on a base year of 2015-16.
States have not got a rupee of compensation during the current fiscal year so far against the requirement of Rs 1.5 trillion for the first four months.
States also rejected the argument that while additional borrowing by the Centre influences yields on central government securities and has other macroeconomic repercussions, yields on state securities do not directly influence other yields and do not have the same repercussions.
“How do you allocate the same fiscal deficit ceiling to Kerala, Telangana or the Northeast?”
THOMAS ISAAC, Kerala finance minister
“In the name of act of God, a huge debt is thrust on states. That will lead to crushing federalism”
AMIT MITRA, West Bengal finance minister
“Both options don’t seem attractive to us. The Centre is running away from its commitment”
MANPREET SINGH BADAL, Punjab finance minister
“The states’ borrowing won’t impact yields — this is the first time I have heard this. Imagine if all states go to the market. Impact on yield is dependent on combined state and central fiscal deficit. This is the most dangerous falsehood spread by the Centre,” added Mitra.
Mitra said 90 per cent of states at the last GST Council
meeting were of the view that the Centre must borrow. “We will put our heads together before the GST Council
meeting,” he said.
Fifteen states, including several Bharatiya Janata Party states, stood up at the GST Council
meeting and said the Centre should do the borrowing, pointed out Mitra.
West Bengal’s shortfall is around Rs 15,000 crore.
Mitra added that on March 14, Infosys Chairman Nandan Nilekani had made a presentation on behalf of the GST Network before the GST Council, and the total tax evasion under GST was said to be at Rs 70,018 crore.
Bihar Deputy Chief Minister Sushil Kumar Modi, however, rooted for the first option of only borrowing Rs 97,000 crore via a special window as it will take care of the interest component, besides getting a 0.5 percentage points additional Fiscal Responsibility and Budget Management limit. “The Centre has said it is committed to the entire amount. The rest is being deferred by two years. The option of interest subvention is also there. You can raise more money. We feel the first option will be the best for states. But our officers will discuss the options threadbare,” said Modi.
Chhattisgarh Finance Minister T S Singh Deo had said on Thursday that states were being arm-twisted in order to get compensation, which was rightly due to them according to the Constitution of India. He had urged the Centre to borrow instead of the 31 states and Union Territories doing that separately.
Delhi Finance Minister Manish Sisodia had called the options laid before the Council on Thursday the biggest betrayal in the name of federalism.
The GST Council met on Thursday to deliberate on a single agenda of compensating states in view of muted compensation cess collections. The Centre also took the opinion of Attorney General K K Venugopal on the issue.
The governments, both the Centre and the states, have collected Rs 21,747 crore from the compensation cess in the first four months of the current fiscal year, which was one-third less than Rs 32,796 crore mopped up in the corresponding period of 2019-20.
In fact, the collections were muted last fiscal year as well. The collection was Rs 95,000 crore, but the states were given Rs 1.65 trillion after dipping into the excess collections from the cess of the previous years.