Finance ministers of select non-BJP-ruled states met in Amaravati on Monday to oppose the terms of reference of the Fifteenth Finance Commission (FFC), with Andhra Pradesh chief minister N Chandrababu Naidu claiming progressive states would lose heavily if the 2011 census was taken as the basis for the devolution of central funds.
Andhra Pradesh finance minister Yanamala Ramakrishnudu claimed his state would lose Rs 8,000 crore a year because of the FFC’s faulty terms of reference (ToR) that would go against the states that have performed well on population control. Last month, Kerala had hosted a similar conclave of finance ministers of southern states to oppose the ToR.
The FFC, whose award will be valid for the 2020-25 period, will rely on the 2011 Census data, while the 1971 Census numbers were mostly used by the previous finance commissions; the 14th commission, whose award (2015-20) is now being implemented, had given weight to both the 1971 (17.5%) and 2011 (10%) censuses. As per the ToR, among the measurable performance-based incentives, the FFC would consider “efforts and progress made in moving towards replacement rate of population growth”.
Puducherry chief minister V Narayanasamy on Monday sought the intervention of the President to fix the “unilateral” and unjustified action of the Centre in fixing such ToR, while West Bengal finance minister Amit Mitra alleged the “Centre is trying to dilute the spirit of federalism”. Delhi deputy chief minister Manish Sisodia said the Centre must protect the interests of states and that it should consider Delhi and Puducherry as special cases in the ToR.
Kerala finance minister TM Thomas Isaac said the goods and services tax (GST) was a huge burden on states and that the commission must refrain from using the 2011 census for fund devolution.
Analysts have also rejected the arguments of the southern states. They pointed out that the previous finance commissions’ awards haven’t made any clear or permanent winners or losers or reflected regional biases. So, if the share of Tamil Nadu and Kerala in tax transfers from the Centre declined steadily over the last four finance commissions (from 5.39% and 3.06%, respectively, in the 11th FC to 4.02% and 2.5% in the 14th FC), so have the shares of Bihar and Odisha.
Also, while the 14th FC’s tax award saw Bihar and Uttar Pradesh lose 6.7% and 8.6%, respectively, from the previous FC award, Karnataka gained 8.9% and Kerala 6.8%. Also, the poorer states rely much more on the Centre for revenue than the more developed ones do, as the latter have more robust source of own revenue (in Bihar’s case, for instance, 60% of the tax revenue came from the Centre’s devolution in 2015-16, while the corresponding figure for Tamil Nadu was just 20%).
However, although the conclave was expected to be a show of solidarity against the ToR at least among southern states, Tamil Nadu and Telangana were conspicuous by their absence. Finance ministers of Mizoram, Meghalaya, Odisha and Sikkim did not turn up either, while poll-bound Karnataka was represented by its expenditure secretary. Apart from Andhra, the states and Union territories that participated in the meeting included Kerala, West Bengal, Punjab, Delhi and Puducherry.
Tamil Nadu and Telangana had skipped last month’s conclave in Kerala as well, although Tamil Nadu chief minister E Palanisami had earlier opposed the ToR.
Prime Minister Narendra Modi and finance minister Arun Jaitley have already rejected allegations that the Centre is using the FFC to trim funds flow to southern states that have performed well on population control. Modi recently said the Centre had, in fact, suggested to the commission to “consider incentivising the states who have worked on population control”.
Jaitley has said that a needless controversy was being sought to be created that the ToR are loaded against any particular region. The ToR, according to Jaitley, rightly balance both the ‘needs’ represented by latest population and “progress towards population control”.