Southern solidarity on fiscal federalism: DMK to join Kerala’s protest in Delhi

'I stand in full support of the Government of Kerala's commitment to preserving fiscal federalism,' Stalin said in his letter to CM Vijayan.


Published Feb 06, 2024 | 3:45 PMUpdatedFeb 06, 2024 | 5:11 PM

Tamil Nadu Chief Minister MK Stalin and Kerala Chief Minister Pinarayi Vijayan. (pinarayivijayan/Twitter)

As Karnataka and Kerala government prepare to stage protests over fiscal injustice in Delhi, another southern state – Tamil Nadu – has shown solidarity with the cause.

Tamil Nadu Chief Minister MK Stalin, on Tuesday, 6 February, extended full support to his Kerala counterpart Pinarayi Vijayan on preserving fiscal federalism. Accusing the Union government of restricting states’ borrowing space, Stalin said, it was misusing its powers under Article 293 of the Constitution. Stalin also assured that the DMK would take part in the protest.

Meanwhile, Vijayan expressed gratitude towards Stalin for extending support to the protest saying that it would boost the efforts to stand up against “efforts to undermine the federal principles enshrined in our Constitution”.

Prior consent from the Union government, mandated by this section, has been converted into a restrictive tool to limit deficit financing beyond the limits prescribed by the State Fiscal Responsibility and Budget Management Act.

“As a result, the fundamental principle of fiscal federalism envisioned by the Constitution makers is under grave threat,” Stalin said in a letter addressed to Vijayan.

Stalin’s support to his Kerala counterpart Pinarayi Vijayan comes at a time when Karnataka too is set to stage a protest in Delhi on 7 February over fiscal injustice in the redistribution of central funds.

“I want to express my sincere appreciation for your efforts in drawing the attention of the Supreme Court to the pressing issue of the Union government’s attempts to stifle state governments by exercising arbitrary and discriminatory control over their deficit financing,” he said in the letter.

Criticising the BJP over trying to “extinguish the flames of the slogan of state autonomy”, Stalin said the Opposition would resist that.

“In South India ‍we (DMK) and Comrade Pinarayi, in the East, our venerable sister Mamata and the leaders who have unswerving faith in our Constitution, all stand together today for self-governance of the states,” Stalin said.

“Our protest will not end until Cooperative Federalism is established and we succeed in winning the autonomy of the states!” he said.

“Fascist BJP can never extinguish the flames of the slogan of state autonomy. We will definitely uphold the rights of states in finance, governance etc! The time has come for that!” he added.

Vijayan expresses gratitude

“Salutes to Thiru @mkstalin & @arivalayam for extending solidarity & support for Kerala’s protest on February 8th at Delhi against the Centre’s discrimination towards states’ functioning & fiscal autonomy,” said Vijayan on X.

“This gesture boosts our efforts to stand up & resist the vicious efforts to undermine the federal principles enshrined in our Constitution. Together, let’s march forward to protect our democracy & constitutional values,” he added.

‘Centre misusing powers under Article 293’  

Although this has been happening for quite some time, the situation has rapidly deteriorated in the last few years and there was a clear consensus emerging amongst progressive state governments that such indirect control over state finances needs to be done away with.

“As rightly pointed out by you, the subject of public debt for financing the public expenditure of states is within the exclusive purview of the State Legislature as per the Constitution of India,” the Chief Minister said in his letter.

However, the Union government has been misusing its powers under Article 293 of the Constitution to restrict the borrowing space of the states.

In the case of Tamil Nadu also, such steps have caused a significant dent in mobilisation of funds for state initiatives. For instance, for the year 2023-24, the Union government had fixed the GSDP growth for calculating the net borrowing ceiling at a mere 8 percent, despite the state consistently achieving around 15 percent nominal growth in the last two years.

This has resulted in a loss of ₹6,000 crore in borrowing space in the current year.

The mandatory condition of funding gross losses of State DISCOMs under the guidelines for additional borrowing for power sector reforms has forced Tamil Nadu to provide ₹17,111 crore to TANGEDCO in the current year, thus severely constraining the Tamil Nadu fiscal space this year. It was likely to affect the state in the future also, he said.

Also Read: With Delhi protest just days away, Kerala CM Vijayan urges everyone to join fight against Union government

‘TN facing revenue shortfall of ₹20,000 crore’ 

The Chief Minister cited the intentional delay in approving the Chennai Metro Rail Phase-II project as a Central Sector project, as the third point in case, which has resulted in the entire debt of ₹33,594 crore for the project being included within the state’s net borrowing ceiling.

“These discriminatory and unconstitutional attempts are being pushed by the Union government at a time when the fiscal autonomy of the states has already been seriously curtailed by the implementation of GST. A revenue shortfall of ₹20,000 crore per annum is being faced by Tamil Nadu government in comparison to the pre-GST regime and the Union has been refusing to extend the compensation regime,” Stalin said.

In summary, the Union government’s intent seemed to be aimed at crippling states’ ability to raise resources and fund crucial developmental initiatives as per their policy priorities, he said and added that this trend needs to be resisted by like-minded progressive states.

“I stand in full support of the Government of Kerala’s commitment to preserving fiscal federalism,” Stalin said in the letter and stressed that Tamil Nadu government was ready to extend its cooperation in this regard and looked forward to collaborating and synchronising its efforts to address this crucial challenge.

Also Read: Kerala Opposition rejects CM’s call for united protest against Union government over discrimination

(With PTI inputs)