THIRUVANANTHAPURAM: Five Opposition-ruled states have flagged concern over the rise in surcharges and cesses levied by the Centre and the low share for states from the divisible pool of taxes. A one-day conclave of finance ministers attended by Telangana, Tamil Nadu, Karnataka, Punjab and Kerala discussed the approach towards the 16th Finance Commission and issues of fiscal federalism.
Chief Minister Pinarayi Vijayan inaugurated the conclave in Thiruvananthapuram on Thursday, which was attended by Telangana Deputy Chief Minister Mallu Bhatti Vikramarka, Tamil Nadu Finance Minister Thangam Thennarasu, Karnataka Revenue Minister Krishna Byre Gowda and Punjab Finance Minister Sardar Harpal Singh Cheema, besides Kerala Finance Minister K N Balagopal and Kerala Leader of Opposition V D Satheesan.
In his address, Pinarayi called for a higher share for the states from the taxes collected by the Union government. Pinarayi said since the 15th Finance Commission, Kerala has been demanding to raise the states’ share to 50% considering the “vertical fiscal imbalance between the taxing powers and expenditure obligations of the Union and the states”.
“The inter se distribution among the states also needs to be reconsidered,” he said. “Due consideration has to be given to the needs of states which have taken extra efforts to achieve health, education and demographic indicators,” he said.
Mallu Bhatti Vikramarka said the Centre failed to uphold the principles of equity, autonomy and efficiency in the financial relations with states. “This has affected the development of states. The framers of our Constitution never intended centralised financial control. The Finance Commission should ensure fair and equitable distribution of resources among the Centre and states,” the Telangana deputy CM said.
TN minister Thangam Thennarasu also called for increasing the states’ share from the divisible pool.
Need to have strategy of rewarding performing states: FinMin
“On the one hand, effective devolution is less due to imposition of cess and surcharges. On the other, states’ share in centrally sponsored schemes (CSS) increased,” he said, adding that the states have less fiscal space for existing and new state schemes. Harpal Singh Cheema said the Goods and Services Tax (GST) limited the fiscal autonomy of states. “Punjab witnessed a considerable decline in tax revenue in the post-GST scenario,” he said.
Karnataka Revenue Minister Gowda said Karnataka did not get a fair treatment from the 15th Finance Commission.
The commission should recommend capping the cesses and surcharges at 5%, and anything above 5% should become part of the divisible pool. Gowda also said Karnataka was eager to host the next meeting of ministers of Opposition-ruled states.
Balagopal said Kerala’s share in the divisible pool declined drastically over the years. “Kerala recorded the highest decline in its share from about 3.8% during the 10th FC to 1.9% during the 15th FC. The loss expressed in absolute numbers will be too huge and sensational. In the future, we need to have a strategy of rewarding performing states while handholding the laggards,” he said.
Satheesan said the finance commission should allocate more to states like Kerala which are at the risk of disasters due to climate change.