Thiruvananthapuram played host to the first southern Finance Ministers’ conclave on Tuesday, with Andhra Pradesh, Karnataka and Puducherry participating. Tamil Nadu and Telangana chose to skip the meeting that was called by Kerala Finance Minister Thomas Isaac, to deliberate on the ‘unjust’ Terms of Reference of the 15th Finance Commission.

The 15th Finance Commission is a body that determines how the tax revenue collected by the Centre is distributed among the states. Several southern states have voiced their opposition to the ToRs, arguing that it will end up penalising them rather than rewarding them for their achievements.

Kerala Finance Minister Thomas Isaac, the host of the conclave, said that the idea behind the meeting was to initiate a dialogue.

“We are initiating a dialogue, a debate, a campaign on the Tor of the 15 FC, which we believe is in contradiction of the principles of federalism enshrined in our constitution. The issue is fundamental. There is an attempt to impose stringent conditionalities on state governments… The conclave is not the end but the beginning of a long dialogue which would draw in more states, not just the southern states represented here,” he said.

One of the main reasons for opposing the 15th Finance Commission is over the decision in the ToRs to use the 2011 Census for calculations, over the 1971 Census, which has been the baseline for earlier commissions. With population being one of the key parameters to distribute funds, the decision to use the 2011 Census would adversely impact the south, argue many of the leaders.

Kerala Chief Minister Pinarayi Vijayan, who inaugurated the meeting, explained that states that had controlled population should not be penalised for doing so.

He observed, “The states need to continue the focus to sustain the achievement in demographic reduction. Less population doesn’t mean less expenditure for the state, on the contrary it creates new commitment to the labour force and senior citizens. The care of the elderly is the responsibility of state government. They (Centre) are intensifying the efforts to use the FC an instrument of fiscal consolidation and to implement ideological and economic agenda of the union government.”

Karnataka’s Agriculture Minister Krishna Byre Gowda points out that Terms Of Reference incentivises those states that will reach the replacement fertility rate of 2.1. But progressive states like Karnataka, that have worked hard to control their replacement fertility rate, bringing it down to less than 2.1 will lose out.  

“Under the incentives clause, states which will reach the replacement fertility level of 2.1 will also get also get incentives. Meaning those states which have reached or crossed below 2.1 will not get incentives. Which means all the progressive states which did their nationalistic duty, called for by successive governments of India to bring the population down, which did bring it down over 30 years, will not only lose out on the first count of shifting the basis from 1971 to 2011 Census, but will also not be eligible to get the incentives which are laid out in the ToRs for 2.1. There is a double whammy delivered to progressive states in the issue of population,” says Byre Gowda.

Noting that the challenge of the Finance Commission is to balance equity and efficiency, the Karnataka minister said win-win solutions can be adopted that will protect all states.

“We call upon government of India to work towards win-win solutions rather than creating winners and losers, and as a result creating fissures within the Union and unwanted discontent within the union which may weaken the union,” said Byre Gowda.

Speaking at the inaugural session, Andhra Finance Minister Yanamala Ramakrishnudu observes that states have in the past appeared before Finance Commissions and expressed their grievances, but the outcomes were limited.

Hitting out at the Centre for not consulting the states, Ramakrishnudu says, “The point is to suffer or not to suffer. This is against the Constitution. I don't know why they have stipulated the ToRs without taking opinion of all state gifts. It's going to affect states rather than Centre. Without asking any state, the government arbitrarily has decided Terms of Reference which are against the law of the land.”

Puducherry Chief Minister V Narayanaswamy, who holds the Finance portfolio, explained that the Union Territory, which has a legislature, faced a peculiar problem. While Union Territories have a separate Finance Commission, Puducherry – as a UT with a legislature – does not come under either commission.

Narayanaswamy said, “They have a separate Finance Commission for union territories. For the Union Territory with legislature, there is no FC. We are at the mercy of Home Ministry. They want to control us by keeping powers with them. Is this their cooperative federalism?”

Slamming the Centre for its treatment of Puducherry, he said, “When it comes to central schemes, the GoI treats us like a state. When it comes to grants, GoI treats us like a Union territory.”

Narayanaswamy pointed out that Puducherry is not a part of the 15th Finance Commission, but is a part of the GST Council like other states.

“I am state under GST law. When it comes to devolution of central funds, they say you are a UT,” he said.

The Puducherry Chief Minister also went on to say that when he raised the issues that many states had on the ToRs with the Chairperson of the 15th Finance Commission, NK Singh had said that modifications of the recommendations would have to be taken up with the President, and it was not in his hands.

Following the day-long conclave, Kerala FM Isaac told reporters that the way forward is inviting more states to the next meeting, which is likely to be held at Vizag in a fortnight. He also said that in the weeks to come, states will jointly create a memorandum, which will then be submitted to the President seeking modifications to the Terms of Reference in the 15th Finance Commission.