Finance Minister Nirmala Sitharaman has said that this narrative that southern states are getting less than what they are contributing to the Centre's revenue is "somewhat distorted". She said she did not question the numbers, but the 'principle' based on which southern states like Kerala, Karnataka, and Tamil Nadu have been demanding a higher share in tax devolution from the Centre.
In February this year, Kerala Finance Minister KN Balagopal said the southern state was getting only Rs 21 for every Rs 100 contributed to the tax pool while Uttar Pradesh was getting Rs 46. Karnataka and Tamil Nadu also claim that their share of taxes has declined.
"First of all, I think this narrative is somewhat distorted. I'm not saying the numbers are distorted. I'm saying the principle, on the basis of which this is being put out, is absolutely distorted. Let's take Kerala, Tamil Nadu, and Karnataka. If the total amount of revenue or taxation that you pay is the principle on the basis of which tax has to be given back to you, Kochi in Kerala would take away everything that is collected," the finance minister said in a podcast - Think School - aired on May 19. Sitharaman said Kochi benefits from having one of the world's best ports, which is a national port in which the Government of India's money goes in, that port is built, maintained, run, and modernised - everything is with the Centre.
"Look at how complexity gets into the argument. Now, Kochi therefore also has an airport to which the Central Civil Aviation Ministry spends a lot. Kochi also has one of the biggest centres of the Navy for which the central government exclusively spends money. Now, all of them have a ripple effect on the economy of Kochi. But even after that, if Kerala representatives say, Kochi gives so much tax? Are you first of all excluding these big-ticket investments, which are having a ripple effect on Kochi's economy and pretending that everything that is happening in Kochi is made out of Kerala's own money? So it starts with a bit of an illogic there," she said.
"Second, if Kochi alone is able to generate so much. What happens to Kannur, what happens to Thrissur, what happens to further up Kozhikode, what happens to Pathanamthitta? Are we then saying everything that Kochi gives Kochi gets back - be damned with the rest of the districts," she argued.
The finance minister suggested similar logic will apply to Tamil Nadu and Karnataka, whose only a few cities contribute a major share of taxes to the state's collections. And if that principle is applied here too, she suggested, then only a few cities would end up with the major collections. "In the case of Tamil Nadu, everything which happens in Chennai and Coimbatore goes back to Chennai and Coimbatore - be done with the values of the world, Perambalur of the world...(would you) forget Ramanathapuram? Would you say that? No, you can't do."
For Karnataka, the finance minister suggested, that major revenue is generated in Bengaluru and if that principle is applied again, then money will go back to the capital city. "Similarly, come to Karnataka. (what will happen to) your Chitradurga, your Bidar, Raichur. Because every money will have to be going back to Bangalore. So what are we trying to convey? I'm not even getting to talking about - we give Rs 1 we get only 25%. No, I'm not even coming to that. First of all, as I took Kochi example, I'll take Bangalore. How many industries in Karnataka and also in Bengaluru are funded by the Centre? The common man travels by train. The Karnataka leg of the train being funded by the Karnataka Government, but the Central government funds it - A to B, B to C to Z."
Sitharaman said Bengaluru has one of the big Air Force centres - one of the southern divisions is there and this money is coming from the Centre. She said a deliberate attempt was being made to mislead. "After all, people, who were sitting in governance holding responsible constitutional positions, do realise that these are not percentages decided by the Prime Minister or the government of India. There is a constitutional body called the Finance Commission that decides it. So when that next commission comes, which is already constituted, meet them and can put your cases forward," she advised the state leaders complaining about the alleged discrimination.
When asked about Kerala's complaint that its share in tax revenue had been declining from the 10th FC to the 15th FC, Sitharaman pointed out that till the 14th Commission, it was the UPA-led Congress government at the Centre. The 14th Finance Commission was constituted in January 2013 under the chairmanship of former RBI Governor YV Reddy.
She said Kerala has had at least five or more ministers sitting there in the Centre, other than the Kerala government themselves. She asked why these ministers could not raise the issue with their own government in Delhi. "They themselves are saying right from the attempts to 14th FC, it's (revenue share) all been falling. It was all yours."
The finance minister said that Kerala's revenue falling may be one of the reasons behind its economic crisis but it should be more efficient. "Why not look at your own state's resources that you collect, be more efficient, and bring more elements into it....If the central share is falling, I'm also asking every state has its way of improving their collection, their resources."