The states, especially the opposition ruled states have been alleging for quite some time now that they have been suffering from financial discrimination under PM Narendra Modi’s rule, and they are not being given their rightful share of taxes and revenues by the Centre. It was only on February 2, 2024, West Bengal Chief Minister held a two-day sit-in protest in Kolkata and alleged denial of funds under key central schemes, such as MGNREGA, due to which wages to rural poor workers are delayed by months. Karnataka government protested in Delhi, and Kerala cabinet ministers led by the chief minister participated in a sit in at Jantar Mantar on February 8 against centre’s discriminatory policy.

It is common knowledge that there are several Central schemes though which the Union government does politics not only in states but at the panchayat level also. Many of the Central schemes cover the subjects not only in the concurrent lists, but also state and the Panchayati Raj. These are great vote catching schemes for the ruling political party at the centre. States on the other hand implement several schemes, including the Central schemes, and naturally they need required funds on time.

Tamil Nadu and Kerala have alleged that Centre was “arbitrarily” restricting state’s borrowing limit by “misusing” its power under Article 293 of the Constitution of India. While under its provision state legislature has power to fix borrowing limits with guarantee from the Consolidated Fund of India, but prior consent from Union government is necessary. Modi government uses this prior permission provision as restrictive tool to limit deficit financing beyond the limits prescribed by State Fiscal Responsibility and Budget Management Act. “As a result, the fundamental principle of fiscal federalism envisioned by the Constitution makers is under grave threat,” CM Tamil Nadu M K Stalin has asserted.

Karnataka, Tamil Nadu, and Kerala have not only alleged Centre imposing restrictions on their borrowings but also of reducing flow of central funds to them chiefly due to recommendations of 15th Finance Commission. They said that they are also not getting GST compensations on time.

Though, Union finance minister Nirmala Sitharaman told the Lok Sabha that there was no discrimination against any state as disbursement of funds were as per guidelines of the finance commission and audit reports of the Comptroller and Auditor General (CAG).

She specifically mentioned the issue of non-release of MGNREGA fund to West Bengal and said it was stopped following audit objections by the CAG as the state had failed to submit utilisation certificates. However, actual sufferer of such a bad politics are poor rural wage workers, who are not getting their guaranteed wages and work under MGNREGA.

Karnataka said the state is getting only Rs 12 or Rs 13 back while we collect Rs 100 in taxes. CM Siddaramaiah said that the state lost Rs 62,098 crore in tax devolution due to changes in the Finance Commission’s recommendations, and the Modi Government has just neglected the interest of Karnataka. He said that the state’s devolution of funds has decreased from 4.71% under the 14th Finance Commission to 3.64% under the 15th Finance Commission.

Siddaramaiah said, “The state’s projected growth from 2017 to the conclusion of financial year 2023-24 amounts to Rs 4.92 lakh crore. However, the anticipated actual collection for the state stands at Rs 3.26 lakh crore. Of the shortfall of Rs 1.65 lakh crore, the Union government has compensated the state with Rs 1.06 lakh crore, resulting in a loss of Rs 59,274 crore.” He also alleged that they are not getting enough funds to deal with even drought conditions.

Kerala has said that the state has been a ‘curtailment’ of Rs 57,400 crore made by the Centre in the state’s receipts in the current fiscal. This includes Rs 12,000 crore due to the cessation of GST compensation, Rs 8,400 crore in this year’s Revenue Deficit Grant, Rs 7,000 crore made in the borrowing limit by accounting the borrowings of KIIFB and Pension Company as Public Debt, Rs 12,000 crore by considering public account money as public debt and reduction of Rs 18,000 crore resulting from the decline of state’s divisible pool share from 3.87% to 1.925% during the 10th to 15th Finance Commission tenures

The state was eligible to borrow Rs 39,626 crore but the Centre allowed them to borrow only Rs 28,830 crore till now. The state was also denied funds in several schemes such as there was a denial of Rs 3,000 crore in the form of interest free loans under the Centre’s Scheme for Special Assistance for Capital Expenditure 2023-24.

Direct tax collection from Tamil Nadu was Rs6.23 lakh crore between 2014-15 and 2022-23, but the state alleged that the Union government gave the state Rs4.75 lakh crore, including the central tax share of Rs 2.46 lakh crore and subsidy of Rs 2.28 lakh crore. To compare the discrimination, Tamil Nadu devolution was compared with BJP-ruled Uttar Pradesh. Tamil Nadu said that Uttar Pradesh was given Rs 15.35 lakh crore which their direct tax collection was only Rs 2.23 lakh crore. Finance Minister of Tamil Nadu said that they get only 29 paise while Uttar Pradesh gets Rs 2.73. Tamil Nadu says that their total divisible central taxes has decreased from 5.305% under the 12th Finance Commission to 4.079% under the 15th Finance Commission.

In this backdrop, it is worth recalling that 14th and 15thFinance Commission had recommended state share of 42% and 41%, respectively, the share of the gross tax revenue to states was just 35% in 2015-16 and 30% in 2023-24 (Budget Estimate).While the gross tax revenue of the Union government increased from Rs 14.6 lakh crore in 2015-16 to Rs 33.6 lakh crore in 2023-24, the States’ share in the Union tax revenue increased only from Rs 5.1 lakh crore to Rs 10.2 lakh crore. Grants-in-aid to States declined in absolute amount from Rs 1.95 lakh crore in 2015-16 to Rs 1.65 lakh crore in 2023-24. Taken together transfer of funds to states declined from 48.2% to 35.32%.

The states, especially opposition ruled states, have enough valid reasons to complain against financial injustice to them under PM Narendra Modi led Centre. (IPA Service)