One of the defining moments in Centre-state relationships came in 1967 when the first completely non-Congress government came to power in Tamil Nadu in the form of the DMK led by its founder C N Annadurai. While most state governments at the time were either Congress or alliances featuring the party, the exceptions were Tamil Nadu and Kerala, where the first ever non-Congress government, that of the CPI, was elected in 1957 but ousted by the Centre in 1959. However, in 1967, the CPI(M) returned to power in Kerala. In his first Budget speech, delivered on June 17, 1967, Annadurai outlined how the over-centralisation of powers that occurred under the Congress governments led by Jawaharlal Nehru and Indira Gandhi posed existential challenges to the federal system. “The powers which the Central Government have assumed in regard to mobilisation, allocation and pattern of utilisation of resources for the Plan have reduced the States to the status of suppliants for aid from Centre," Annadurai said. “Though some may shrink from discussing this issue on account of party discipline, all those who have looked at this problem from the purely economic angle, have expressed regret at these trends in financial relationship between Centre and State.” He argued that several heads of state government recognised that the states would not be able to meet the “growing aspirations of the people for a new way of life” unless the resource base of the states was strengthened by allocating them on an “agreed basis” and giving the states “complete freedom to utilise them according to their judgment”. A simmering issue History is now repeating itself as non-BJP governments in several south Indian states call for an alliance to counter the over-centralisation of financial powers by the Narendra Modi government. Finance Ministers from five non-BJP-ruled states — Kerala, Tamil Nadu, Karnataka, Telangana. and Punjab — met on September 12 in Thiruvananthapuram in Kerala to discuss issues related to "economic federalism" amid consultations of the 16th Finance Commission. A day earlier, Karnataka CM Siddaramaiah invited the CMs of eight states to hold a conclave to discuss the “unfair devolution of taxes by the Union government”. Five of the states the Karnataka CM invited — Kerala, Tamil Nadu, Andhra Pradesh, Telangana, and Punjab — have non-BJP governments, while three — Maharashtra, Haryana, and Gujarat — have the BJP or coalitions it is part of at the helm. The states invited have been chosen based on their high contribution to the central pool of taxes. “States with higher GSDP per capita, like Karnataka, are being penalised for their economic performance, receiving disproportionately lower tax allocations,” Siddaramaiah said after the invitation was sent out on September 11. “This unjust approach undermines the spirit of cooperative federalism and threatens the financial autonomy of progressive states. I have invited them to a conclave in Bengaluru to collectively deliberate on issues of fiscal federalism at a juncture when the Finance Commission needs to make a directional shift and create incentives for growth and better tax mobilisation.” Ahead of the Lok Sabha elections, Karnataka and Tamil Nadu had staged protests in Delhi against the increasing centralisation of financial resources under Modi. Earlier this year, the Siddaramaiah government took the Centre to the Supreme Court over its demand for Rs 18,000 crore drought relief. The Left Front government in Kerala has taken the Centre to court over borrowing restrictions amid a financial crisis in the state. The DMK government in Tamil Nadu has also approached the Supreme Court over the Centre’s “step-motherly” treatment in the release of Rs 38,000 crore of cyclone disaster funds. At the meeting in Thiruvananthapuram, the discussions revolved around an increase in the share for states in the divisible pool of central tax revenues from the current 41% to 50% and stopping direct collection of taxes by the Centre through cesses and surcharges. Karnataka Revenue Minister Krishna Byre Gowda suggested a 5% cap of gross tax revenue on cesses and surcharges. There have also been concerns raised about the GST regime restricting the fiscal autonomy of the states and the need for more flexibility. States have also highlighted the significant cut in their central fund allocations under the 15th Finance Commission and have sought hikes under the 16th Finance Commission. Tamil Nadu has said that its allocation dropped from 7.93% under the Ninth Finance Commission to 4.07% under the 15th Finance Commission. Karnataka has said it is one of the biggest losers because of devolution on account of the reduction in its share from 4.71% in the 14th Finance Commission to 3.64% under the 15th Commission. The Karnataka government estimates the loss it has suffered due to factors such as the reduction of the state's share in the divisible pool of taxes and GST is around Rs 1.87 lakh crore. Despite the Union Budget doubling in size between 2016-17 and 2022-23, there was no marked increase in grants allocated to Karnataka, Siddaramaiah has said. Karunanidhi and the Rajamannar Committee While Annadurai was among the first to take a strong stand on federalism and the autonomy of states, it was his successor M Karunanidhi — he took over as CM in 1969 after the DMK founder’s death — who took bold steps on the federalism front (in 2018, his son and CM M K Stalin wrote to the CMs of 10 non-BJP CMs about modifying the 15th Finance Commission's terms of reference to ensure that no injustice is done to states). Karunanidhi set up the Centre-State Relations Inquiry Committee, also known as the Rajamannar Committee, to look into the challenge of diminishing federalism amid the increasing centralisation tendency of the then Congress government of Indira Gandhi, who assumed power in 1966. "Soon after the Constitution began to work, there was a growing realisation of the strong domination of the Centre not only on general policies but also in the spheres which exclusively belonged to the States and of the tendency on the part of the Centre to exercise control over the States, drastically affecting the autonomy of the States," the committee reported in 1971. "But these issues were prevented from flaring up into serious conflicts between the Centre and the State Governments because the Centre and the State Governments were controlled by one and the same party," the panel noted. The committee noted that even in Congress-ruled Karnataka, CM Veerendra Patil in 1970 "deplored the general deterioration in Centre-State relations and has gone even to the extent of giving a warning that a day might come when different houses and bhavans of states in Delhi are constrained to assume the character of embassies”. In 1970, Karunanidhi threatened to withhold support for the fourth Five-Year Plan during a meeting of the National Development Council. He sought a steel plant in Salem, which the Centre later granted. The efforts of Opposition-ruled states to form a federal alliance came to a head in the 1980s after the Central government imposed President's Rule in as many as nine such states. Opposition leaders from multiple parties held many meetings to counter the Indira Gandhi government that returned to power after Emergency. On October 5, 1983, 53 Opposition leaders from 17 parties met in Srinagar in Kashmir and issued a declaration seeking a clear demarcation of the powers of the states and the Centre. The leaders who attended the three-day Srinagar conclave accused the Central government of being partisan towards non-Congress governments in states. The resolutions from the summit said the Centre should restrict itself to the areas of defence, foreign affairs, currency, and communications.
