CHENNAI: Opposing the Centre’s move to put forth “needlessly onerous” conditions for increasing the borrowing limits of States, Chief Minister Edappadi K Palaniswami on Monday shot off a strongly-worded letter to Prime Minister Narendra Modi, stating that the move lacked consensus and was not in keeping with the spirit of cooperative federalism.
One of the riders of the Centre to States to increase their borrowing limit was discontinuation of free electricity to farmers. The Centre had asked States to switch to Direct Benefit Transfer instead. Writing to PM Modi in this regard, Palaniswami reiterated that the mode of disbursing subsidy for free power should be left to the prerogative of State governments.
Referring to the communication dated May 17 from the Union Ministry of Finance, which attached conditions for increasing the borrowing limits, the Chief Minister said, “Imposing needlessly onerous conditions on borrowing will constrain States in finding funds to meet essential expenditure in the wake of a serious financial situation. I am confident you will appreciate and understand the difficulties that States face at this time and instruct that necessary changes be made to relevant guidelines.”
Reminding the Centre of the ethos of cooperative federalism, the CM said the reform agenda, on which a consensus is yet to be made, is being pushed at a time when States are battling the pandemic.
Reminding the Centre of ethos of cooperative federalism, Palaniswami said, "Aggressively pushing a reform agenda on which a consensus is yet to be made at a time when the States have approached the Centre for additional borrowing out of sheer desperation, is not in keeping with the spirit of cooperative federalism."
The Chief Minister pointed out that ideally, the proposed reforms ought to have been discussed in detail with the States and a consensus is developed depending on the specific conditions in each State. The reforms ought to have been linked to special Central Covid grants, and not to additional borrowing by States."Linking the Central government's power under Article 293(3) of the Constitution to permit additional borrowing by the States to conditionalities, is unprecedented," he added.
Pointing out that the States had sought the additional borrowing limit, beyond three per cent of GSDP mainly because of the significant shortfall in revenues due to the pandemic, Palaniswami said, "There are also large additional expenditure commitments. These are borrowings by the State governments, which have to be repaid from future tax revenues of the States. They are not grants from the Centre."
In Tamil Nadu's context, the Chief Minister said, "In some of the four major areas where reforms are demanded by the Centre to avail of the additional borrowing, the State government has already undertaken the reforms without expecting any financial assistance. Some other areas, specifically power distribution reforms, are politically sensitive."
Thanking the Prime Minister for having announced the five-tranche economic relief package, Palaniswami expressed confidence that the package would help revive the Indian economy.