State gets raw deal, powers and rights infringed: Ponnaiyan

CHENNAI, MARCH 11. The Finance Minister, C. Ponnaiyan, today said the Twelfth Finance Commission (TFC) in its recommendations in key areas gave a raw deal to the southern States, particularly Tamil Nadu. This would impair the federal system.

Replying to the budget discussion in the Assembly, he said the Centre had changed the pattern of plan assistance on the basis of the TFC recommendations, "infringing the State's powers and rights."

Deviating from the practice of providing 70 per cent as loan and 30 per cent as grant in plan assistance, the Centre decided to ask the States to raise the loan from open market, though the 30 per cent grant would continue.

The TFC's recommendations on the substantial deficit gap grant of Rs.56, 855.87 crores for 15 States, leaving out States such as Tamil Nadu were also disappointing, Mr. Ponnaiyan said. Grants including Rs. 5,887.08 crores for health and Rs.10, 171.65 crores for education were provided only to certain States and the southern States denied the benefit.

The Centre announced the Rs. 5,000-crore backward district/area fund for identified districts. As the allocations became discretionary, States which were performing well would not get anything. It allocated funds for States to tackle eleven special problem areas as per the TFC recommendations. In this category also the Centre earmarked only Rs. 300 crores for Tamil Nadu, while Rs. 450 crores was set apart for Rajasthan, Rs. 500 crores for Andhra Pradesh, Rs. 600 crores for Karnataka and Rs. 890 crores for West Bengal.

Though the Centre told the State during discussions that the plan grant would be stepped up by 18 per cent, it went up only by 8 per cent in the Union budget estimates.

`A Penalty?'

Mr. Ponnaiyan flayed the Centre's policy of allocation of grants, saying denial of funds to some States including Tamil Nadu amounted to penalty for good performance. It would run counter to the federal system, besides paving the way for a unitary system, he cautioned.

Recalling the fiscal reforms introduced by the Tamil Nadu Government in 2001 to ensure rapid development, he said no other State achieved such a major fiscal adjustment in a short span despite severe drought, flood and the tsunami.

The Centre released a fiscal reform incentive grant to the State in recognition of its excellent management of finances. The annual plan outlay of Rs. 8,001 crores for 2004-2005 would be achieved in full, the Minister said. The budget estimates for 2005-2006 were formulated to accomplish the higher plan outlay of Rs. 9,100 crores.

Why recruitment freeze

On the recruitment freeze order, he said it was passed in the light of the views of the international funding agencies and the Centre that the number of government employees was disproportionate to the State's population.