The territorial administration was entitled to ₹2,731 crore for the current fiscal from the Centre than the actual allocation of ₹1,545 crore, according to an assessment report prepared by the National Institute of Public Finance and Policy (NIPFP), a Central government organisation.
The assessment, done against the backdrop of Union Territories not coming under the purview of the Finance Commission recommendations for devolution of funds, noted that Central allocation to Puducherry is in the form of grants to meet gap in resources and financing the schemes. The Union Territory was eligible to get larger share of the revenue, the report said.
Puducherry, according to the assessment report, has a higher revenue collection compared to the Gross State Domestic Product (GSDP). It was higher than most States. It also runs a small revenue deficit and a fiscal deficit of less than 3%.
The debt to GSDP ration has been around 3%. A considerable part of the deficit was met through open market borrowings. If the UT was part of the Finance Commission, the allocation would have been higher than the current allocation. In case the region was part of the 14th Finance Commission Recommendations, the exchequer would have been entitled to a sum of ₹2,731 crore for 2019- 20.
CM meets FM
According to a senior official, the issue figured prominently in a meeting Chief Minister V. Narayanasamy had with Finance Minister Nirmala Sitharaman in New Delhi on Thursday.
Mr. Narayanasamy pointed out to the Minister the assessment report and the allocation made by the Centre. Going by the report, the territory was eligible to get around ₹1,186 crore extra during the current financial year and also more than a meagre sum of ₹1,703 crore which was set aside for the region by the Centre for 2020-21.
According to an official, the Chief Minister reportedly told the Union Minister that his government was entitled to a share of the financial resources as people of Puducherry had contributed to the Consolidated Fund of India through income tax, customs duty and central excise remittance. The tax paid by people and establishments here was on par with any States, the official told The Hindu .
He also highlighted the disparity in allocation to Puducherry and New Delhi. While in the case of the national capital, the Centre incurred the expenditure for salary to the police and pension amount, no such favour was done to Puducherry. In that context, Mr. Narayanasamy requested Ms. Sitharaman to provide a revenue deficit grant for the next financial year.
GST revenue shock
Puducherry’s finances were expected to experience a revenue shock post-July 2022 when the Centre stops compensating for GST loss, a top official said.
Currently, the territory gets around ₹150 crore as GST compensation bi-monthly, the official said, adding the transition to GST was detrimental to Puducherry’s revenue as the region was a manufacturing State. The addition of services under GST has failed to compensate for the revenue loss, the official added.
