FMs of non-BJP States fear financial emergency

Finance ministers of several Opposition-ruled States and several senior Opposition leaders on Monday apprehended a financial emergency and severe curtailment of States’ fiscal space.

At a day-long video conference alongside Prime Minister Narendra Modi’s meeting with chief ministers, these leaders underlined their concerns and feared that the next logical step in the long series of the Centre denying the due share of revenue to the States is a total usurping of their fiscal powers.

Addressing a webinar organised by the Gulati Institute of Finance and Taxation, an autonomous institution under the Kerala Government, Punjab Finance Minister Manpreet Singh Badal, Delhi Deputy Chief Minister and Finance Minister Manish Sisodia, Kerala Finance Minister Thomas Isaac, former Jammu and Kashmir Finance Minister Haseeb Drabu, senior Opposition politicians Sitaram Yechury, Jairam Ramesh and D Raja, urged the Centre to immediately pay GST dues to the States to ease their concerns regarding fiscal consolidation by the Centre.

They asked the Centre to increase the borrowing ceiling and release funds to the States to battle the pandemic, including the funds collected through the PM Cares fund. “Financial emergency will be resolutely opposed. This is the manner through which the totalitarian order will be legitimised,” Yechury said.

According to Haseeb Drabu, the pandemic situation is being used by the Centre to create a new kind of “cannibalistic federalism”.

“The route we are headed on is the declaration of financial emergency... That will be the end of fiscal federalism. I would not advise a fresh budget. Within what has been approved, reallocations can be done by the States without getting into legislative approval. The moment you get into monetisation of State taxes and all, you are giving enough grounds for a financial emergency. Create a corpus of funds jointly by the States and Centre,” he said.

Badal said economic activity is at a standstill in Punjab. “Many sectors are on the verge of collapse. 75 per cent of MSMEs are facing crisis,” he said chairing a session on fiscal federalism. “Central assistance has been abysmal. GST arrears are pending,” he said.

According to the Delhi Deputy CM, State revenues have come down drastically. He said the State collected ₹3,500 crore as revenue from GST and VAT last April and this year it is ₹323 crore.

Isaac said there is a mismatch between the revenues and expenditure of the States.

“Unfortunately, GST has undermined the fiscal space of the States. The FRBM Act severely restricted the fiscal domain of the State,” he said.

Ramesh said entire fiscal and political architecture are going to be transformed after the lockdown. “Political decentralisation as envisaged by the Constitution will be a casualty. Real danger is we are going to go back into a centralised polity,” he said. Raja said attempts to bring in a financial emergency must be outrightly rejected.

Later, talking to reporters after the CMs’ meeting with PM, senior Congress leader and Puducherry Chief Minister V Narayanasamy said almost all the States have demanded more resources from the Centre to address the crisis. He said Modi did not provide any answers to the queries on managing the crisis of migrant workers and ensuring enough test kits and PPEs.

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