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Kerala: LDF Protest in Delhi on Feb 8 Against Centre’s Financial Restrictions, ‘Double Standards’

The state government claims it has lost around Rs 57,000 crore due to the end of GST compensation, revenue deficit grants, reduction in tax share and loan disallowance.
The state government claims it has lost around Rs 57,000 crore due to the end of GST compensation, revenue deficit grants, reduction in tax share and loan disallowance.

Image Courtesy: PTI

The Chief Minister of Kerala, Pinarayi Vijayan, cabinet ministers, Left Democratic Front (LDF) members of the Assembly and Parliament will sit in protest in Jantar Mantar on February 8, against the “negligent” approach of the Union government.

The protest by the LDF government comes after continuous allegations on the Union government of denying the rightful share of tax and slashing the borrowing limit of the state government. 

The reduction in revenue share,  as per the recommendations of the 15th Finance Commission, shortfall due to discontinuation of Goods and Sales Tax (GST) compensation, revenue deficit grants and loan disallowance is pegged at Rs 57,000 crore by the LDF government. The revenue expenditure of the state government has increased to 71%, since the share from the Union government has been continuously reducing and is at 21% at present.

The inclusion of debts of the Kerala Infrastructure Investment Fund Board (KIIFB) and the Kerala Social Security Pension Limited (KSSPL) in the public debt with retrospective effect has led to further shrinking of the borrowing limit. The LDF has accused the Bharatiya Janata Party (BJP)-led union government of “double standards”.

The LDF has been advocating better fiscal federalism to ensure that state governments are provided with their rightful share of revenue. The Kerala government has also approached the Supreme Court against the borrowing limit imposed by the Union government and “violation” of fiscal federalism.

For the February 8 Delhi protest, Chief Minister Vijayan has invited the Opposition bloc, United Democratic Front (UDF) led by the Indian National Congress (INC), to unitedly protest for the rights of the state, but in vain. 

Accusing the Union government of “strangling” the state by imposing financial restrictions and working against fiscal federalism, the government has said though the state's own tax revenue (SOTR) has increased in the last couple of financial years, it is unable to completely meet its expenses. 

Thomas Isaac, the former finance minister of Kerala, has accused the Union government of attempting to derail the developmental works carried out by the government of Kerala.

“Kerala has achieved the top position in almost all the human development indices (HDI) and the Union government is upset over the aspirations of Kerala in becoming a knowledge economy”, he told NewsClick.

The LDF has held a series of agitations against the “neglect” of the Centre, with the entire cabinet travelling to all the 140 Assembly constituencies to appraise the people of the neglect from the Centre. The Democratic Youth Federation of India also held a 650-km long human chain across the state, raising the issue. 

The end of GST compensation, despite the demand for extension at the outset of the COVID-19 pandemic, was also rejected by the Union government. Several state governments accused the Centre of unilaterally deciding on such crucial matters. The seizure of the revenue deficit grants came as another setback for states like Kerala.

The LDF government has claimed that the state has lost around Rs 57,000 crore due to the end of GST compensation, revenue deficit grants, reduction in tax share and loan disallowance.

It further cited co-branding issues and few technical aspects for about Rs 5,100 crore loss. Also, the state government has not received the funds under the UGC (University Grants Commission) salary revision, urban and rural development grants and capital investment special assistance.

The inclusion of loans taken by the KIIFB for infrastructure development and KSSPL for paying social welfare pension to around 64 lakh beneficiaries in the public debt has led to reduction of borrowing limit. 

“The Union government has double standards on off-budget borrowing. While considering the borrowing of KIIFB since its inception as part of the public debt, the Union government has kept the borrowing of National Highways Authority of India out of the public debt”, Isaac said.

The financial crisis faced by the Kerala government has been a talking point for quite some time, since the growth rate of Kerala has remained stable. The major contention of the LDF government is that state finances were being impacted mainly due to the “apathy” of the Centre. 

Isaac claimed that the SOTR (state’s own tax revenue) had increased and the expenditure of the state had reduced in the past two fiscals. “So, it is very clear that the crisis is not due to over expenditure or reduction of SOTR. The apathy of the Union government in reducing the share of the state is the sole reason for the problems the people of Kerala are facing”, he said. 

Chief Minister Vijayan, who will lead the protest wrote on ‘X’, “On February 8th, Kerala will protest in Delhi against the Centre's apathy towards the state, manifested through the denial of grants and the reduction of merited taxes. The Ministers, MLAs, and MPs of the state will participate in the protest, standing up against attempts to undermine the federal values enshrined in our Constitution. Join us in the fight for our hard-earned rights!”.

The increase in cess and surcharges, which need not be shared with the states have increased since the BJP assumed power has come as another setback for the state governments. 

Several state governments, mostly non-BJP ruled states including Karnataka, Punjab, Tamil Nadu have expressed similar concerns over the centralisation policies of the BJP-led Union government. Representatives of the Dravida Munnetra Kazhagam (DMK) are slated to join the protest of LDF in the capital. 

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