In Delhi, Tamil Nadu FM demands greater fiscal federalism from Union govt

In his speech at a pre-Budget meeting, Tamil Nadu Finance Minister Palanivel Thiaga Rajan (PTR) asked for greater fiscal autonomy for states from the Union government. 

In his speech at a pre-Budget meeting, Tamil Nadu Finance Minister Palanivel Thiaga Rajan (PTR) asked for greater fiscal autonomy for states from the Union government. 

Questioning the increasing cesses being collected by the Union, and pointed out that the ratio of grants given by the Union to states for specific Union government projects has increased drastically, compared to money devolved directly to the state governments for their own projects and purposes, PTR made a strong demand to the Narendra Modi government to merge the cesses and surcharges into the basic rates of tax so that states receive their legitimate share in devolution.

He was participating in the pre-budget meeting chaired by Union Finance Minister Nirmala Sitharaman in New Delhi.

He went on to say: “The fathers of the Constitution provided the states with some powers of taxation and mandated a sharing of taxes between the Union and states. This original balance which was already skewed against true fiscal federalism has been skewed even further towards the Union over a period of time.”

“Cesses and surcharges as a proportion of the Gross Tax Revenue of the Centre have almost tripled from 6.26 percent in 2010-11 to 19.9 percent in 2020-21. In effect, states are deprived of a share in approximately 20 percent of the revenue collected by the Union,” PTR underscored.

The Tamil Nadu government has been alleging for a while now that the Narendra Modi government has been further encroaching upon the fiscal rights of states.

DMK leader also highlighted that dues to the tune of Rs 17,000 crore are pending from the Union government to Tamil Nadu and demanded that the dues be released as the states are already under immense fiscal stress.

He said: “These dues have a considerable impact on the fiscal calculations of the state which are already under severe stress due to the pandemic. I strongly urge the government to release pending dues at the earliest and make appropriate allocation in the upcoming Budget 2022-23.”

PTR further demanded the rollback of the Union government’s recent decision to increase the GST for the textile and apparel sector from 5 percent to 12 percent saying this move would increase the financial burden on already-stressed MSME textile and handloom sectors which are reeling under the effects of the pandemic.