Special Correspondent

State's share of taxes down from 2.6% to 2.3%

Asks Centre to devolve more resources to State

THIRUVANANTHAPURAM: Finance Minister T.M. Thomas Isaac has said that it will not be possible for the State to do away with revenue deficit by 2010-11 as declared by him earlier.

Presenting the State budget for 2010-11 in the Assembly on Friday, Dr. Isaac said he had made it clear that the State would be able to achieve zero revenue deficit only if it received favourable treatment from the Thirteenth Finance Commission. But its award was totally disappointing. The State's share of taxes had come down sharply from 2.6 to 2.3 per cent and the State would lose around Rs.5,000 crore over the next five years.

If the State followed the advice of the Finance Commission to get rid of its revenue deficit in the next two years, it would have to forego the pay revision for its employees, give up UGC [University Grants Commission] pay scales for teachers and reduce welfare pensions. The Finance Commission was pressing the government to reduce the deficit at the cost of the employees and the people.

The State would not accept any fiscal responsibility legislation to that effect. He wanted the Union government to devolve more resources to the State to get rid of its deficit.

He expressed the State's strong resentment at the Finance Commission's stand. It was largely responsible for undermining the consensus on the GST (Goods and Services Tax) which was emerging over the last three years on the basis of constant discussions among State Finance Ministers. It wanted the taxation powers of the State to be vested in a committee headed by the Union Finance Minister. It was clear that the commission's recommendations were intended to subjugate the States to the fiscal policies of the Union government.

The global recession had rendered the financial position of the State and the Centre precarious. The revenue deficit of the Centre, instead of becoming zero, had actually become 5.3 per cent in 2009-10.

The fiscal deficit which should have been restricted to 3 per cent had increased to 6.7 per cent.

Even those figures had been arrived at only after a great deal of juggling with statistics.

Tax concessions

The huge tax concessions given to corporates in the name of stimulus package were responsible for the situation. Now the Centre was trying to reduce the deficit by disinvesting the shares of public sector undertakings and increasing the prices of petrol and diesel during a time of food price inflation. He warned that “these anti-people policies” would only further deepen the crisis.