Kerala has called for it against the terms of reference of 15th Finance Commission

The Tamil Nadu government is yet to decide on participating in the meeting of Finance Ministers of southern States called by the Kerala government on April 10 to discuss possible adverse implications of the terms of reference governing the 15th Finance Commission (FC).

Confirming the receipt of the invitation from the Kerala Finance Minister T.M. Thomas Isaac to Deputy Chief Minister and Finance Minister O. Panneerselvam and himself, Fisheries Minister D. Jayakumar, who represents Tamil Nadu at the GST [Goods and Services Tax] Council, told The Hindu that “there is enough time for us to take a call on the invitation. Let us wait till then.”

The principal objection being raised by the South is that the population data of the 2011 Census are going to be the basis for the work of the 15th FC. As the southern States have generally performed better than the rest of the country in terms of population growth reduction and stabilisation, there is an apprehension among them that the South would receive a “raw deal.”

Even though the Tamil Nadu government shares the concerns of other southern States on how the 15th FC would work out its devolution formula, it is not likely to disregard, at the time of its decision on the invitation, the fact that the move has come from the Left Democratic Front government of Kerala.

This assumes relevance as Chief Minister Edappadi K Palaniswami has been keen on explaining again and again his stand that the State government has been adopting a conciliatory approach towards the Centre as it wants to get expeditious clearances and approvals from the latter for its projects and schemes.

Regardless of Tamil Nadu’s eventual decision on the invitation, the State government’s stand on the basic issue can be gauged from how Mr. Panneerselvam, in his budget speech two weeks ago, talked of the State experiencing “adverse impact” because of the implementation of the recommendations of the 14th Finance Commission, which had assigned 17.5% weight to the 1971 Census and 10% weight to the 2011 Census.

“Citing the increase in the vertical devolutionary share from 32 % to 42 %, the government of India has drastically reduced its share in the Centrally Sponsored Schemes. However, the increase in vertical devolutionary share has not provided Tamil Nadu with any additional fiscal space and therefore the State government has to provide resources from its own revenues for implementing the Centrally Sponsored Schemes,” Mr Panneerselvam complained.

Population stabilisation

Officials of the State Finance Department contend that there is nothing in the terms of reference of the 15th FC with regard to incentivising those States which have made “impressive achievements” in population growth reduction and stabilisation.

The notification on the FC only talks of proposing measurable performance-based incentives for “efforts and progress made [by States] in moving towards replacement rate of population growth.”

Tamil Nadu government officials estimate that the State loses some ₹7,500 crore every year due to the change in the formula for fixing its share of the Central taxes.

The State stands to lose more if the implementation of flagship schemes of the Centre is taken into account. For example, the State has little use for the rural electrification and rural roads schemes since Tamil Nadu has already achieved much progress on those fronts.

Tamil Nadu’s stand is that the 15th FC should consider only the 1971 Census.