Karnataka Chief Minister Siddaramaiah has written to the Chief Ministers of eight states to get together for a strategy session to negotiate a better financial deal for states that contribute more to the Central coffers. Besides the four southern states of Kerala, Tamil Nadu, Andhra Pradesh and Telangana, the list also includes Maharashtra, Gujarat, Haryana and Punjab. Mr Siddaramaiah argues that higher income states are being pensalised for their economic performance. The current system undermines cooperative federalism and threatens financial autonomy of progressive states, he said.
His Kerala counterpart Pinarayi Vijayan has said they must stand together and fight, arguing that fiscal federalism is in threat.
The letter comes ahead of the 16th Finance Commission’s move to finalise criterion for devolution of Central funds. Already, finance ministers of Telangana, Karnataka, Kerala, Tamil Nadu and Punjab have met in Thiruvananthapuram to build consensus on their recommendations to the Finance Commission.
Over the last years, the tax share issue has been growing increasingly contentious, complicated, controversial and politically sensitive, with southern states getting increasingly vocal about getting an unfair deal despite their better performance.
Karnataka has said it receives just 15 paise for every rupee it contributes to the Union. Kerala and Tamil Nadu get 25 paise and 29 paise for every rupee they give. In comparison, Uttar Pradesh gets Rs 2.73 and Bihar receives Rs 7.06 for every rupee they contributed.
Southern states contribute 30 per cent to the GDP, have 19.6 per cent population. But tax devolution declined from 21 per cent under 11th Finance Commission to 15.8 per cent under the 14th Finance Commission.
The states are asking for a bigger share in central taxes. They say it should be hiked from the current 41 per cent to 50 per cent.
Their other demands and complaints:
- Southern states account for 62% of expenditure but get 37 per cent revenue share.
- Cess, surcharge account for 28 per cent of Central taxes and are not shared with states.
- The states want a reduction in Centrally sponsored schemes, allowing them to spend according to local priorities. Expenditure on Centrally sponsored schemes is more than three times the grants to states.
- They also say states that demographic discipline should not be punished.
Besides, the Deputy Chief Minister of Telangana, Bhatti Vikramarka, has sought that political representation of southern states be kept intact during delimitation. The good performance by states on population control, good governance, transparency should not be punished, he added.
“Southern states, despite their significant contribution to the GDP of over 30 per cent and representing a considerable portion of the population (19.6%), have seen their share in tax devolution decline from 21.073 per cent under the eleventh finance commission to just 15.8 per cent under the 15th Finance Commission,” he said.
