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Telangana Rashtra Samithi

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KCR seeks financial freedom for States

Telangana Chief Minister K Chandrashekhar Rao on Tuesday called for increased financial freedom to States, allowing them to chart their own progress and facilitate a “paradigm shift” in the institutional structures and official business processing.

In his address to the members of the 15th Finance Commission here, the Chief Minister said, in the context of development of States: “I feel that piecemeal and half-hearted measures taken so far will not suffice.”

He said the existing fiscal powers have “significant centripetal bias” with respect to distribution of fiscal powers between the Centre and the States. Chandrashekhar Rao said that in addition, the Centre was increasingly intruding into State subjects by running numerous Centrally-sponsored schemes, shifting subjects from the State List to the Concurrent List and introducing new schemes in State subjects without any prior consultation with States.

He pointed out that the 14th Finance Commission assessed that Centre’s expenditure on State subjects increased from an average of 14 per cent of its total expenditure to 20 per cent and on subjects in the Concurrent List from an average of 13 per cent to 17 per cent between 2002-05 and 2005-11. “This is indicative of the excess fiscal space available with the Centre, a major part of which can easily be shared with States through higher tax devolution,” he said.

Chandrasehkhar Rao said now the States are mature enough to formulate their own plans and prioritize their expenditure to suit the needs of people being closer to them. “States are lot more fiscally prudent than the Centre. The Gujarat and Kerala models of development were being talked about previously. Now, it is the Telangana model of development which has taken centre-stage,” he said.

Despite such existing conditions and the challenges that faced Telangana State upon its formation after decades of neglect of the region by previous governments, he said: “We thought there was no point in brooding over the past neglect and be deterred by the challenges before us. We did not want such a serious crisis to go waste and took it as an opportunity to do things that were not done before to meet the suppressed aspirations of our people. We started the process of reinventing and reorienting the State to realize the goal of ‘Bangaru Telangana’. We took up a number of programmes to alleviate the hardship of people and to put the Telangana economy on a higher growth trajectory. “

He further said that though when Niti Aayog was formed it was promised that it will encourage a true spirit of fiscal federalism and cooperation of the Centre with the States, this has remained one of the unfulfilled promises by the Centre. Chandrashekhar Rao pointed out that the 15th Finance Commission has a decisive role in taking this idea forward and pave way for path-breaking reforms in Indian fiscal federalism that reflect the changing realities.

Telangana, he said, “suffered a double-whammy” with a reduction in its share of tax devolution from the Centre, which, following 14th Finance Commission recommendations, ended programmes like BRGF, Model Schools and increased matching contribution of States for a number of Centrally sponsored schemes.

“I am confident that the Fifteenth Commission will adopt a judicious approach while dealing with these considerations and ensure a higher flow of resources to States taking into account the reality that the development of the nation lies in the development of States,” he said.

Highlights of CM’s speech

1. No justification for Centre to imposing conditions such as limiting borrowings to 3 per cent of GSDP while giving consent to states to borrow and raise loans.
2. Commission should recommend raising borrowing limits to 1 per cent instead of .5 per cent for financially well performing States
3. Commission should incentivize States to implement at their own flagship programmes that are better designed than the one-size-fits all programmes of the Centre , which is adopting many States’ schemes
4. Maintenance cost of the lift irrigation projects in Telangana, estimated at Rs 40,169 crore during the award period of the Commission should be given to State as a maintenance grant;
5. Commission should also recommend payment of maintenance cost of Mission Bhagiratha, estimated at Rs.12,722 crore for five years.
6. Set up a permanent River Water Dispute Tribunal to neutralize perverse incentives of individual Tribunals;
7. Let us not talk of ‘Best practices’… Let us think of ‘Next practices’; Time has come to reinvent India by setting a development-centric national agenda and move away from centralization;
8. Agriculture, education, health, urban development, rural development, housing, drinking water, sanitation, and women and child welfare are subjects best left to the States;
9. Investment Support of Rs.10,000/- per acre (@Rs.5,000/- per crop per season for both Kharif and Rabi) as in Telangana will be a step in the right direction to address the distress in the sector;
10. Increase MSP by Rs.500/- or 1/3rd more of existing MSP. Thereafter the MSP should be increased every year by linking it to the price index as in case of employees’ dearness allowance.

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