Four southern govts in sync, allege North bias on tax sharing

The southern states claim that the skew allocation of central funds is in favour of states with large populations like Uttar Pradesh and Bihar.

india Updated: Apr 11, 2018 07:29 IST
Ramesh Babu
Ramesh Babu
Thiruvananthapuram, Hindustan Times
15th finance commission,Terms of reference,Central transfers
In this file photo, Kerala CM Pinarayi Vijayan addresses an event in Kolkata. On Tuesday, Vijayan also said the introduction of GST in the country has resulted in erosion of fiscal autonomy of the states.(PTI)

In an unprecedented move, finance ministers of three southern states and one union territory came together on Tuesday, denounced the 15th Finance Commission’s formula for sharing of revenue between the Centre and the states and decided to form a pressure group to oppose what they termed ‘anti-federal’ policies of the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government.

The meeting in Thiruvanthapuram on Tuesday was attended by Puducherry chief minister V Narayanaswamy who also holds the finance portfolio, Andhra Pradesh finance minister Y Ramakrishnadu, Karnataka agriculture minister Krishna Byre Gowda and Kerala finance minister Thomas Issac.

Interestingly , the finance ministers of Tamil Nadu and Telengana skipped the event. Puducherry and Karnataka are ruled by Congress governments and Andhra by the Telugu Desam Party, which recently exited the NDA.

The finance ministers told the media after the meeting that changes in the terms of reference (ToR) of the finance commission would adversely affect the southern states and said they will form a bloc to carry forward their fight. They said they shouldn’t be penalised for successfully implementing policies of the union government.

The ToR recommended that the 2011 census be used as the benchmark for allocating funds to the states compared to the 1971 census which was being used earlier. The share of Tamil Nadu, Kerala, Andhra Pradesh, and Karnataka in the country’s population declined from 22% in 1971 to 18.2% in 2011 . The ToR also reduced the weightage for fiscal discipline.

The southern states claim that these skew allocation of central funds is in favour of states with large populations like Uttar Pradesh and Bihar.

The recommendations of the 15th Finance Commission come into effect from April 1, 2020.

In a late evening statement on Wednesday, finance minister Arun Jaitley termed the controversy over the finance commission’s recommendations “needless”.

He added that the commission’s recommendations are based on an assessment of the needs of the states (based on population) and “Income Distance” (a measure of relative poverty) and that, as a result, more resources go to poorer states “which need additional funds for providing education, health, and other services to the people” which these states might otherwise not be able to provide.

Puducherry chief minister Narayanaswamy, who also holds the finance portfolio, said the union government’s policies were forcing some of the states to revolt against it. “The Centre is usurping the rights of states and dictating terms.”

Kerala state finance minister Thomas Issac, who organised the meeting, claimed his state stood to lose at least ~20,000 crore if the new terms of reference are used. Tamil Nadu would lose twice that, he added. Together, the four southern states and Puducherry would lose ~80,000 crore.

It isn’t just about the South and the North, Issac clarified. More states such as Delhi, Punjab, and Odisha would be invited to join the bloc, he said, listing three more states with non-BJP or non-NDA governments.

Andhra Pradesh finance minister Ramakrishandu said most of the policies of the Union government were arbitrary in nature and against the federal polity of the country. “We need more power. At least 80% of the developmental activities are carried out by states and the Centre is only doing 20%,” he said.

His view was echoed by Karnataka agriculture minister Gowda who said that instead of lauding the southern states for executing national policies (such as those on population control) effectively, the union government seems keen to penalise them.

Tamil Nadu and Telengana did not send any representatives to the meeting. TN Deputy CM O Paneerselvam, who also holds the finance portfolio, skipped the meeting. The state’s decision not to send a senior minister is being viewed as a move aimed at keeping the Centre happy.

Telangana’s chief minister K Chandrasekhar Rao had turned down the invitation , saying such meetings were against the spirit of national integration. “Some states are talking about the north-south divide. This is not good for national integration. The Centre should take necessary actions to avert such situations,” he had said. Like Tamil Nadu, Telangana’s decision to skip the meeting is being viewed as a part of its political strategy.

Kerala chief minister Pinarayi Vijayan, who inaugurated the meeting, said the terms of reference of the 15th Finance Commission have created enough apprehensions about the principles of fairness and equity in the distribution of national resources for development.

“The finance commission’s proposal is nothing short of an attack on the federal structure mandated by the constitution. Reframing the terms of reference is imperative to strengthen the federal structure of the country and to reinforce its unity and integrity” he added.

In his statement, though, Jaitley pointed out that the 14th finance commission, which increased the share of states’ revenue to 42% from 32%, had already set a precedent by giving 10% weightage to the 2011 census data. He added that the ToR of the 15th commission includes a provision for rewarding with special incentives states that have done well in terms of population control. “There is no inherent bias or mandate in the ToR of the 15th Finance Commission which can be construed as discriminatory against the states which made good progress in population control,” he said.

(Zia Haq in New Delhi contributed to this story)

First Published: Apr 10, 2018 17:50 IST