It is that it under-prices its assets, under-recovers its services, and tolerates leakages. Here are over fifty ideas for a fiscal reset.

Tamil Nadu has finally acknowledged what its fiscal numbers have been signalling for years. A state that prides itself on combining industrial dynamism with an expansive welfare model can no longer finance both through incremental fixes.

The appointment of a six-member Revenue Augmentation Committee under former Planning Commission Deputy Chairman Montek Singh Ahluwalia is therefore much more than another committee. It is an admission that Tamil Nadu's revenue model itself requires redesign.

The committee's terms of reference are refreshingly broad. Rather than simply recommending new taxes, it has been asked to improve tax and non-tax revenues, rationalise fees and exemptions, plug leakages, strengthen compliance, improve revenue buoyancy and identify under-utilised sources of income such as land monetisation, dividends from public sector undertakings (PSUs), user charges and alcohol revenues. That is precisely the right brief.

The arithmetic is unforgiving. Tamil Nadu today carries over Rs 10 lakh crore of direct debt, second only to Maharashtra in absolute terms, and more than Rs 13 lakh crore in total liabilities. At 28.3 per cent of gross state domestic product (GSDP), its debt burden exceeds that of Gujarat at 17.6 per cent, Maharashtra at 19.7 per cent and Karnataka at 23.4 per cent.

More worrying still, its own-tax-to-GSDP ratio has slipped to 5.45 per cent, the lowest level in two decades. Fiscal stress is no longer cyclical. It is becoming structural.

The temptation in such circumstances is always the same: invent another cess, raise another tax rate or increase borrowing. That would be a mistake.

Tamil Nadu's problem is not that it taxes too little. It is that it under-prices public assets, under-recovers the cost of public services, under-monetises state-owned assets and tolerates leakages that erode revenue every year. A richer state should not have a weaker revenue effort than many of its peers.

Fortunately, the committee's mandate leaves room for a more ambitious agenda.

Over the past few months we have compiled more than fifty practical ideas for revenue augmentation. Many are modest. Some are politically contentious. None is revolutionary. Collectively, however, they represent a different philosophy of public finance: one that treats government not merely as a tax collector but as the owner of valuable public assets, the regulator of markets and a catalyst for economic activity.

The proposals have been organised into thematic categories covering taxation, non-tax revenues, pricing reforms, asset monetisation, public enterprises, compliance and institutional reforms. Together they offer a practical menu of options for the Revenue Augmentation Committee as it undertakes the task of redesigning Tamil Nadu's revenue architecture. No committee will adopt every recommendation, nor should it. But if the objective is to build a fiscally stronger state without relying solely on higher taxes and larger borrowings, this is where the work begins.

1. Reform Alcohol Policy

Tamil Nadu should stop treating alcohol policy purely as a social question and start recognising it as an economic sector.

The state could introduce microbrewery licences to seed a craft beer ecosystem, and permit stand-alone pubs and taprooms instead of forcing every establishment into the TASMAC ecosystem.

It could also expand premium wine and imported beer retail, for which significant demand exists in every state and which the sheer lack of availability has suppressed here. Differentiated licensing for premium hospitality would let that segment price itself properly, and regulated private participation in retail is worth considering while excise taxation remains firmly with the state.

Two changes matter more than the rest. Premium licences should be auctioned transparently rather than allocated administratively. And the monopoly of politician-owned production capacity should be broken, so that liquor can be sourced from within and outside the state at competitive prices.

2. Monetise Public Assets

Tamil Nadu owns thousands of crores worth of under-utilised public assets that generate little or no income.

Bus stations, bus shelters and transport terminals can be monetised through commercial redevelopment. The recent initiative of covering transformers with steel sheets is a welcome move, and those surfaces can carry advertising and corporate sponsorship.

Advertising rights on public infrastructure should be auctioned transparently, which would also draw pan-India out-of-home players into the market. Parking can be commercialised through digital pricing, with build-own-operate-transfer multi-level facilities auctioned transparently across all principal cities.

The larger prizes lie in land and roads. Mature state-owned road assets can be monetised through toll-operate-transfer models, replicating the National Highways Authority of India's approach, and this alone holds the potential to raise several thousand crores.

Thousands of public properties sit on expired leases at historical rates. The state should take complete stock of them, reclaim every expired lease and re-auction at market rates.

Surplus government land, particularly in dense locations, should be auctioned periodically, and under-utilised commercial government properties redeveloped through public-private partnerships.

3. Modernise Property And Local Finance

Revenue productivity is often improved more by better pricing than by higher rates.

GIS-based property-tax mapping is the obvious starting point, since experience across the country indicates collections rise by 10 to 35 per cent after such an exercise.

Compliance should be improved before rates are touched. The law already allows a property to be sealed or even auctioned for prolonged default, and a few instances of high-profile, visible punitive action would have a dramatic effect on collections.

Rationalising guideline values to reflect market realities would reduce the stamp-duty distortions that encourage under-reporting. This single action carries a large multiplier, since it brings transactions into the formal economy where their circulation lifts collections further.

Pricing of services needs the same honesty. Water tariffs across most of the state are extremely low and bear no relation to the cost of supply. A targeted subsidy for low-income households is entirely defensible, but the same rates for multi-storey buildings and commercial establishments are simply a drain on public funds, and consumption-based tariffs would fix that.

Garbage-user charges should be levied on commercial establishments, office complexes and multi-storey buildings according to waste generated and actual cost incurred. Professional tax, which reports among the lowest collection efficiency and the weakest enforcement of any levy, needs both strengthened.

4. Turn Tourism Into An Industry

Tamil Nadu possesses one of India's richest combinations of heritage, religion, coastline and culture, yet captures a fraction of its economic value.

Fifty globally marketable destinations could be developed across the state, backed by a reasonable advertising budget to promote them across India.

Adventure tourism such as paragliding, parasailing and water sports can be expanded through public-private partnerships, where sporadic events in the past have drawn excellent patronage and indicated real scope. Cruise tourism and marina development remain almost untouched despite one of the longest coastlines in India.

The institutional gap is in large-scale convention and exhibition infrastructure. Meetings, incentives, conferences and exhibitions form a fast-growing sector across several states and Tamil Nadu has missed the growth badly.

Such events generate immediate income, but their real value is the multiplier: more investment, more visitors and greater long-run economic activity. Sports tourism points the same way, as the patronage received by the 44th FIDE World Chess Olympiad at Mamallapuram in 2022, the annual surfing competition at Covelong and the international kite-flying competition all attest.

Religious tourism is the state's most under-exploited asset of all. Premium circuits built around the Arupadai Veedu, the 108 Divya Desam, the Great Living Chola Temples, the Pancha Bootha Sthalams and the annual Velankanni festival could each be marketed across India and South East Asia to draw inbound visitors, alongside cultural festivals and waterfront entertainment districts.

5. Improve Compliance Before Increasing Taxes

The cheapest revenue is revenue already legally due.

Enforcement should be digitised across departments, where cross-correlation with FASTag, GST, income tax and financial reporting data can plug leakages to a great extent.

Outdated exemptions need rationalising, commercial licensing strengthening and transport permit enforcement tightening. In every case, collection efficiency should be raised before any new levy is imposed.

6. Liberalise Markets

Liberalisation often expands the tax base more effectively than higher taxation does.

Greater private participation in bus transport, achieved through transparent licensing in Chennai, would relieve a substantial burden on the state, and premium inter-city services could be opened up through transparent permit auctions.

Power is the least reformed sector of all. It lags every other developed state and remains a heavy drain on the exchequer.

Open access, transparent and stable wheeling charges, digital metering and disinvestment of state-owned generation are all long overdue, each with a tangible effect on state finances.

Beyond that, private tourism infrastructure, marinas and waterfront recreation deserve encouragement, and competition should be introduced wherever government monopolies no longer create public value.

7. Create New Revenue Industries

Rather than taxing existing sectors ever harder, Tamil Nadu should cultivate new ones.

Online gaming can be regulated and taxed, and the potential for regulated casino tourism is at least worth examining. Chennai can be positioned as a convention and exhibition capital, anchored by an annual Global Tamil Business Summit.

Co-working infrastructure can be expanded, sports and entertainment venues built to a standard capable of hosting international events, the state's growing creative economy monetised, and the fintech start-up initiatives already in place strengthened.

8. Improve Government Productivity

Better governance eventually translates into better public finances.

Education is the largest single item in the state budget and salaries the biggest cost head within it, so linking teacher salaries and incentives to measurable learning outcomes, difficult as it is to enforce, would tell on costs and on social outcomes alike.

Public sector undertakings need improved profitability and dividend payouts, and those no longer delivering a differentiated public good should be actively divested. ELCOT, TIDEL, TAMIN, TANMAG, TNPL and the state's holding in Titan have all fulfilled their original purpose and could be disinvested to augment revenues.

Several institutional fixes would pay for themselves. Credit guarantees for micro, small and medium enterprises, on the model of the Union scheme that provided relief during Covid, would strengthen an ecosystem that contributes heavily to both revenue and employment.

Employment exchanges are outdated, and the state has a meaningful role in bringing prospective employers and rural jobseekers onto a common platform for discovery.

Alternative dispute resolution could become a distinguishing strength: a world-class arbitration centre for corporates and stronger consumer redressal forums for retail would unclog the courts and attract investment. Corporate partnerships with government schools and industrial training institutes have worked in other states and would improve employability here.

And raising women's workforce participation would widen the long-term tax base, a task for which Tamil Nadu is uniquely placed given its urbanisation, its education system and its peaceful industrial climate.

From Tax Collector To Asset Manager

The most striking aspect of these ideas is that most are not new. Many have existed in policy discussions for years. Several are already common practice in other Indian states or across Asia. The real obstacle has never been economics. It has been politics.

Tamil Nadu has historically excelled at building institutions, attracting investment and delivering welfare. The next frontier is building a twenty-first-century revenue architecture. That means pricing public services more rationally, monetising public assets professionally, encouraging new industries, strengthening compliance and reducing the state's dependence on ever-increasing borrowing.

If Montek Singh Ahluwalia's committee merely recommends another round of tax increases, it will have missed a historic opportunity. But if it is willing to challenge long-standing fiscal orthodoxies and embrace a broader philosophy of public finance, it could produce one of the most important reform blueprints in Tamil Nadu's recent history.

The committee's real opportunity is not to discover new taxes. It is to discover a new philosophy of government finance.

Tamil Nadu has spent decades thinking like a tax collector. It now needs to think like a modern asset manager.

Fiscal resilience will come not from taxing more, but from taxing smarter, pricing honestly and monetising strategically.