Thrissur: Kerala gets only Rs 21 for every Rs 100 collected by the state in tax revenue while Uttar Pradesh is getting Rs 46, Finance Minister K.N. Balagopal said Monday as he lashed out at the Centre for curtailing the state’s share in tax devolution.
Presenting the 2024-25 State Budget, Balagopal said the state attained a record-breaking growth in tax revenue with a rise from Rs 47,661 crore in 2020-21 to Rs 71,968 crore in 2022-23. He said the revenue growth is anticipated to rise to more than Rs 78,000 crore in the current fiscal.
“Then why is there a financial crisis despite this much increase in our own tax collection? Our total tax revenue includes Kerala’s eligible tax share from the tax collected by the Centre. The details of the same are given in the RBI’s State Finances Report,” the finance minister said in the assembly.
“As per the statistics of 2021-23, on national average, the Centre will provide Rs 35 for every Rs 65 collected by the respective states. But it provides only Rs 21 against Kerala’s own tax collection of every Rs 79. That is, only Rs 21 out of Rs 100 is the Centre’s contribution. Uttar Pradesh gets Rs 46 out of Rs 100 from the Centre.”
The LDF government expects a revenue of Rs 1,38,655 crore, while the expenditure is pegged at Rs 1,84,327 crore. The revenue deficit stands at Rs 27,846 crore (2.12 percent of the state’s GDP), while the fiscal deficit is Rs 44,529 crore (3.4 percent of GDP), according to the budget document.
The minister added that the state lost tens of thousands of crores due to the decreasing share of the divisible pool of tax collected by the Centre and said the share was reduced from 3.87 percent during the 10th Finance Commission to 1.925 per cent in the 15th Finance Commission.
The minister added that the neglect reached its zenith during the current 2023-24 fiscal.
Kerala’s borrowing entitlement as per the Centre’s own criteria has been denied during the fiscal year and the State was allowed to borrow only Rs 28,830 crore against the borrowing limit of Rs 39,626 crore, he said.
Balagopal said the state is hopeful that the legal battle in the Supreme Court and the political agitation outside the court will improve matters.
A protest march is scheduled 8 February against the Centre’s alleged negligence towards the State in Thiruvanathapuram in which ministers, MLAs and MPs are set to participate. Tamil Nadu Chief Minister M.K. Stalin was also sent an invite to join the protest.
Kerala has been reeling under a financial crisis for some time. In a submission made at the Kerala High Court in a matter related to repaying a depositor of the Kerala Transport Development Finance Corporation (KTDFC) Ltd, the government had in November admitted that the “state is now passing through a phase of financial constraints”.
In December, Kerala had approached the Supreme Court against the Centre imposing a ceiling on net borrowing on it. The state alleged that the Centre is interfering in the exercise of its “exclusive, autonomous and plenary powers” to regulate the state’s finances. Meanwhile, the Centre submitted that the state’s financial crisis was a result of mismanagement.
“What if the neglect towards Kerala continues? In such a situation, we will definitely have to figure out a Plan B. We are not ready to make any cuts in the benefits provided by the state to its people,” Balagopal said in his budget speech.
The minister said that the excessive centralisation of resources and the Centre’s discrimination in violation of the constitutional principles of federalism are the cause of financial distress. The opposition Congress also agrees with the state in this matter, he added.
Apart from Kerala, several non-BJP states have been alleging financial crisis after the Centre slashed borrowing limits. In 2023, the Centre cut AAP-ruled Punjab’s borrowing limit from Rs 39,000 crore to Rs 21,000 crore. It also reduced Himachal Pradesh’s limit from Rs 14,000 crore to Rs 9,000 crore and Telangana’s borrowing limit by Rs 15,000 crore.
Last month, Tamil Nadu’s Finance Minister Thangam Thennarasu too blamed the Centre for its neglect towards his state. Accusing the Centre of following different yardsticks in devolving funds to states, Thennarasu said the Centre has done precious little to ease Tamil Nadu’s financial burden.
Days after the Kerala government’s announcement, the Congress government in Karnataka too announced that it will hold a protest in New Delhi on 7 February against the Centre’s ‘step-motherly treatment’ towards the state in budget and other financial matters.
(Edited by Tony Rai)
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