In pre-Budget meet, states ask for higher borrowing limit, more Central funds

Tamil Nadu Finance Minister Palanivel Thiaga Rajan said all states, irrespective of the political party in power, expressed a common theme at the meeting — that states’ fiscal autonomy is constrained by the extent of centrally sponsored schemes, by the extent of changing ratios of funding of such schemes.

“…and by the fact that states have to top up 2x, 3x and 5x of what the Union gives and still it is centrally sponsored or PM scheme…in old age pension, Tamil Nadu pays Rs 1,000 a month, the Union Government of India only gives Rs 200 a month. Every state, every minister of BJP-government states made the same exact request and many have asked for an extension of GST compensation and also 3.5 per cent fiscal deficit limit,” he told reporters.

Centrally Sponsored Schemes (CSS) are implemented by state governments but funded jointly by the Central and state governments with a defined sharing pattern. Bihar Finance Minister Vijay Kumar Choudhary said these schemes should be limited as the burden on states for them is increasing and Centre should implement only Central schemes if they want to help states. He also said that the borrowing limit should be fixed at 4 per cent of GSDP for states.

The Old Pension Scheme found mention in the meeting, with Chhattisgarh Chief Minister Bhupesh Baghel asking for Rs 17,240 crore to be returned from the new National Pension System, which will be deposited in a separate pension fund to be used for future pensionary obligations. “Funds should be given for OPS which has been implemented in Chhattisgarh,” he said after the meeting.

Finance Ministers of Assam, Delhi, Gujarat, Karnataka, Nagaland, Odisha and West Bengal did not attend the meeting.

The Union Finance Ministry said in a statement after the meeting that “most of the participants thanked the Union Finance Minister for financially supporting their States/ Union Territories by enhancing borrowing limits, providing two advanced devolution installments and through Special Assistance for capital expenditure. The participants also gave numerous suggestions to the Union Finance Minister for inclusion in the Budget Speech.”

More funds for capital expenditure were also demanded by many states, including Maharashtra, Meghalaya and Bihar. Maharashtra put up a proposal of projects worth Rs 3,000 crore under schemes of special assistance to states for capital investment.

Although the state has received a grant of Rs 6,800 crore, it urged Centre to consider additional allocation of Rs 3,000 crore for various projects. “The Centre has come up with a very good scheme for special assistance to states for capital investment. Its size has been increased from Rs 15,000 crore during the year 2021-22 to Rs 1 lakh crore for the year 2022-23. This will help states,” Deputy Chief Minister Devendra Fadnavis said.

Meghalaya Chief Minister Conrad Sangma said he has demanded an increase in capital assistance given to the states. “Have asked for a system where it should be linked to the population. Village-based schemes should be stressed on,” Sangma said.

Andhra Pradesh Finance Minister Buggana Rajendranath Reddy said he has sought special assistance towards capital expenditure. “We have demanded that state-promoted renewable projects be included in the green bond funding scheme,” Reddy said.

Himachal Pradesh Chief Minister Jai Ram Thakur sought better road, rail, air connectivity in the state to promote tourism, and wanted GST on apple packaging to be reduced to 12 per cent from 18 per cent.

Pending dues of compensation cess were also sought by states. Chhattisgarh’s Baghel further urged for continuation of the system of GST compensation for the next five years after June 2022 and demanded Rs 1,875 crores as GST compensation for April-June along with coal royalty amount of Rs 4,140 crore. Royalty for minerals extracted in the state should be increased, he said, adding that it was to be fixed every three years but has not changed over ten years.