Image credit: Getty Images
6 February 2024, 15:47 GMT
Updated 47 minutes ago
Delhi, the capital of India, is going to witness something never seen before for the next two days. Starting tomorrow (Wednesday) and for the next two days, the Chief Ministers of Karnataka and Kerala states in South India have announced that they will hold a protest against the injustice done to their states by the Prime Minister Modi-led central government.
All Congress MLAs, MLCs and MPs, led by Karnataka Chief Minister Siddaramaiah, will protest at Jandar Mandar in Delhi.
At the same time, under the leadership of Kerala Chief Minister Pinarayi Vijayan, all the ministers of Kerala and the MPs of the Left Democratic Front are going to hold a protest demanding the provision of necessary financial resources to the states under the Constitution.
This struggle echoes in Tamil Nadu as well. The ruling DMK is protesting in front of central government offices in Tamil Nadu. Out of the five states in South India, the demands of three states are almost identical.
On social media, the campaign is being carried out under the hashtag ‘N Vari N Rani’. The Government of Karnataka has taken it up and made a full-page advertisement in newspapers saying ‘My tax is my right’.
These states are not saying that additional funds should not be allocated to the financially backward states in the country from the financially better off states. On the contrary, they point out that when central government funds are transferred to states, it should be transferred in such a way that the best states are not affected.
“As the budget size of the central government increases, devolution and grants to the states should also increase. But it doesn’t happen. We have no problem with providing additional financial resources to backward states in North India.
Out of Rs 100 given to the central government, Karnataka gets only Rs 12 or Rs 13 back. The central government kills the hen to get the golden egg. But that should not be done,” said Siddaramaiah in a nutshell.
It is well known that southern and western states are better in terms of financial and human resource indices than northern states.
“This struggle is not political. This is not a contest between BJP and Congress. It is to protect the interests of states.” Said Siddaramaiah.
What is the problem with financial distribution?
States feel that the norms for allocation of financial resources have been decided in the 14th and 15th Finance Commissions so that they do not get adequate funds.
Income tax, corporate tax, GST, diesel, petrol, cess and surcharge are directly collected by the central government from the states. But the amount given to the states from the central government is very less.
Between the two Finance Commissions, the share of funds Karnataka receives from the central government has come down from 4.71 per cent to 3.64 per cent. During this period, the state of Karnataka contributed 42 percent tax and 41 percent tax respectively.
Karnataka is the second highest tax payer (Rs 4,34,000) to the central government in the country after Maharashtra. In terms of losses, Karnataka cited Rs 62,098 crore in this financial year. Karnataka’s loss in 2017-18 was Rs.1,87,000 crore.
Kerala Finance Minister KN Balagopal presented the Legislative Budget on Monday.
At that time, he said, “Kerala’s share was 3.87 percent during the 10th Finance Commission in the tax distributed by the central government to the states. It came down to 2.5 percent in 14th fiscal and 1.925 percent in 15th fiscal. People of Kerala are being punished for high per capita income and better control of population growth,” he said in the Assembly.
Balagopal said that for every Rs.65 collected by the respective states, the central government will give Rs.35. But against Kerala’s own tax collection of Rs.79, the central government provides only Rs.21.
“That’s only Rs 21 per Rs 100 from the central government. UP (Uttar Pradesh) gets Rs 46 per Rs 100 from the central government. Bihar gets Rs 70 per Rs 100. Need better proof than RBI figures?” he said. asked the assembly.
Is financial distribution the only problem?
Image credit: Getty Images
Out of 234 taluks in Karnataka, 130 taluks were reported to be experiencing drought last year. In this regard, a central government committee conducted an investigation and submitted a report. A committee headed by Union Home Minister Amit Shah will take a decision on the report. In this regard, Karnataka Chief Minister met Prime Minister Narendra Modi and Amit Shah in Delhi. But the committee never held any meeting.
“As we had incurred a loss of Rs 35,000 crore, we had asked for Rs 17,901 crore in September 2023. But not a single rupee has been disbursed so far,” said Siddaramaiah.
Tamil Nadu Chief Minister M.K. In the letter written by Stalin, “Compared to pre-GST implementation, the Tamil Nadu government is losing Rs 20,000 crore annually. The central government is also refusing to extend the compensation period.
In short, they seem to aim to stifle the ability of states to mobilize resources and fund critical development initiatives according to state government policy priorities. Like-minded progressive states should unite against this,” he said.
Siddaramaiah pointed out that the 15th Finance Commission had realized that injustice had been done to some states and had recommended a grant of Rs 5,495 crore. “This has been recommended during the Interim Budget of the Central Government. But Union Finance Minister Nirmala Sitharaman, who has been elected to the Rajya Sabha from Karnataka, has rejected it,” he said.
In this situation, Nirmala Sitharaman, speaking in the Lok Sabha on Monday, said, “The system of tax distribution cannot be changed according to one’s will.” He also pointed out that the current financial crisis in Karnataka is due to the promises made by the government during the elections.
Pointing to a statement issued by the CEO of Niti Aayog, Siddaramaiah also spoke about Prime Minister Modi’s attempts to limit the Finance Commission’s recommendations. “The finance committee recommended Rs 5,495 crore as special subsidy, which has been rejected.
There was no announcement in the budget about the dwindling financial assistance, including the Rs 5,300 crore fund for the Upper Batra Irrigation Scheme. All this raises questions about the autonomy of Niti Aayog,” Siddaramaiah pointed out.
Where is the problem?
Image credit: Getty Images
The problem lies in the two policies of the Niti Aayog, which distributes funds from the central government to the states. One element is the devolution of power from the Center to the states. There is also horizontal devolution. Rich states are expected to help poor states. The formula for this is called Distance Formula.
Narender Bani, a professor in the Department of Social Sciences at the National Institute of Advanced Studies (NIAS) College, spoke to the BBC about the issue.
Then he said, “The question is whether to continue this time or not. Siddaramaiah challenges that. He says all southern states. Another aspect of this is employment for people from less developed states.
If you target them, their condition will get worse. Niti Aayog has developed a formula for Niti Pakar. Now, after this issue, the question is whether Niti Aayog will come up with a new formula or not,” said Narendra.
However, the central government selects the members of the finance committee, said Narendra Bani.
Dr. D. Narayana, former director of Gulati Finance, Thiruvananthapuram, spoke to BBC Hindi.
He then said, “One of the things that the finance commissions refused to take into account was migration. If, on its own policy, they are preparing states to provide comparable services to migrants, shouldn’t they give the money to the migrant state?” he asked.
He points to the “serious problem” facing the 16th Finance Commission, set up last week.
“We have not had a census for almost 15 to 16 years. This was also the period when migration was at its peak. In the southern states, the population has almost doubled in the last six to seven years due to industrialization and urbanisation. Unfortunately, the Niti Aayog has refused to accept this and so has the central government,” he said. Narayanan said.
Continuing, he said, “Southern states should point out that the central government has not done anything good for its own people in Hindi-speaking states, not counting the number of migrants. It would be better to proceed like this than to protest. You should note that Niti Aayog’s results are based on 2011 census,”’
“State governments must realize that migrants are wealth creators. And the states should build houses for them and ask the central government to bear the cost,” said Dr. Narayana.
Dr. Narayana is currently the Head of the Department of Economics, MS Ramaiah University, Bangalore.
What angered the southern states?
Image credit: Getty Images
But when Kerala started building houses for its people, it faced a peculiar problem. It asked Kerala to stick the Pradhan Mantri Awas Yojana (PMAY) “branding logos” on the houses constructed by the Kerala government for the homeless.
“The central government insisted that the PMAY logo and the Prime Minister’s photograph must be displayed on the houses. We have refused to implement the central government’s order as it violates Article 21 of the Constitution, which ensures that citizens live with human dignity,” said Kerala Local Government and Excise Minister M.P. Rajesh told BBC Hindi.
“The point is that the central government is not funding the entire amount for building houses in urban and rural areas. In the last seven years, our government has spent Rs 17,103 crore and the central government has spent only Rs 2,083 crore. Clearly, the share of the central government is much less than that of the state,” he said. Rajesh.
Rajesh wrote a letter to Union Minister Hardeep Singh Puri in November 2023, seeking a review of the order requiring the logo to be affixed.
“I did not write the letter to drive a different sticker on those houses. But there is no response from him till now,” said Rajesh.