June-2016-Adverse Treatment by 14th Finance Commission .J.Jayalalitha

5. Compensating Tamil Nadu for the
Adverse Treatment by Fourteenth Finance
Commission:
The Fourteenth Finance Commission (14th F.C.) recommended a substantial enhancement
in the share of the States in the divisible pool of central taxes from 32% to 42%. While we welcomed this increase in tax devolution from
the Centre to the States,

Tamil Nadu was singled out for the sharpest reduction in its
share in the divisible pool of taxes.

As against 4.969% share in the divisible pool of Central Taxes recommended by the 13th Finance
Commission,

Tamil Nadu’s share came down
to 4.023% in the 14th FC recommendations.

The unbalanced formula adopted by the 14th FC treated Tamil Nadu most adversely.

The reduction in the inter-se share of
Tamil Nadu of 19.14 % represents the biggest loss in share amongst all States.

Tamil Nadu was doubly penalized for its prudent fiscal management as it has not received revenue deficit grants.

The very large drop in Tamil Nadu’s share in the divisible pool is barely compensated by the increase in the overall devolution pool by 10 per
cent and Tamil Nadu’s overall share in Central taxes has increased by just 0.1 per cent from 1.59 per cent to 1.69 per cent.

The 14th Finance Commission has also not recommended any special purpose grants and State specific grants, of which Tamil Nadu received Rs.4,669 crore during the 13th Finance Commission period.

The loss to Tamil Nadu, due to the reduction in its share in the divisible pool and the discontinuance of special purpose and state
specific grants is estimated at Rs.6,000 crore per annum.

The Central Government has found
numerous ways to claw back the increased devolution recommended by the 14th FC and to place additional burden on the State:-

‘ In the last two Union Budgets, many new cesses and surcharges have been levied, which reduce the shareable pool of Central Tax receipts
and thereby the devolution to States.

The conversion of Rs.4 per litre out of the specific duty of petrol and diesel into a road cess, the
replacement of wealth tax with a surcharge on income tax of 2 per cent on the super rich,
levy of the
*Swachh Bharat Cess,
*Krishi Kalyan cess,
*infrastructure cess on Excise Duty on vehicles and the
*doubling of the Clean Environment Cess
are all examples of this retrograde approach ‘

Many schemes have been de-linked from Central Assistance including

*Normal Central Assistance (based on the Modified Gadgil-Mukherjee formula),
*Backward Regions Grant
Fund,
*Hill Areas Development Programme and
*Western Ghats Development Programme.
‘ The State’s share for 13 key programmes, including

*National Agricultural Development
Programme,
*Pradhan Mantri Krishi Sinchayee
Yojana,
*Sarva Shiksha Abhiyaan,
*National
Health Mission,
*National Livelihood Mission,
*Smart Cities Programme,
*Housing for All
*Integrated Child Development Service (ICDS)
has been increased to at least 40 per cent.

The State being required to take on the burden of additional expenditure on Central Government priorities is an unfair expectation and detracts from the States’ own expenditure
priorities. In order to redress the large financial loss that Tamil Nadu had suffered as a consequence of the recommendations of the Fourteenth Finance Commission,

I had requested a sizeable allocation to Tamil Nadu out of the special allocation made in the Budget for schemes to be approved by the
NITI Aayog. Based on this request, in 2015-2016
Tamil Nadu received release of Rs.552 crore.
This is meagre recompense.

I request you to enhance the annual
special grant to Tamil Nadu to Rs.2,000 crore in each of the remaining four years of the 14th Finance Commission Award period up to 2019-2020.

We have a ready shelf of large projects that could be funded out of this special allocation including
the

Comprehensive Special Package for *Diversification of Fisheries, *Desalination Projects and
*several infrastructure projects
under the Vision Tamil Nadu 2023.

6. Release of Pending 13th Finance
Commission Grants:
*The Thirteenth Finance Commission had recommended a grant of Rs.11,366.90 crore to
Tamil Nadu for the five year award period, which came to an end on 31st March, 2015.

Apart from the
*Local Body Grants,
*Maintenance Grants and
*State Disaster Response Fund allocations
which amounted to Rs.8,537.33 crore,
*Rs.2,829.57 crore was earmarked for State Specific Needs Grant and other Grants-in-aid.
*Of this, only Rs.1,805.82 crore has been released to Tamil Nadu.

Utilization certificates have been
submitted for a further sum of Rs.522.91 crore incurred up to 31.03.2015 to the respective
Ministries and the Ministry of Finance and this amount is yet to be released.
Even on earlier occasions, the Union Government had released grants towards expenditure incurred during the award period after the expiry of the Finance Commission’s award period. Hence,
I request you to instruct the officials of the concerned Ministries to release the balance grants towards
expenditure within the award period under the 13th Finance Commission recommendations based on the utilisation certificates already furnished