Amidst the 24-hour politics going on in the country and the new narrative being run every hour by the political machinery of BJP, another big phenomenon seems to be happening in the country, which is not being paid attention to. This phenomenon is an attempt to establish economic federalism as opposed to political federalism. Last month, on September 12, a meeting of finance ministers of five states was held in Thiruvananthapuram, the capital of Kerala. This was a very important meeting. It was attended by the Finance Ministers of four states of South India – host Kerala, Tamil Nadu, Karnataka and Telangana, besides Punjab, a state of North India.
The five Finance Ministers discussed how the states’ share in central taxes is decreasing and the central government is retaining more money through the use of various financial instruments. Keep in mind that this complaint of the states is old. But for the first time, the finance ministers of the states met and considered this in such a systematic manner.
In the Thiruvananthapuram meeting, the finance ministers of five states proposed that the share of states in the pool of revenue sharing in central taxes be increased from the current 41 percent to 50 percent. Apart from this, these states also want that the central government should not directly collect taxes and deposit it in its treasury in the form of surcharge and cess. This process has to be stopped. In fact, the complaints of the governments of all the opposition parties in the country, including the states of South India, are that the central government is increasing the cess and surcharge and is filling the income from it in its treasury. Keep in mind that the Fourteenth Finance Commission increased the limit of revenue to be distributed among the states from 32 percent to 41 percent.
This should have increased the revenue of the states, but since then the central government stopped increasing the revenue pool to be distributed among the states and increased its earnings by increasing cess and surcharge. The states want the Center to make changes in this. Do not fill your treasury directly by collecting cess and surcharge and make the states’ share 50 percent. Karnataka Finance Minister Krishna Byre Gowda suggested that a maximum limit of five percent of cess and surcharge should be fixed, so that the Center cannot collect more.
The second concern of the five Finance Ministers was that after the implementation of Goods and Services Tax i.e. GST, the financial autonomy of the states is continuously decreasing. It is true that states have participation in the GST Council and whatever decision is taken regarding GST is taken in the Council. But its chairperson is the Union Finance Minister, there is a majority in the government and usually if any committee or group of ministers is formed, the responsibility for it goes to the Finance Minister of any state from BJP. A major concern of the states was that their share in the revenue was decreasing with each Finance Commission.
The 15th Finance Commission had made a big cut in the states’ share and then the opposition ruled states say that the 16th Finance Commission should increase the states’ share in its recommendation. At the meeting in Thiruvananthapuram, Tamil Nadu said that at the time of the Ninth Finance Commission, its share in central taxes was 7.93 per cent, which came down to 4.07 per cent by the 15th Finance Commission. Similarly, Karnataka’s share was 4.71 percent, which came down to 3.64 percent after the recommendations of the 15th Finance Commission. He feels that he has suffered the biggest loss. The Karnataka government estimates that there has been a loss of Rs 1 lakh 87 thousand crore. State Chief Minister Siddaramaiah says that the size of the Union Budget has doubled in 2022 as compared to 2016 but there has been no significant increase in the allocation for Karnataka.
A day before the Thiruvananthapuram meeting, on September 11, Karnataka Chief Minister Siddaramaiah announced another such meeting. He invited the Chief Ministers of eight states to consider whether the central government was distributing taxes unfairly. He invited the chief ministers of four states, Kerala, Tamil Nadu, Telangana and Punjab, and Andhra Pradesh, to attend the Thiruvananthapuram meeting. Also invited the Chief Ministers of three states where BJP or its allies are in power. He invited the Chief Ministers of Gujarat, Haryana and Maharashtra. Apart from Karnataka, eight states have been selected on the basis that they have a larger share in central taxes.
States with high GSDP per capita were invited by Siddaramaiah. He believes that the spirit of cooperative federalism is not being followed and the financial autonomy of the progressive states, i.e. the states which have better economic growth rates while controlling the population, is decreasing. He says that before the start of the tenure of the 16th Finance Commission and its meetings, he wants the Finance Commission to change the direction of its functioning and work for better revenue collection and to encourage development.
Moving away from party lines, such states of the country are trying to come together, which have better economic condition, good growth rate and which have controlled population growth. Their concern is that economic autonomy is continuously decreasing and on top of that, political power is also decreasing. They are also worried that if the central government conducts delimitation with the census, based on population, then the developed states of South India or across the country may suffer losses. His political power may further reduce. That is why, in the name of economic federalism, these states want to unite and put pressure on the Central Government and the 16th Finance Commission.
The concerns of the states of South India regarding the powers of the Center are old. In 1967, DMK leader CN Annadurai had said that the principle of federalism was facing an existential crisis due to the centralization of power at the Center by the governments of Jawaharlal Nehru and Indira Gandhi. He had said that due to arbitrariness in the control and allocation of resources, the status of the states has become that of a subordinate unit of the Centre. He wanted the financial relations between the Center and the state to be discussed in detail. On this line, the states of South India are feeling that the central government is not giving them their fair share, they are being discriminated against, their share is being withheld due to which they are not able to work properly for the betterment of their people. Are.
Then, just before the Lok Sabha elections, the governments of Karnataka and Tamil Nadu demonstrated at Jantar Mantar in Delhi and alleged that the Central Government was not giving their share of money, while they were contributing the most to the central pool. Siddaramaiah government of Karnataka alleged dues of Rs 18 thousand crores and dragged the Center to the Supreme Court for this.
Kerala also appealed in the court regarding the cap on borrowing during the financial crisis. The DMK government appealed to the Supreme Court regarding its step-motherly treatment in the matter of giving Rs 38 thousand crore to the Cyclone Disaster Fund. But the demands of these states started being described as a conspiracy to break the country. However, these state governments are indifferent to such allegations. They will be successful in convincing the citizens of their state about this discrimination.