People exercise on King’s Way boulevard outside the North Block of the Central Secretariat building, which houses the Ministries of Finance (Photographer: Prashanth Vishwanathan/Bloomberg)

‘Terms Of Reference’ Of 15th Finance Commission Against Progressive States

Three non-BJP ruled southern states and Union Territory Puducherry today came out against the Terms of Reference stipulated by the Centre in the 15th Finance Commission for devolution of funds to states.

At a conclave of finance ministers of southern states here, Kerala, Karnataka, Andhra Pradesh and Puducherry opined that the ToR was in contradiction to the principles of Federalism enshrined in the Constitution and also would result in revenue loss to 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 previous Finance Commissions.

However, 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.

Briefing reporters on the deliberations of the conclave, Kerala Finance Minister Thomas Isaac said a similar conference would be held at Visakhapatnam either in April end or May first week to finalise a memorandum seeking changes in the ToR. “We will see that Tamil Nadu and Telangana along with more states like West Bengal, Orissa, Punjab and Delhi attend that conference,” Isaac said.

Stating that all states would be affected, he said BJP ruled states were also welcome to the conference. However, he expressed doubt about their participation as ToR was drawn up by the BJP government at the Centre.

The memorandum would be submitted either to the President or to 15th Finance Commission Chairman, he said.

On the outcome of today's meet, he said the states, which participated, came together on several issues. They were of the view that there was an attempt to reduce the Centre's share to states through the 15th Finance Commission, he said. "If this is allowed to succeed, states would become a glorified muncipalities," Isaac added.

The 15th Finance Commission was expected to visit the state in May, he said to a question.

He also said the conclave was the beginning of a debate on Centre-State relations.

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 Central Government 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," Vijayan added.

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 chief minister said.

Attacking the BJP-led NDA government, he said 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.

Andhra Pradesh Finance Minister Yanamala Ramakrishnudu said they were not blaming the Finance Commission or its composition. They were against ToR 'unilaterally' stipulated by the Centre without consulting 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.

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.

Narayanasamy also came down on the recommendation to do away with Central funds for 'populous schemes' of states. He took a dig at Prime Minister Narendra Modi, saying he talks about co-operative 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 percent 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," Narayanasamy said.

Representing Karnataka, agriculture Minister Krishna Byre Gowda said his state fully supports 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.

Isaac in his opening remarks said it was estimated that Kerala was bound to lose around Rs 80,000 crore due the present ToR.