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KCR: Don’t penalise performing States
The Telangana government on Saturday pitched for 40 per cent devolution of the central tax revenue to states, making a case for allocation of resources based on the “functional responsibilities” of the Centre and the States under the Constitution.
- CM apprises 14th Finance Commission of State’s finances
- Says 9 out of 10 districts of Telangana are backward
- Calls for 40% devolution of funds and raising share of States
- Makes out a case for waiver of `6,000 cr loans by Centre
- Centre needs to pay `5,126 cr of VAT collections to T State
- GST introduction sought with exclusion of liquor, petroleum
Hyderabad: The Telangana government on Saturday pitched for 40 per cent devolution of the central tax revenue to states, making a case for allocation of resources based on the “functional responsibilities” of the Centre and the States under the Constitution.
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Making a presentation before the 14th Finance Commission here on Friday, Rao said 9 out of 10 districts in the state were covered under the Backward Regions Grant Fund (BRGF). He told the Commission led by Dr Y V Reddy that the Planning Commission had categorised Khammam and Mahabubnagar as the ‘Most Hungry’ and backward districts. The state government raised issues of income inequalities and said they need to be addressed through specific schemes tailored to meet the requirements of backward states and special development packages and not through tax devolution. It also sought an adequate “compensatory mechanism.”
KCR told the panel here that 40 per cent devolution can easily be accommodated by a marginal reduction of five per cent in the Centre's expenditure on state subjects.
He also sought waiver of outstanding central loans to the state, estimated to be Rs 6,000 crore.
“With focus on inclusive growth, the commitments of states have increased considerably. As most of the sectors touching on the lives of the people fall within the purview of states, there is an imperative to align resources in favour of states,” the CM observed.
He called upon the Finance Commission to be a trail-blazer, ushering in an era of resource transfers based on constitutionally assigned responsibilities. There is another compelling reason for a paradigm shift in resource sharing in favour of states, “as there has been considerable increase in the non-tax revenues of the Centre from off-shore royalties, sale of spectrum and disinvestment proceeds.”
Stating that the state favours introduction of Goods and Service Tax (GST), Rao called for ensuring that there is no accentuation of vertical imbalances and compromise of autonomy of states. He said an adequate compensatory mechanism should be put in place. He suggested that petroleum and liquor be kept out of the purview of the GST.
"We also request immediate payment of CST (central sales tax) compensation dues to assure the states of the commitment of the Centre in fully compensating the states for the possible loss of revenue on the introduction of GST," the chief minister said. Finance minister Etela Rajender earlier said that the undivided Andhra Pradesh had lost Rs17,595 crore since the introduction of Value Added Tax (VAT) in 2005, but the Centre had compensated only Rs 5,000 crore. According to him, the Centre still owes Rs 12,000 crore in VAT collections to undivided state, of which Telangana's share is Rs 5,126 crore.
"We are of the firm view that population and area represent the needs of a state in terms of provision of public goods and services more than any other indicator. We propose that weights of 25 and 30 per cent be assigned to population and area respectively," he added.
Rao said the government felt it was more relevant that the 2011 population figures be taken into account for the purpose of tax devolution, instead of 1971 population, which was more than 40 years old, he said.
“Successive Finance Commissions have been assigning higher weightage to equity parameters, as a result of which the share of middle-income states in tax devolution has witnessed a massive erosion. Better performing states have lost out heavily because of higher weightage to distance of per capita income or its variants,” he said.
Fourteenth Finance Commission Chairman Y V Reddy, Commission members, Telangana Finance Minister E Rajender, Chief Secretary Rajiv Sharma and other officials were present.
