Inside the Centre vs states battle over funds

Karnataka protested against the Centre on Wednesday, claiming it was not getting its fair share of taxes, which crimps its ability to do good for the state, and Kerala and Tamil Nadu have similar protests lined up in Delhi in the coming days, as the fractures in India's fiscal federalist framework become more marked. On February 2, West Bengal chief minister Mamata Banerjee held a two-day dharna in Kolkata against the Centre's alleged denial of funds under key central schemes.

- Arun Dev, Divya Chandrababu & Vishnu Varma

Such protests relate to five main issues. One, the share of states in central taxes; two, the end of the GST compensation; three, the Centre's support for state borrowing programmes; four, the Union government's receptiveness to demand for special assistance such as drought or flood relief by states; and five, the funding of large infrastructure projects in the states.

The first is guided by the formula set by the finance commission and the second was how the move to GST was strucPICH tured. The fourth and THE fifth are a function of discretion, and, by extension, politics; and the third is an area where both sides have plausible arguments. But underlying the widening fracture in the country's fiscal federalist framework are two trends: one, the growing realisation among states that the Centre's welfare schemes (many from subjects in the state or concurrent list) are a great vote puller, and that their own ability to launch similar schemes is limited by lack of funds; and two, the tremendous antipathy between the Centre and the states that is most evident in the conduct of governors of states ruled by parties that are opposed to the NDA.

On Wednesday, the entire Karnataka cabinet and Congress party MLAs staged a protest at Jantar Mantar and on Thursday, the Kerala cabinet will host a protest at the same venue. Tamil Nadu chief minister M K Stalin on Tuesday wrote a letter to his Kerala counterpart, Pinayari Vijayan, supporting the latter's claim that the Centre was "arbitrarily" restricting state's borrowing limit by "misusing" its power under Article 293 of the Constitution.