Union Finance Minister Arun Jaitley, who is under pressure to raise public investments to spur the economy, urged the States on Saturday to boost spending on infrastructure creation and anti-poverty programmes by leveraging the increased devolution from the implementation of the 14th Finance Commission’s recommendations.
At a pre-budget consultative meeting here, the State Finance ministers, in turn, asked the Centre to release the compensation for phasing out the central sales tax. They said the government should reappraise its role in funding social sector schemes such as the Sarva Shiksha Abhiyan. The Centre had reduced its contribution to such schemes after the 14th Finance Commission’s recommendations were implemented, placing a greater burden on the States.
“We also expect that those States whose resources have increased after the implementation of the 14th Finance Commission’s recommendations will spend more on infrastructure creation and anti-poverty programmes…,” Mr. Jaitley said after the meeting. “The States have discussed their own resources, and each of them is competing for higher resources, higher investment, and they are all geared up to fight this environment of global slowdown so that India remains an economy on the move.”
One of the unanimous demands made by the States was that the Centre release the compensation for the phasing out of the Central Sales Tax.
“The Union Government has finally released a portion of the long-pending Central Sales Tax (CST) compensation. Even after this, Rs. 7,471 crore is yet to be reimbursed by the Government of India for the period up to March 31, 2013. I request the Union Finance Minister to make adequate provision for CST compensation either in the Supplementary Estimates for 2015-16 or in the forthcoming budget,” Tamil Nadu Minister for Finance and Public Works O. Panneerselvam said in his speech.
This plea was echoed by Odisha, Punjab, Uttar Pradesh, Assam, Telangana and West Bengal among others.
“In the last budget, the devolution to the States was increased to 42 per cent. However, when that was done, the Centre’s share in 58 social development programmes was reduced, including the important schemes like Sarva Shiksha Abhiyan and the Integrated Child Development Services (ICDS),” West Bengal Finance Minister Amit Mitra told reporters.
“The 14th Finance Commission had recommended that the States that have maintained financial discipline be allowed to borrow 3.5 per cent [of their GDP], up from 3 per cent. Since we have maintained financial discipline, the government should allow us this increment in borrowing. This will allow us to raise Rs. 3,000 crore more for FY2016,” Madhya Pradesh Finance Minister Jayant Kumar Malaiya said.
Among the other recommendations made by the States was that the Centre account for one-fourth of the GST Council and the States three-fourths, against the current composition of one-third of the Centre and two-thirds of the States.
“Around 39 schemes were eliminated in the last budget such as those for model schools and for modernisation of the police force. These schemes need to be carried out, with the States bearing the burden. So, the result is that the States do not end up gaining. We have requested that the Centre to rethink the devolution process and revive some of the important projects that have been dropped,” Mr. Mitra said.
Several Finance Ministers made demands for their own States. For example, Bihar asked for special category status and for the allocation under the Rs.1,25,000-crore package for FY17… Tamil Nadu asked for a special allocation to compensate it for the loss it had suffered because of the changes in the devolution pattern.
Odisha wanted the mineral-producing States to be allowed to levy their own cess, and tobacco on the State list.
