Allow States to borrow 5% of GDP, urges OPS

Deputy Chief Minister puts forth slew of demands during pre-Budget meeting, chaired by Union Finance Minister

Published: 19th January 2021 05:16 AM  |   Last Updated: 19th January 2021 05:16 AM   |  A+A-

Deputy CM O Panneerselvam on Monday chaired a meeting with functionaries of AIADMK’s Amma Peravai in Chennai, ahead of former Chief Minister J Jayalalithaa’s 73rd birth anniversary in February | Expre

By Express News Service

CHENNAI: Deputy Chief Minister O Panneerselvam, who also holds the finance portfolio, on Monday put forth a slew of demands before the Centre, while preparing the 2021-22 State Budget. The demands include allowing States to borrow up to five per cent of GDP, no abrupt fiscal correction during 2021-22, discussions on continuance of the compensation mechanism and devolving further taxation powers on States, permission and fund allocation for water resource augmentation projects, early disbursal of pending dues to the State, etc. 

Addressing the pre-budget meeting chaired by Union Finance Minister Nirmala Sitharaman on a virtual platform, the Deputy CM said, “Though the early signs of economic revival are apparent, the financial situation of State governments would take more time to recover. Hence, no abrupt fiscal correction should be attempted during 2021-22. The transition back to fiscal targets should be through a gradual path over two to three years.” 

Panneerselvam also said the viability of using all measures to support growth, including the escape clause in the Fiscal Responsibility and Budget Management Act to permit the Reserve Bank of India to subscribe to the Central government’s loans, should be explicitly placed on the table for consideration. “This will give confidence that the government will do whatever it takes to sustain growth,” he added.

Pointing out that the State governments had given up their autonomy on their main source of revenue based on a assurance that the transition to the GST regime would be revenue neutral in the long run, Panneerselvam said, “The expectations of revenue growth with the implementation of GST have been belied. The reasons for this tepid revenue growth have to be analysed in detail.”

“Alternatives, including continuance of the compensation mechanism and devolving further taxation powers on States will have to be discussed in the GST Council in order to ensure that States are not put to hardship in 2022-23. This very crucial issue should be addressed urgently to ensure that the interests of the States are not affected,” he added.  

“With regard to the local body grants in the first report of the 15th Finance Commission, the all-India ratio of rural to urban population was applied uniformly for all States. In more urbanised States like Tamil Nadu, this deprived urban areas of much needed funding. I request that this anomaly be set right when the final report of this Commission is implemented during 2021-22. Besides, no further conditions should be imposed by the Centre for the release of grants recommended by the Finance Commission to ensure that the States receive their full share of the grants on time,” he added.

The Deputy CM also pointed out that Tamil Nadu was yet to receive grants of Rs 2,577.98 crore recommended by the 14th Finance Commission for rural and urban local bodies. In fact, performance grants recommended by the 14th Finance Commission have not been released in the last three years to any State.

“Tamil Nadu has a long track record of efficient implementation of Externally Aided Projects, which later serve as models for other States and countries in project design and execution. Now the Union Finance Ministry intends to approve only one externally aided project per agency per State in a year. Such an abrupt change in policy greatly disrupts our development plans. So, the projects that are at an advanced stage of consideration should be approved for implementation without any restrictions and limitations,” he added. 

“At present Rs 19,591.63 crore, including pending GST compensation claims, arrears related to 13th and 14th Finance Commission grants to local bodies, and pending grants for programmes including Sarva Shiksha Abhiyan, Rashtriya Madhyamik Shiksha Abhiyan, Right to Education Act, Flood Management Programme, and Post-matric Scholarship Scheme, is due to Tamil Nadu. I request the Centre to release dues at the earliest,” he added. 


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