At NITI Aayog meet, CMs say centrally sponsored schemes bleeding states dry

Kerala CM Pinarayi Vijayan cautioned against doing away with the Essential Commodities Act as hoarders can misuse it
At the fifth meeting of NITI Aayog’s Governing Council on Saturday, Karnataka Chief Minister H D Kumaraswamy demanded the Centre extend GST compensation period beyond five years as he feared his state will face “severe financial crunch” when the recompense period ends in 2022. The demand comes ahead of the Goods and Services Tax (GST) Council meeting on Friday.

Several chief ministers (CMs), of not only Opposition parties but also allies like Bihar’s Nitish Kumar, went beyond the suggested five-point agenda of the meeting to stress that centrally sponsored schemes (CSS) were bleeding states dry, and asked the Centre to either fund these fully or discontinue them. They also demanded the Centre, given the rural distress because of drought, release its backlog of MNREGA payments.

Later at a press conference, NITI Aayog Vice-Chairman Rajiv Kumar said the suggestions made by the states could form input for the formulation of the Budget, to be presented on July 5 in Parliament.

Finance Minister Nirmala Sitharaman said central devolution to states rose from Rs 20 trillion between FY12-FY15 to Rs 41 trillion in the next four years, a rise of around 97 per cent.

Kerala CM Pinarayi Vijayan and Bihar’s Kumar expressed reservations at the reforms proposed in the model agriculture produce marketing committee (APMC) Act. Both said the reforms in the APMC Act might not be the panacea the model law promises.

Chhattisgarh CM Bhupesh Baghel, who earlier met the PM, said that premium should be increased for mines allotted for government venture from Rs 100 per tonne to Rs 500 per tonne and the state should also be given a share in electricity generated. Baghel said there were several loopholes in the proposed amendment to Indian Forest Act, 1927, and it does not protect the rights of tribals living in forest areas.

On GST, Kumaraswamy said several structural issues, including flawed tax rates, have caused GST revenue shortfall in the state. He said Karnataka has limited scope to mobilise additional revenue, and this would mean that at the end of 2022-23 there would be a steep fall in revenues of the state as compared to the protected revenue of 2021-22. He said this would hurt social welfare, development and infrastructure work. He demanded that compensation be extended beyond 2022.

While West Bengal CM Mamata Banerjee skipped the meeting after writing to the PM where she termed the exercise “fruitless” as the NITI Aayog does not have any financial powers, Vijayan seemed to echo her.

In his speech, the Kerala CM said the NITI Aayog in its “present form has not played the much expected role of a facilitator in the last four years. There is a growing realisation that it is perhaps not a substitute for the erstwhile Planning Commission.” He said the Inter-State Council should be revived.

The Bihar CM said the 14th Finance Commission devolution has meant states having to dip into their finances to fund central schemes. He suggested the Centre discontinue the CSS and implement its priority area schemes under central sector schemes, while states fund their priority schemes from their respective funds.

Kumar demanded the Centre do away with the PM crop insurance scheme for Bihar’s farmers. He said the scheme should be delinked from farmers seeking bank loans as its premium is proving to be an additional burden when his government provides such insurance free of cost. He said the Centre should extend the PM Kisan Nidhi scheme, in which it pays Rs 6,000 to farmers, to tillers as well.

Vijayan criticised the model APMC Act. He said in a society with highly unequal bargaining and monopoly powers, the influence of corporate entities would worsen the exploitative conditions. “Our state has shown we need to look beyond certain restrictive assumptions and prescriptive policies. We need to learn from popular experiences,” he said.

Kumar said the Bihar government dissolved all agricultural marketing boards and committees in 2006, converted these into free public markets. He said the main premise of the ‘model APMC Act’ of the Centre is based on regulating agricultural markets, but his government feels there is no need to regulate the market.

Vijayan cautioned against doing away with the Essential Commodities Act as hoarders can misuse this to create a situation of rising prices, which would hurt the consumers, especially poor and vulnerable sections.

Kumaraswamy said the ‘ease of living index’ ranking system adopted by the NITI Aayog should be “more participative, scientific and transparent”. He said giving 58th rank to Bengaluru in that index is “unacceptable as Bengaluru is widely rated as the most preferred city for work in the country by reputed agencies”.

The Karnataka CM also echoed others on central schemes and subsidies. “Regarding subsidies, our view is that the subsidies which arise because of specific central legislations or policies should be borne by the central government itself and the state should not be expected to share a portion of them,” he said.

Apart from the West Bengal CM, Telangana’s K Chandrashekhar Rao did not attend the meeting. Punjab CM Amarinder Singh also skipped it because of health reasons, but state finance minister Manpreet Badal represented him. The Punjab CM, in his speech circulated at the meeting, asked the Modi government to increase the annual assistance under PM-KISAN from Rs 6000 to Rs 12,000.

Madhya Pradesh’s Kamal Nath called for adopting a mechanism by which import and export of farm commodities is seamlessly taken care of to benefit the farmers. Rajasthan’s Ashok Gehlot was also at the meeting.

Andhra Pradesh CM Y S Jaganmohan Reddy demanded special category status for his state, saying the PM and the BJP manifesto for 2014 polls had committed to it. He placed before the meeting a letter by 14th Finance Commission member Abhijit Sen, which “explicitly stated that the commission did not recommend the abolition of special category status”.

Bihar’s Kumar made a case for special category status for his state, but suggested a way out. He said the Raghuram Rajan committee had identified 10 most backward states in the country and Bihar was one of them. He said the panel had recommended the Centre could provide assistance under other heads to most backward states. 

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