States have sought enhanced financial support from the Centre for implementation of Seventh Pay Commission recommendations, centrally sponsored schemes as well as the long pending compensation for phasing out of central sales tax (CST) in the upcoming Budget for 2016-17. States also asked for greater focus on measures to boost farm productivity and agricultural sector growth.
“It has been a tradition to meet with states to discuss on the Budget and other economic issues. They gave their suggestions for more resources and investments. Most of the states have suggested that they have been concentrating on anti-poverty schemes and particularly their concentration has been on the agricultural sector,” said finance minister Arun Jaitley.
The finance minister said states should spend more on infrastructure and poverty alleviation.
“We expect that those states whose resources have been increased after the implementation of the fourteenth finance commission will spend further on infrastructure creation and on anti-poverty programmes to the extent that they continue to spend more. The resources of the states have increased considerably after the Fourteenth Finance Commission,” Jaitley said after the Pre-Budget meeting with state finance ministers on Saturday.
At the meeting with the finance minister, states put forward their list of demands for the 2016-17 Budget (April-March), which will be presented on February 29.
The Fourteenth Finance Commission had last year recommended a 10 per cent increase in the states’ share in the Union taxes to 42 per cent. The Seventh Pay Commission has recommended 23.55 per cent overall hike in pay, allowances and pensions of government employees with effect from January 1, 2016.
“As far as central government is concerned, we would like to cooperate with every state, and as the growth of states increases, the national growth will also increase,” Jaitley said in his opening remarks at the meeting.
He said agricultural sector has suffered due to inadequate monsoon rains over the last two years.
States sought compensation for revenue losses due to the phasing out of the CST till the Goods and Services Tax (GST) is implemented along with the demand to increase borrowing limit.
States such as Odisha, Punjab, Uttar Pradesh, Assam, Telangana and West Bengal spoke about the release of CST compensation during the meeting.
“We would urge upon the the Union Government to fully compensate the state for the CST loss through adequate provision in the Union Budget 2016-17,” said Odisha finance minister Pradip Kumar Amat.
West Bengal finance minister Amit Mitra also said the government should ensure that CST compensation is paid on time to the states so that there is no trust deficit between the Centre and the states.
“We request appropriate allocation in the Budget for clearing remaining CST compensation liability of all states for 2012-13 during the current financial year,” said S Parminder Singh Dhindsa, finance minister of Punjab.
States also asked the government to provide special assistance for meeting the burden arising out of Seventh Pay Commission recommendations as states too have to increase salary of their employees.
“The committed liabilities of states will increase and so the Centre should give us some assistance or at least compensate us for a part of the pay hikes,” said Bihar finance minister Abdul Bari Siddiqui.
Bihar has also sought special category status from the central government, informed Siddiqui, adding the Centre should make announcement in the upcoming Budget reflecting last year’s announcement of special package of Rs 1.25 lakh crore by the Prime Minister.
Jharkhand chief minister Raghubar Das sought a hike in income tax exemption limit and abolition of Minimum Alternate Tax on infrastructure firms. He urged the government to increase 80C limit to Rs 2 lakh from Rs 1.5 lakh for individual taxpayers and create separate limit for life insurance premium deductions. TDS deduction limit should be hiked to Rs 50,000 from Rs 10,000 from interest earned on bank deposits, Das said.