What states want from Modi govt to fight coronavirus pandemic and its economic fallout

Since the lockdown began in March, there have been five interactions between Prime Minister Modi and the states.

A health worker checks the temperature of a woman, during distribution of food among the needy, amid the nationwide lockdown (Representational image) | PTI

New Delhi: Prime Minister Narendra Modi Monday asked states to provide to the Centre by 15 May a list of suggestions on the way forward from the Covid-19 pandemic.

Over the last couple of months, the states that have been at the forefront of the battle against the pandemic have sought greater autonomy and more funds from the central government.

There have been five interactions between Prime Minister Modi and the states so far during the lockdown. Here is what the states have demanded from the central government for an effective response to the Covid-19 battle.

Classification of containment zones

After the second phase of the lockdown ended on 4 May, several states demanded a greater say in classifying the containment zones. Punjab CM Amarinder Singh and West Bengal CM Mamata Banerjee have been at the forefront, saying that the Centre can’t take a unilateral decision because it is the states that are working on the ground.

The Centre had categorised districts into red, orange and green zones based on the number of Covid-19-positive cases on 15 April, immediately after lockdown 1.0 ended.

Other states that have demanded more discretion include Rajasthan, Kerala and Chhattisgarh. Prime Minister Narendra Modi Monday indicated to the CMs that the Centre could allow states to decide on which areas to be declared as containment zones.

Resumption of industry & transportation 

Chief ministers have also pointed out during their meetings with the central government that they should be allowed to decide what kind of economic activities to start in their respective states.

“It can’t be a sweeping one size fits all directive from the Centre that xyz industries can open. States are better judges of what is feasible,” said a chief secretary of a southern state.

Similarly, many states, including Kerala, Telangana and Chhattisgarh, have also sought more freedom to decide on resumption of public transport services within and outside the state and opening of inter-state borders. Kerala CM P. Vijayan raised it again in the PM’s video conference meeting Monday.

Increase in MGNREGA wages

States with a large agrarian economy like Jharkhand, Chhattisgarh and Rajasthan have also urged the Centre to hike the wages under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).

As a nationwide lockdown kicked in on 25 March, bringing economic activities to a near-standstill, Jharkhand CM Hemant Soren wrote to PM Modi demanding an increase in wages and man-days by 50 per cent under MGNREGS to ensure that villagers have some form of livelihood to tide over the impact of Covid-19 outbreak.

Rajasthan Deputy Chief Minister Sachin Pilot also wrote to Rural Development Minister Narendra Singh Tomar demanding that the number of days of work under MGNREGS be doubled to 200 from the current 100 to benefit the 1.13 crore workers registered under the scheme.

This, he said, will also help the lakhs of migrant workers returning to home. States, seeing a return of many of their migrant labour, are also banking on schemes like the MGNREGS.

Early release of central funds, payment of GST compensation

States have been asking for the timely release of funds owed by the Centre to the states as rising expenditure and virtually non-existent own tax revenues squeeze their budget.

States like Tamil Nadu and Bihar have sought an advance release of some of the grants recommended by the 15th finance commission. This includes revenue deficit grants to the states as well as grants to urban and rural local bodies. States like Maharashtra have sought the timely release of the states’ share in central taxes.

So far, the Centre has released funds due to the states as per the recommendations of the finance commission until May.

Punjab and Delhi have flagged the delays on receipt of GST compensation dues. The GST law mandates that states will be compensated until 2022 for losses incurred by the states on account of a shift to the goods and services tax.

The Centre so far has only cleared compensation payment dues until November 2019 and states are awaiting the payment for the remaining months of the previous fiscal year.

Greater room to borrow and amending the FRBM Act

Many states, including Kerala, Rajasthan, Tamil Nadu and Bihar, have sought a relaxation of the fiscal deficit target as mandated by the Fiscal Responsibility and Budget Management (FRBM) Act.

At present, states have to keep their fiscal deficit within 3 per cent of the gross state domestic product. A relaxation in the cap by 1-2 percentage points will give states more room to borrow, these states have argued.

Some states have also sought that they should be allowed to borrow directly from the central bank to lower their cost of funds. States are borrowing at an interest rate of around 7-9 per cent from the market even though the RBI repo rate or the rate at which RBI lends is as low as 4.4 per cent.

Financial package for MSMEs and stressed sectors

The Congress-ruled states of Chhattisgarh, Rajasthan and Punjab have sought relief packages for micro, small and medium enterprises (MSMEs), arguing that they have been one of the worst hit. The government is working on a package for the MSMEs and the migrant labourers and it is expected to be announced in the next few days.