Centre should ensure states receive legitimate share in devolution: Tamil Nadu FM

Terming continuous increase in cesses and surcharges as “antithetical” to the spirit of fiscal federalism, Tamil Nadu Finance Minister P T R Palanivel Thiaga Rajan on Friday made a fervent appeal to the Union Government to merge them into basic rates of tax to ensure states receive their “legitimate share” in devolution.

In his speech at the pre-Budget meeting chaired by Union Finance Minister Nirmala Sitharaman in New Delhi, Thiaga Rajan said cesses and surcharges, which do not form a part of the divisible pool of taxes, have adversely affected the transfer of resources to the states.

“Cesses and surcharges, as a percentage of gross tax revenue, have increased manifold from 10.4% in 2011-12 to 26.7% in 2021-22. This has deprived the States of their legitimate share of revenue collected by the Union Government,” he said, demanding that they be merged into basic rates of tax.

Flagging that the state’s fiscal autonomy has further been curtailed by the increasing ratio of Grants-in-aid to share in central taxes, he said the ratio of grants-in-aid to share in central taxes has increased from 45 per cent in 2012-13 to 94 per cent in 2021- 22 for Tamil Nadu.

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He also asked the Union Government to provide greater untied funding to the states, rather than a “one-size-fits-all homogenization” through increasingly detailed Central schemes. Thiaga Rajan, in his speech, also said the state ends up undertaking “additional financial burden” to meet legitimate aspirations of the people as unit costs and the Centre’s share of the cost are not in consonance with the ground realities in many schemes.

Contending that the Tamil Nadu government envisions a data-driven support infrastructure to ensure targeted delivery of welfare schemes, he felt that seamless sharing of datasets by the Union and state Governments will be mutually beneficial and help in better targeting and delivery of schemes.

“This will also ensure effective utilization of scarce resources by the Governments. In this regard, I request the Union Government to share the available datasets under various schemes and projects with the States so that data can be effectively used for better governance,” Thiaga Rajan said.

Talking about issues concerning the state, the Finance Minister said the garment sector is undergoing a severe crisis and asked the Centre to announce a special Emergency Credit Line Guarantee Scheme (ECLGS) for the MSMEs in the garment sector with twenty per cent additional collateral-free credit in the upcoming budget.

He also demanded reduction in duties on imported wood since Tamil Nadu has set up the first International Furniture Park in the country and extended the Production Linked Incentive (PLI) scheme for leather and non- leather footwear sector and for Green hydrogen and electrolyser manufacturers.

Complaining that successive Union Budgets have always under-provided for Railway projects in Tamil Nadu, the minister demanded adequate fund allocation for railway projects in the state to strengthen rail infrastructure in suburban areas of Chennai. He also demanded funds for four new railway lines and asked the Centre to introduce two Vande Bharat trains connecting Chennai with Madurai and Coimbatore.