The governments of Tamil Nadu, West Bengal and Kerala on Monday slammed the Centre over its decision to link additional borrowings of states to certain conditions, and raised concerns that the move may go against the spirit of federalism.
In a letter to Prime Minister Narendra Modi Monday, Tamil Nadu Chief Minister Edappadi K Palaniswami accused the Centre of “aggressively pushing” a reform agenda “without building consensus” and said it is not “in keeping with the spirit of cooperative federalism”.
His West Bengal counterpart Mamata Banerjee said if the conditions are obeyed, the state’s “federal structure will be gone”. Kerala Chief Minister Pinarayi Vijayan said the state government is not happy with the conditions.
“The states sought the additional borrowing limit beyond 3% of GSDP mainly because of the significant shortfall in revenues due to the lockdown imposed in the wake of the Covid-19 pandemic. There are also large additional expenditure commitments. These are borrowings by the state government, which have to be repaid from future tax revenues of the States. They are not grants from the Centre,” Palaniswami has stated in the letter.
One of the conditions cited by the Centre is discontinuation of free electricity to farmers. The Centre has asked states to switch to Direct Benefit Transfer instead.
“Our government is strongly opposed to the idea of removing the Free Power Supply to farmers. It has been our stand that the mode of disbursement of subsidy should be left to the state governments themselves. Since a consensus is yet to emerge on these issues, I request you to instruct the concerned ministries to remove the requirements to reform the power sector from amongst the proposed conditionalities and also to allow greater latitude to states in implementing a reform agenda,” he wrote.
Slamming the conditions, Banerjee told the media Monday, “You have seen different press statements for hours during four days…. increase in FRBM from 3 to 5%. But, actually we are getting only 0.5%. They have basically applied some conditions. If I will obey those conditions then our state’s federal structure will be gone. If I will not obey them, I will not get the increase in FRBM.”
She added, “Many states increased tax or cess on petrol. We did not. Many states cut the salary of government employees. We did not. Now if they say, we will increase your FRBM and we will control your electricity or you have to increase tax in urban areas, we cannot accept this… We are for the people, we will remain that…”
Speaking to reporters, Vijayan welcomed the Centre’s decision to increase the borrowing limit, but added, “We are not happy with the conditions set for the use of the increased limits.”
Targeting the Centre’s package, he said, “The bulk of the Rs 20 lakh crores is the amount available to the banks as part of the RBI’s monetary policy and the amount that these banks are expected to pay to farmers and small businesses. The reality is that banks are wary of giving loans in today’s financial uncertainty.”