Centre's policies main hindrance in creation of new Kerala: CM Vijayan

The Centre's policies are the main hindrance to the state government's efforts for the creation of New Kerala, Chief Minister Pinarayi Vijayan has said.

"Despite the good achievements in tax revenue and domestic production, the financial crisis arising as part of the central government's policies is tightening the state. The opposition, which should stand for the people against these bad policies, attacks the state government," Vijayan said in a press meet on Saturday.

As per the recommendations of the 15th Finance Commission, Kerala can borrow up to 3 per cent of its domestic revenue unconditionally and 0.5 per cent subject to implementation of reforms in the power sector, he said.

"But the central government has reduced Kerala's loan limit with retrospective effect from 2021-22 by including the loan taken by independent institutions in the state's loan limit. Due to this, there has been a reduction of Rs 6,000 crore in the total credit limit for Kerala in the financial year 2023-24," the CM said.

The Union Finance Ministry overrules the recommendations of the Finance Commission appointed under Article 280 of the Constitution, the CM alleged.

"The 15th Finance Commission has not said that the debt of special purpose entities like KIIFB (Kerala Infrastructure Investment Fund Board) will be included as debt of the state. In accordance with articles 293(3) and 293(4) of the Constitution, as was the case before August 2017, the provision in the public account and loans of public sector institutions should be excluded from determining the borrowing limit of the state. But the Union Finance Ministry, through an executive order, took the wrong position that loans taken by special purpose entities on their own are part of the public debt of the state government," he said.

CM Vijayan alleged that in this way, the Centre reduced the borrowing limit of the state.

"25 per cent amount was asked from Kerala to acquire land for the development of National Highway 66. 5854 crore rupees have been collected through KIIFB for this purpose. The centre has taken the position of deducting this amount from the borrowing rights of the state," he said.

The Chief Minister claimed that the proportion of tax resources to be distributed to the states has declined from 42 per cent during the 14th Finance Commission to 41 per cent during the 15th Finance Commission.

"In addition, one-third of central revenue was transferred to cess and surcharge, as cess and surcharge did not have to be shared with the states. It was just 10 per cent in 2014-15 to 28.1 per cent last year. The state demanded that the tax to be apportioned to the states be increased to 50 per cent but this was not considered," CM Vijayan said.

The central government's approach is to deny the rightful amount to Kerala by interfering with the issues and criteria of the Finance Commission, he alleged.

"After the BJP government came in, the population of 2011 was set as the benchmark for tax distribution. It has been given a 15 per cent weightage. This has led to a reduction in tax revenue for Kerala, which effectively implemented population control. Based on the 1971 census, the state demanded that the weightage for demographic gains be 30 per cent," CM Vijayan further said.

The central government had promised to ensure an annual tax growth rate of 14 per cent under GST as part of resolving the loss of tax entitlements due to GST. However, due to shortcomings in the implementation of the GST system, natural calamities and COVID-19, this growth rate has not yet materialised. The proposed GST compensation was terminated after five years, the CM claimed.

"Even though the central share is nominal, the central government branding is mandatory in the LIFE Mission scheme, the housing scheme under PMAY. The central government gives a nominal amount and the state government spent a major share for constructing houses in Life mission scheme. But citing the nominal amount that Kerala gets under the LIFE scheme, the central government is pressing to make branding mandatory," the CM further said.

Houses built as a part of the PM's Life Plan are owned by everyone, the CM said.

"No one else has the right to it. After the house is built, it is an attack on the self-esteem of the homeowner to write that it was built in this way and with the help of these people. No such labelling is practised in Kerala. The state government will not be ready for it no matter who forces it," said CM.