Kerala FM Thomas Isaac: Is centre trying to turn state govts into glorified municipalities?
Kerala finance minister Thomas Isaac says the 15th Finance Commission’s proposal on tax revenue sharing will make Tamil Nadu lose Rs40,000 crore and Kerala Rs20,000 crore
Kerala’s finance minister Thomas Isaac is preparing to host a meeting of leading politicians from across the southern states in Thiruvananthapuram on Tuesday to discuss the 15th Finance Commission’s proposal to use 2011 census, instead of the current 1971 census, as a criteria for revenue devolution, which would leave the southern states worse off.
It is also important for its political potential to unite southern political parties against the Bharatiya Janata Party (BJP) ahead of the 2019 general election. Edited excerpts from a phone interview :
Your meet has invited criticisms. Some experts have called it too alarmist, some say this is regional grandstanding. How do you respond?
Tamil Nadu stands to lose Rs40,000 crore (with the shift to census 2011). Kerala would lose some Rs20,000 crore. It is a pretty big issue. Secondly, today only condition for borrowing is, it has to be within the fiscal deficit of 3%. Now the Finance Commission wants to see what conditions can be put to public borrowing. That would mean total erosion of the fiscal space for the states. What are they trying to make state governments, glorified municipalities?
Third, the Commission is asking to discourage populist measures. Populist measures should be determined in the political domain, you can’t leave it to some commission chairman. At one point of time, M.G. Ramachandran’s school-meal programme was the biggest “populist measure”, now it has become a national law.
Do you see a halfway where you can agree with the Commission?
There are many ways they can do some balancing acts, they can even give an outright grant. I think already it is half-successful because we have brought it to the national debate. If the BJP chose not to respond, I think politically they will be wiped out in southern states.
Going ahead, do you see this as the southern states joining hands against the BJP?
That’s not the idea. For me, this is purely about the economy. I’m trying to protect my revenue because I have a clear fiscal strategy where I have bring down my revenue deficit for this award from the Finance Commission is very important.
You got about Rs1,000 crore last year from the centre and it was nowhere short to plug your revenue deficit of about Rs10,000 crore. You have also started raising Rs50,000 crore outside the budget for public spending. So you are not entirely dependent on the devolution from the centre, so asking for an outright grant of Rs20,000 crore is a bit greedy on your part?
This is very important to keep my revenue deficit in control. This is revenue I’m getting. I’m borrowing outside the budget and doing so many other things, but to carry on these activities I need my revenue deficit low and finance commission award becomes very important in my fiscal strategy.
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