In case of privatisation of Central public sector undertakings for which the State had given land, the Union government should compensate the State with the land cost at the current rates or with an equivalent equity stake in the new entity, Tamil Nadu said on Thursday.
Speaking at a meeting of the State Finance Ministers, chaired by Union Finance Minister Nirmala Sitharaman, ahead of the Union Budget in Delhi, Finance Minister Palanivel Thiaga Rajan said the Tamil Nadu government had given land for free or at concessional rates for many Central public sector undertakings and projects.
“During the privatisation of such organisations, the State should justly be compensated for the land either through payment of the land cost at the current market value or through an equivalent equity stake in the new entity. Further, to incentivise the States to show more interest in Union government projects, I request that a policy be formulated and announced in the Budget,” he said. Mr. Rajan underlined that the increased levy of cesses and surcharges, which are not part of the divisible pool, had adversely affected the transfer of resources to the States. The cesses and surcharges, as a proportion of the Union government’s Gross Tax Revenue, had almost tripled from 6.26% in 2010-11 to 19.9% in 2020-21. In effect, the States are deprived of a share in approximately 20% of the revenue collected by the Union.
“As a consequence of this realignment, the ratio of grants-in-aid to share in the Central taxes has increased from 62.67% in FY 2010-11 to 130.7% in FY 2020-21 for Tamil Nadu. While the share in taxes is a legitimate right and provides the State with the autonomy to cater to local needs and aspirations, the grants-in-aid are discretionary and tied funds. This greatly impinges on the federal structure enshrined in the Constitution,” he contended. He reiterated Tamil Nadu’s previous demand that the Union government merge the cesses and the surcharges into the basic rates of tax.
In the last five years, there has been a wide gap between the revenues realised and the revenues guaranteed, and the States’ revenues were yet to recover. “I urge the Union government to extend the period of compensation by at least two years beyond June 2022 and also request the immediate release of the pending compensation of ₹16,725 crores.”
Noting that the share of revenue collected from indirect taxes in the Union government’s Gross Tax Revenue had increased sharply in the recent past and surpassed the collections from direct taxes in 2020-21, he said, “This is highly inequitable, as indirect taxes are regressive, and disproportionately affect the poor. I request the Union government to maintain a ratio of 60:40 between direct taxes and indirect taxes.”
He highlighted that ₹17,000 crore in dues were pending from the Union government to Tamil Nadu. A sum of ₹2,029.22 crore in performance grants for the period from 2017-18 to 2019-20 and the basic grant of ₹548.76 crore for 2019-20 under the14th Finance Commission were also pending.
