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Tamil Nadu chief minister J Jayalalithaa said the state government has requested for Rs 41,408.79 crore as grants including 14 proposals for upgradation of standards of administration and 10 proposals for state-specific needs.
Addressing members of the 14th Finance Commission which was visiting the state, the chief minister said the greatest proportion of fund flow from the Centre to states should be on the basis of the recommendations of the constitutionally- mandated Finance Commission rather than through other mechanisms which ends up in discretionary transfer of funds.
“The Fourteenth Finance Commission is at the cusp of history. It has the opportunity to re-order Centre-State financial relations in the country and make them reflect the contemporary reality of the political economy. I urge the Commission that your approach should not be incremental and self-limiting. I request you to take a bold approach and effect the paradigm shift that is needed at this juncture.”
The state has requested the Commission to recommend a grant of Rs 2,250-crore for the evacuation infrastructure to transmit the power to load centres in the context of its solar Power Policy, which aims to add 3,000-Mw capacity in the next five years.
Besides, it requested a grant of Rs 3,825-crore for modernisation of equipment and updating of technology and provision of housing for Tamil Nadu Police and its workforce; Rs 7,150-crore for the slum upgradation and rehabilitation in municipalities and town panchayats which would cover about 25 per cent of the slum population in these areas; and a substantial assistance for harvesting rain water through rehabilitating traditional water bodies.
She said the allocations are only made partially through the normal system, which is under the recommendation of the Finance Commission, while a part of the allocations are made through other routes, which is discriminatory in nature. “The situation is made worse by the fact that Tamil Nadu does not receive its due share in Central Plan funds. According to the Twelfth Plan Document, Tamil Nadu received just 4.328 percent in fund flow against 5.96 percent population share as per the 2011 census,” she said.
“Not only does this design of fund flow penalise a better performing State; it also raises a very serious doubt that there is a sinister conspiracy to consciously discriminate against some States in matters of Plan Fund allocation,” she added. Plan transfers are also subject to arbitrary mid-year cuts and year after year the State has found that promised releases of funds have not been made.
Jayalalithaa suggested “a simple robust and equitable formula for distribution of resources amongst States,” that one-third weight may be assigned to each of the following criteria--population based on the 1971 census; fiscal discipline including tax effort; and third fiscal capacity distance.
Tamil Nadu’s share of resources transferred based on the recommendations of the Commission has shrunk from 7.68 per cent in the Seventh Commission to 4.98 per cent in the Thirteenth Commission and the State was particularly hard hit by the recommendations of the Tenth and the Eleventh Commissions, she said.
Mentioning the impact of the Raghuram Rajan Committee for identifying Backward States and to suggest how the criteria may be reflected in future planning and devolution of funds from the Central Government to the States, she said that the Fourteenth Finance Commission should reject outright the Report of the Expert Committee. The Commission should independently make its recommendations without getting pressured by such misleading and unnecessary inputs.
Considering that the majority of the expenditure and the subsidies are distributed by the state government, she argued, an alternative radical approach is needed, in which the levy, collection and appropriation of the substitutes for value added tax (VAT), Central Excise Duty and Service Tax within a state should be delegated completely to the state machinery, with the Central machinery focusing on interstate taxation.
"I would like to emphasise that the Commission needs to make a complete break with the incremental approach of the past. It needs to attempt to match expenditure responsibilities and resource needs and thereafter work out what proportion of the resources needs to be allocated to the states as a whole and to each individual State. A predictable nondiscretionary and non-discriminatory mechanism has to be put in place," she added.
