The Hindu Business Line : Southern States want higher share in Central taxes

Chennai, Dec. 9 State Governments have come together to push for an increased share of Central taxes and are asking the Centre to bear the additional burden of implementing the Sixth Pay Commission, according to Mr Rajeev Ranjan, Tamil Nadu Secretary for Commercial Taxes.

Addressing a seminar, “Finance Commission: Issues of Southern States”, organised by Madras School of Economics here on Monday, he said the Empowered Committee of State Finance Ministers has made the representation to the Finance Commission on increased devolution of funds to the States.

They expect the Centre to bear at least 50 per cent of the additional burden of implementing the Sixth Pay Commission recommendations. To Tamil Nadu particularly, which has over 13 lakh employees on the Government payroll, one of the highest in any Government, this was a large burden.

The State Finance Ministers have demanded a 50 per cent share in the Central taxes against the 35 per cent that the Centre now gives them. Traditionally, there has been a tension between the State Governments and the Centre on this issue.

They have also represented that the Centre should not impose conditions on State-related subjects without their concurrence. Fiscal discipline has improved at the State level with the fiscal deficit being better curtailed in the State finances than at the Centre, he said.

Mr D.K. Srivastava, Director, Madras School of Economics, said that the imbalances in the formula of the devolution of funds to State Government need to be addressed. The southern States, which are in the middle income group, now tend to lose as much as high-income States. The southern States’ share of tax devolution has dropped to less than 20 per cent as compared to 24.5 per cent between the Third and Twelfth Finance Commissions.

Also, the Centre has continued with a large amount of cesses and surcharges that are not shareable with the State Governments and when they do pass on funds to the States, the distribution is arbitrary and not transparent.

The Centre also implements a plethora of Centrally-sponsored schemes in which the States bear a share of the expenditure. But the Centre has its own priorities and preferences and the number of areas and schemes proliferate without any rationale.

In a recent submission to the Thirteenth Finance Commission, the Empowered Committee of State Finance Ministers has argued that the total projected central assistance of Rs 3.25 lakh crore in the 11th plan period over two-thirds would be under Centrally-sponsored schemes. In many cases, the Centre bypasses State Governments and incurs expenditure in State jurisdictions through ad-hoc local bodies.

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