MK Stalin Supports Pinarayi Vijayan's Fight For Preserving Fiscal Federalism

Chennai: Tamil Nadu Chief Minister M K Stalin on Tuesday extended support to his Kerala counterpart Pinarayi Vijayan’s fight against the centre’s attempt to stifle State Governments on fiscal matters. The Tamil Nadu government was prepared to support of the government of Kerala’s commitment to preserving fiscal federalism and looked forward to collaborate and synchronise efforts to address this crucial challenge, he said in a letter from Spain, where he is on an official visit. 

Appreciating Kerala for drawing the attention of the Supreme Court to the pressing issue of the Union Government’s “attempts to stifle State Governments by exercising arbitrary and discriminatory control over their deficit financing,” Stalin said although this has been happening for quite some time, the situation has rapidly deteriorated in the last few years. “There is a clear consensus emerging amongst progressive State governments that such indirect control over state finances needs to be done away with,” he said.

“As rightly pointed out by you, the subject of Public Debt for financing the public expenditure of States is within the exclusive purview of the State Legislature as per the Constitution of India. However, the Union Government has been misusing its powers under article 293 of the Constitution of India to restrict the borrowing space of the States. The prior consent from Union Government, mandated by this section, has been converted into a restrictive tool to limit deficit financing beyond the limits prescribed by the State FRBMs. As a result, the fundamental principle of fiscal federalism envisioned by the Constitution makers is under grave threat,” the Tamil Nadu Chief Minister said.

Such steps have caused a significant dent in mobilisation of funds for State initiatives, he said citing a few instances related to Tamil Nadu. “These discriminatory and unconstitutional attempts are being pushed by the Union Government at a time when the fiscal autonomy of the States has already been seriously curtailed by the implementation of GST. A revenue shortfall of Rs.20,000 crore per annum is being faced by the Government of Tamil Nadu in comparison to the pre-GST regime and the Union has been refusing to extend the compensation regime,” he said.

Stalin believed the Centre’s intent seems to be aimed at crippling States’ ability to raise resources and fund crucial developmental initiatives as per their policy priorities. “This needs to be resisted by like-minded progressive states,” he said.