Centre's alleged 'injustice' in devolution of taxes to southern states

The “South Tax Movement” is the new phrase that crept into Indian political parlance after some southern states, notably Karnataka and Kerala, staged protests in the national capital last week against the Centre’s tax devolution policies. They alleged that these policies shrank their share of the divisible pool of taxes distributed by the Union government to states, facilitating spending on development, welfare, and priority-sector schemes and projects.

Complaints from the south of the Vindhyas gained intensity as the debate over the lower devolutions added to the perception of a “North-South divide” and fuelled the sentiment that the South was meted out “stepmotherly” treatment by the Bharatiya Janata Party (BJP)-led government. This government allegedly favoured the North and the West, from where the party drew its political support and sustenance.

The non-BJP parties, part of the Indian National Developmental Inclusive Alliance, or INDIA, spearheaded the protests to coincide with the ongoing Parliament session, which concluded on February 10.

On February 8, Congress-ruled Karnataka brought tax-related issues to Delhi, with indications from Siddaramaiah, the chief minister (CM), to form a southern alliance. This alliance would function as an enabling forum to articulate its stand before the 16th Finance Commission.

Karnataka’s grievance was that the 15th Finance Commission had “significantly reduced” its revenue, with a reported drop of its share from the central kitty of taxes from 4.71 per cent to 3.64 per cent.

“We see this drop as a punishment for ensuring better living standards in the South compared to the North,” maintained a state Congress source.

Months before the Lok Sabha elections, the political resonances in Karnataka’s outcry against the Centre were inescapable.

A BJP Member of Parliament (MP) from the state explained, “Siddaramaiah is under pressure to deliver the maximum number of seats after leading a government in Karnataka. He knows this will not be easy because of factionalism in the Congress, his differences with (D K) Shivakumar (the deputy CM), caste contradictions, no action against the corruption charges he had levelled against the (previous) Basavaraj Bommai government, and the failure to deliver on various fronts. Above all, we are armed with advantages like Hindutva, the Ayodhya temple, and Prime Minister (Narendra) Modi. Blaming the Centre for supposedly denying Karnataka its rightful fiscal share is a diversionary ploy.”

A state Congress functionary conceded that the government’s performance was “lacklustre”.

On February 9, Kerala CM and Communist Party of India (Marxist) politburo member Pinarayi Vijayan brought his battle on the same theme as Siddaramaiah’s to Delhi with his Cabinet and Left Democratic Front (LDF) MPs and legislators. They emphasised in media interviews that Kerala bore the “severest” brunt of the Centre’s “discrimination and injustice” against Opposition-governed states.

“We are discriminated against during disasters, in Budgets, in the transfer of funds, in the administration of projects and schemes, as regards railway development, in calculating public debt, and so on,” Vijayan alleged to the media.

Tamil Nadu’s Dravida Munnetra Kazhagam (DMK) dispensation confined the fight to the state through a symbol, embodied in the “zero” halwa packs that were distributed to passengers at a Chennai bus terminus to make the point that the Centre gave “zero rupees” during the recent floods and in the Interim Budget.

Vijayan’s show of strength was bolstered by the presence of other Opposition leaders such as Farooq Abdullah of the National Conference, Arvind Kejriwal and Bhagwant Mann of the Aam Aadmi Party, D Raja of the Communist Party of India, and Palanivel Thiaga Rajan, DMK minister, to try and rekindle the spirit of federalism.

Defending the Centre, Finance Minister Nirmala Sitharaman said the rate of devolution was earmarked by the Finance Commission and described the protests as a “politically vitiated narrative of some vested interests.”

The developments laid bare the contradictions inherent in INDIA’s attempts to cobble together a joint front against the Centre on the issue of “fiscal injustice”.

Siddaramaiah’s demonstration was a solo act of the Congress. The Congress was conspicuously missing from Vijayan’s show because the United Democratic Front it heads in Kerala is the LDF’s principal adversary. Moreover, Congress leader Rahul Gandhi, an MP from Wayanad, has large stakes in retaining the Congress’ advantage over the Left in Kerala.

However, it is not as though the BJP tucked away the arrows in its quiver to fight the 130 (including Puducherry’s lone seat) seats in Andhra Pradesh, Telangana, Tamil Nadu, Karnataka, and Kerala. On top of its strategy is forging alliances with the regional forces that remain potent in these states.

While the Janata Dal (Secular) — which commands the votes of the Vokkaliga caste in Karnataka — is on board the National Democratic Alliance (NDA), in Andhra, the BJP could be close to tying up with N Chandrababu Naidu’s Telugu Desam Party (TDP) and TDP ally, the Jana Sena Party.

A day after Naidu met Amit Shah, the home minister and the BJP’s coalition architect, Andhra CM Y S Jagan Mohan Reddy of the Yuvajana Sramika Rythu Congress Party (YSRCP) called on Prime Minister Modi and the finance minister.

Significantly, although Jagan Mohan spoke once about the reduction in the devolution of funds, the YSRCP did not join the southern dissenters. Neither did the TDP, indicating that even if these parties did not become part of the National Democratic Alliance, they would continue being “friends” with the BJP as they did over the past five years.

‘Whence cooperative federalism?’

The birth of South Council

On March 20, 1983, chief ministers (CMs) of Karnataka, Tamil Nadu, Andhra Pradesh, and Pondicherry (Puducherry) formed the South Council

Absentee echoes: Kerala CM’s stand

Kerala CM K Karunakaran of the Congress opted to stay away from the meeting that the non-Congress CMs from southern India attended

Key figures and discussions

The attendees included Tamil Nadu’s M G Ramachandran, Andhra Pradesh’s N T Rama Rao (N T R), Karnataka’s Ramakrishna Hegde, and Puducherry’s M D R Ramachandran. Their discussions revolved around fund sharing between the Centre and states, as well as states’ overdrafts with the Reserve Bank of India

Building consensus: A collective front

The CMs aimed to build consensus from other non-Congress states, such as the Left Front government in West Bengal and the National Conference in Jammu & Kashmir. Their objective was to present a united front to former Maharashtra CM and deputy prime minister Y B Chavan, the head of the 8th Finance Commission

Constitutional reassessment

Proposing a re-examination of Articles 256 and 257 of the Constitution, which delineate states’ obligations to the Centre, the four CMs sought a comprehensive review

A North-South strife?

A day after the CMs’ meeting, Congress’ C M Stephen labelled it as an extra-constitutional and dangerous act. He expressed concerns about emerging regionalist tendencies, foreseeing a potential North-South conflict

The catalyst: Justice R S Sarkaria’s appointment

In June 1983, Prime Minister Indira Gandhi appointed Justice R S Sarkaria to lead a commission tasked with examining the entirety of Centre-state ties

Opposition unity and its demise

N T R orchestrated conclaves of Opposition leaders, including CMs, in Vijayawada, Calcutta, and Srinagar. These efforts, while initially impactful, succumbed to the sympathy wave in favour of Rajiv Gandhi during the 1984 Lok Sabha elections

Legacy and future alliances
 

Despite the setback, these initiatives laid the groundwork for the National Front government of 1989, the United Front (1996–98), and later, the coalition governments of the Bharatiya Janata Party-led National Democratic Alliance and Congress-led United Progressive Alliance

Compiled by ARCHIS MOHAN