Kerala, Karnataka, A.P., Puducherry want 15th Finance Commission Terms of Reference reframed

(Left to right) Puducherry Chief Minister V.Narayanasamy, Kerala Chief Minister Pinarayi Vijayan, A.P. Finance Minister Yanamala Ramakrisnudu, Kerala Finance Minister T.M. Thomas Issac and Karnataka Agriculture Minister Krishna Byre Gowda at the Conclave of Finance Ministers of Southern States held in Thiruvananthapuram on April 10, 2018.

Three non-BJP ruled southern States on April 10 demanded reframing the Terms of Reference of the 15th Finance Commission for devolution of funds to States, saying it was in contradiction to the principles of federalism enshrined in the Constitution.

In a first-of-its-kind initiative, the Finance Ministers of three south Indian States and the Union Territory of Puducherry that stare at drastic cuts in Central transfers in the wake of the Terms of Reference (ToR) met in Thiruvananthapuram to discuss the challenges ahead, observing it was against the interests of the progressive States.

At the conclave, Kerala, Karnataka, Andhra Pradesh as well as the Congress-ruled Puducherry while opposing the ToR said it was in contradiction to the principles of federalism enshrined in the Constitution and also would result in revenue loss to the performing States.

Among other things, they also strongly opposed the ToR recommendation to use the 2011 census to calculate population for allocation of union tax revenue in place of 1971 census, which was used by the previous Finance Commissions. However, the AIADMK-ruled Tamil Nadu and TRS-ruled Telangana opted out of the conference hosted by Kerala to discuss issues of common concern with respect to the 15th Finance Commission.

Inaugurating the conference, Kerala Chief Minister Pinarayi Vijayan said the heated debates that followed appointment of the Commission was unprecedented because of the ‘conspicuous bias’ in-built in the ToR of the new commission. It was widely feared that the ToR framed by the Centre would prevent the Finance Commission from fulfilling its constitutional responsibility, he said. “Therefore, it is only proper for all of us to appeal to the Union Government to reframe the terms of reference of the 15th Finance Commission,” Mr. Vijayan added.

Mr. Vijayan said introduction of GST in the country has resulted in erosion of fiscal autonomy of the States. “We are all aware that the terms of reference of the 15th Finance Commission has created apprehension about principles of fairness and equity in the distribution of national resources for development,” the CPI(M) veteran said. Attacking the BJP-led NDA government, he said the ToR was unprecedented in asking the Commission to consider proposing performance-based incentives beyond those relating to fiscal responsibility, population and devolution to local bodies. “This reflects the viewpoint and ideological inclinations of the Central government and are attempts to micro-manage the the fiscal domain of States,” he said.

Backing the southern States, senior Congress leader P. Chidambaram in a tweet said the ToR was “seriously flawed” and would adversely affect the better-performing states. Earlier, he had said the Centre has “lit a fire” and that it should be doused before the southern “flames scorch the federation”.

Andhra Pradesh Finance Minister Yanamala Ramakrishnudu said they were not blaming the Finance Commission or its composition. The State was against ToR “unilaterally” stipulated by the Centre without consulting the States, he said, and demanded that it be reframed after discussions.

Puducherry Chief Minister V. Narayanasamy said the conference would be an eye-opener for the Union government. The best performing States are punished and worst performing ones are rewarded, he said, and sought to know how developed States could carry out works if funds were not given to them. He took a dig at Prime Minister Narendra Modi, saying he talks about cooperative federalism at all meetings, “but what was actually happening is dictatorship”.

“They want to impose (various things) on States in the name of the Constitution, but actually infringe on the powers of the States,” he added.

On GST, he said there was a 30% decline in revenue of the Union Territory after implementation of new tax regime, though it had been repeatedly said GST would be very beneficial to consumer States like Kerala and Puducherry. “We have to revolt against the Union Government for our rights. It is high time that the Government of India changes the ToR and includes Puducherry also in the ToR,” Mr. Narayanasamy said.

Representing Karnataka, Agriculture Minister Krishna Byre Gowda said his State fully supports the views of other States. Karnataka was of the opinion that all progressive States, including perhaps all the southern States, have been ‘disincentivised’ by means of the ToR, he said.

Kerala’s Finance Minister T.M. Thomas Isaac in his opening remarks said it was estimated that Kerala was bound to lose around ₹80,000 crore due to the present ToR.