments in health and related sectors it was only natural that they play an important role in the fight against COVID-19.

 

Local Governments and the Pandemic

 

On 20th March 2020 the involvement of local government was formalised through a government order. It listed generation of awareness about COVID-19 and Break the Chain movement, sanitation, support for persons in isolation, ensuring availability of essential items and documentation of prevention efforts including inventorying medical and other resources and number of persons who needed additional support as responsibility of local governments. It also listed the functions of different levels and office bearers.

 

Beyond the above formal assignments, what brought out the strength of the local bodies, were the community kitchens to provide food to whoever needed it, which sprung up in less than three days across the state. They were set up wherever they could be: closed down hotels, school kitchens, marriage halls. Most of the provisions needed- rice, pulses, condiments, vegetables and even meat and fish - were mobilised through donations. Apart from one or two cooks every kitchen was run by a large number of volunteers as kitchen helpers, parcel makers and distributers. At its height the community kitchens were serving more than five lakh meals per day. For persons who could not come to the kitchens food was delivered at home.

 

It was possible to scale up the operation so effectively in such a short time because of Kudumbasree, a network of women’s neighbourhood groups (Kannan et al, 2017). They have a strong tradition of involvement in poverty alleviation programmes. They were already operating 946 catering units and 1479 cafรฉ units. There were also palliative care groups that provided food free to the doorstep of destitute bed ridden persons. The local governments drew on their experience for setting up their community kitchens. As the economy exits from the lock down, the community kitchens will also withdraw but most of them would be taken forward as budget hotels by Kudumbasree women providing meals at Rs. 20 and even free to the needy.

 

Yet another responsibility of the local government has been monitoring the camps of migrant workers and ensuring their food and medical treatment. Kerala accounted for 65 percent of the 23567 camps and 47 percent of the 6.5 lakhs migrant workers sheltered in them in India[5]. The local government representatives and officials visit the camps, check sanitation, provide food kits in some locations and, in some cases, even made available free mobile chargers and games like chess and caroms to keep them engaged. An interesting good practice is that of Uralunkal Labour Contract Cooperative Society, the largest construction cooperative in India with nearly 3000 workers, majority of whom are migrant workers. The migrant workers are encouraged to take membership in the society so that they get full benefit of a member (Thomas Isaac and Williams, 2017). When the crisis came, those workers who wanted to return home were sent back at the expense of the Cooperative itself in special buses. While the situation of the migrant workers is far from satisfactory the local governments tried to make them as bearable as possible.

 

In addition to health and local self-government departments, similar guidelines were also issued by other departments such as police, disaster management, education and a few other departments on how to support COVID-19 prevention efforts. Such guidelines would not produce the desired results if their implementation was not coordinated and monitored. Performance monitoring and coordination of the functioning of different departments are meticulously reviewed by the Chief Minister every day and results of the analysis shared with the people of Kerala.

 

Exit Strategy

 

Kerala is now preparing an exit strategy from complete lock down. An important challenge would be to track and test and where needed quarantine or treat the expected 5 lakh migrant Malayalees who would be returning from gulf and other foreign countries and also from other states in India. Local governments have been involved in identifying all the potential return migrants in their area and are collaborating with Public Works Department to find hotels, hostels, unoccupied flats and large houses to quarantine them. Already accommodation has been identified for 2.5 lakh persons. All the returnees have to be quarantined and tested    and those found positive would be isolated and treated. There would be also option for the return migrants to use hotel accommodation for quarantine on payment.

 

The second component of the exit strategy is reverse quarantine. All persons above 65 and those suffering from chronic diseases, who are at higher risk of adverse consequences if infected, will have to stay indoors and, if necessary, in the isolation rooms in the houses. For Kerala this will be a daunting task with 13.5 percent of population above the age of 65 and high incidence of diabetics and hypertension. Quarantining more than 40 lakh people in the house would require big data analytics to draw up regional strategies. Equally important are the local level planning to provide medicine, counselling and if necessary, free food to those who are quarantined. Personal hygiene, habits of hand washing and use of masks will have to be strengthened. Some of the local governments like Aryad Block Panchayat and constituent Gram Panchayats are already experimenting with reverse quarantining. Using digitised health data of all the citizens, telemedicine, free food, medicine and counselling to the needy, their effort is to ensure that the aged and other vulnerable sections stay home safe.

 

Third component of the exit strategy would be carefully opening up livelihood activities. The first to open up was agriculture and allied sectors and cottage and small scale industry. These sectors are largely with in the domain of the local governments. Cultivation of paddy and mixed crops in the coconut homesteads in the state have been declining. Perhaps COVID-19 crisis may provide an opportunity to reverse the trend. Even during the lock down period vegetable cultivation was being promoted and is going to be taken up on a campaign mode. Peoples’ Plan Campaign had succeeded in establishing large number of aggregation models of participatory small scale vegetable cultivation. The Agriculture Department is in the process of drawing up a comprehensive package for agrarian revival in collaboration with the local governments. The reopening the traditional industries will be paralleled with program for promoting new enterprises.   The budget for 2020-21 had provided for generating five new jobs in non-agriculture sector for every 1000 persons in every local government area.

 

The MGNREGS activities constitute an important component of the exit strategy. They would be front loaded to the maximum extent to provide employment and income to the poor. It has been decided that the focus of the program will be on de-silting and reconstructing about half the 80000 km canal network in Kerala, which would help to mitigate the possible flood during monsoon and help irrigation in summer. The gram panchayaths are the sole agency for the implementation of the MGNREGS works in Kerala and a convergence approach with the local plan is being adopted.

 

Unlocking the economy is a much larger exercise than local agriculture and industry programmes. It would require concerted action from the Central and State Governments. The state has already drawn up certain priority sectors such as pharmaceuticals and medical devices industries, bio technology and information technology sectors, value adding agro processing industries and tourism. The new brand image the state has gained as safe and resilient region would be utilized to attract investment to these sectors. With the expected heavy return migration, special efforts would also have to be made for the rehabilitation and reintegration of migrants. Large scale infrastructure investment from resources mobilized through special purpose vehicles like Kerala Infrastructure Investment Fund Board (KIIFB) will also be playing a major role in the exit strategy.

 

Fiscal Crisis

 

The State Government has already appointed two committees, one by Planning Board and the other by Gulati Institute of Finance and Taxation to study the impact of COVID pandemic on the economy and state finances respectively. It is not our intention to discuss these ongoing exercises. Special packages have to be prepared for each of the industrial sectors. For the MSME sector as well as the farm sector, the moratorium period should be extended to one year with an interest waiver and the existing loans restructured to provide additional working capital. While the Central Government has been generous with the tax concessions for the corporates it has been extremely miserly towards the MSME sector. The conditions imposed for accessing central governments support for PF and ESI concessions are too unrealistic for most industrial units in Kerala to take advantage of.

 

The biggest handicap of the state government has been the unprecedented fiscal crisis that the state government is facing. The states own revenue have shrunk to one tenth of the normal and overall revenues including the central devolution is insufficient to even pay the monthly salary. This situation has not deterred the state government from rolling out a 20,000 crore Covid package, half of which is essentially direct income transfer to the people under lockdown conditions. This has been largely financed by front loading the borrowings, the co-operatives and kudumbasree micro finance.

 

At present we have a strange situation in the country when the central government is following a moderately expansionary fiscal stance while it is forcing states to cut expenditure in times of the pandemic crisis. What one does is neutralised by the other. It is very important that the state governments are also taken into confidence and provided with additional fiscal space by raising the fiscal deficit ceiling to five percent, full payment of the GST Compensation and a special COVID pandemic grant to neutralise the decline in central devolution.

 

Conclusion

 

The STEPP framework, developed by the United Nations to deal with the Ebola outbreak[6], - Stop the outbreak, Treat the infected, Ensure essential services, Preserve stability and Prevent further outbreaks - has become a standard reference norm for health emergencies. Being a health emergency, health systems will be the centre of the response. In STEPP only treatment is the exclusive domain of health department. A comprehensive response will need to go beyond health systems and mobilise the entire society. A large-scale, coordinated humanitarian, social, public health, and medical response will be needed (Farrar and Piot, 2014). Kerala’s COVID-19 response has passed this test. While the exemplary leadership at state level in addressing the crisis has been widely noted our discussion also highlighted the importance of the social capital and the active involvement of the people through local governments that played a significant role in Kerala’s success.

 

The challenge is not over yet. We do not know the prevalence of the virus in the community which may lead to new clusters developing silently. The large number of expatriates and from other places in India who are set to come back is yet another major challenge Kerala is gearing up to meet and may adversely impact the disease situation. Till a proper vaccine is discovered or herd immunity develops people will have to learn to live with the Virus.  However Kerala has demonstrated the resilience to handle all but the worst case scenario and perhaps avoid such an eventuality.

 

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[1] Dr. T.M Thomas Isaac is the Finance Minister of Kerala and 2 Rajeev Sadanandan is Former Health Secretary of Kerala and currently CEO, Health Systems Transformation Platform, New Delhi. Views are personal.



[2] Reserve Bank of India: ‘Reserve Bank of India Bulletin’, Various issues.

[3] Economic Review 2018: [http://spb.kerala.gov.in/ER2018/index.php] Downloaded on 28 April 2020

[4]See for instance: How has Taiwan kept its coronavirus infection rate so low? https://www.dw.com/en/taiwan-coronavirus/a-52724523 Downloaded on  28 April 2020

[5] Coronavirus Lockdown: Kerala Has 69% Of India’s Government-Run Relief Camps For Migrant Workers  https://www.bloombergquint.com/coronavirus-outbreak/coronavirus-lockdown-kerala-has-69-of-indias-government-run-relief-camps-for-migrant-workers Downloaded on  30 April 2020


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