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State seeks higher share of Central taxes

Special Correspondent

State’s share down from 7.9 % to 5.3 %
Commission praises State’s performance

CHENNAI: Chief Minister M. Karunanidhi on Thursday called for an increase in Tamil Nadu’s share in the scheme of devolution of Central taxes, noting that it had come down from 7.9 per cent to 5.3 per cent over the years. He requested the panel to raise the share to 50 per cent and reduce discretionary grants.

During a meeting with Finance Commission chairman Vijay Kelkar and members of the panel at the Secretariat, he said: “We feel that performing States like Tamil Nadu have not been receiving their due share. Successive Finance Commissions have given more importance to backward States, ignoring the needs of performing States.”

Attributing this to the practice of giving higher weightage to income distance (difference between average per capita income of the top three States and the per capita income of a given State) and lower weightage to performance and fiscal discipline, the Chief Minister said this had to be corrected. The Commission should study the alternative formula suggested by the State and arrive at a “just and fair” arrangement.

Tamil Nadu had been focussing on improving the lot of the poor, giving importance to the social sector and public infrastructure.

“Expenditure for such efforts and the impact of the economic slowdown have led to a difficult fiscal situation,” he said. The State expected a “fair and favourable assessment” by the Commission.

The size of the Calamity Relief Fund for Tamil Nadu should go up, considering the frequent natural calamities. The Commission should consider the State’s needs in promoting clean energy, improving slums, aiding coastal protection works, restoring traditional waterbodies and so on, he said.

Dr. Kelkar described Tamil Nadu as the “most progressive and performance-oriented State” and congratulated the State government, according to an official release.

Referring to the increase in non-tax revenue from Rs. 3,304 crore in 2007-2008 to Rs. 5,645 crore in 2008-2009, Dr. Kelkar said this was primarily due to revenue derived from long-term industrial lease of government land to third parties.

“This bold initiative is commendable,” he said, seeking more details. The panel would like to recommend it to other States.

As for the criteria and revised weights suggested in the State’s memorandum for determining the States’ share in the divisible pool of Central taxes, he assured the government that the panel would give “the most careful consideration” to the suggestions.

It would examine the State’s request for various grants made in the memorandum, aggregating to Rs. 25,893 crore, Dr. Kelkar said.

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