Union Finance Minister Arun Jaitley has rejected the charges of bias in allocation of funds to the southern states, calling it a “needless controversy”. His reaction came after three southern states – Kerala, Karnataka and Andhra Pradesh demanded reframing the Terms of Reference of the 15th Finance Commission for devolution of funds to states.
The three states and the government Puducherry, which is a Union Territory, alleged it was biased and in contradiction to principles of Federalism enshrined in the Constitution.
Responding to the charges, Arun Jaitley rejected the charge and said there was no inherent bias or mandate in the ToRs which can be construed as discriminatory against the states which made good progress in population control.
“The share in central taxes is allocated to the states based on recommendations made by the Finance Commissions to help states meet fiscal deficiency in providing a minimum standard of services to their people” he said.
“This calls for assessing States’ ‘needs’ on rationale and equitable basis. Finance Commissions use appropriate criteria to assess true needs of States,” the Union Finance Minister added.
In a first-of-its-kind initiative, the finance ministers of southern states who apprehend cuts in Central transfers in the wake of the ToR met at Thiruvananthapuram on Tuesday to discuss the challenges ahead, alleging it was biased against some of the progressive states.
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.
AIADMK-ruled Tamil Nadu and TRS-ruled Telangana opted out of the conference, hosted by Kerala.
Inaugurating the conclave, Kerala Chief Minister Pinarayi Vijayan said that it was widely feared that the ToR framed by the Central Government would prevent the Finance Commission from fulfilling its constitutional responsibility.
“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 said, adding that the introduction of GST has “resulted in erosion of fiscal autonomy of the states”.
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 the TDP-ruled state was against ToR “unilaterally” stipulated by the Centre without consulting the states demanded it be reframed after discussions.
Puducherry Chief Minister V Narayanasamy said the conference would be an “eye opener” for the union government.
Karnataka was of the opinion that all progressive states, including perhaps all the southern states, have been ‘disincentivised’ by means of the ToR, Karnataka Agriculture Minister Krishna Byre Gowda said.
(With inputs from PTI)