The cut in off-budget borrowings such as those by the Kerala Infrastructure Investment Fund Board (KIIFB) will adversely affect State projects, Minister for Finance K.N. Balagopal said in the Assembly on Wednesday.
The Finance Minister said the Union government was infringing on the State’s rights. As per the report of the 15th Finance Commission, States were earmarked 34% of the total national revenue, while their expenditure was 64%. On the other hand, the Union government revenue was 64%, when its expenditure was just one-third of it. This was pushing the States into grave financial crisis.
The Union government had cut the State’s share in the divisible pool from 3.9% to 1.92%. This was 18% for Uttar Pradesh, he pointed out.
The State’s GST revenue neutral rate was 16% earlier. The highest rate was 28%. The Union government had reduced the tax on 250 items from 28% to 18% or 12%. This had led to loss in GST revenue to the State, but the customers did not benefit as the prices of goods did not come down, instead these went up. This issue had been brought to the notice of the GST council, he said.
Similarly, the Union government had collected ₹5.25 lakh crore as special excise duty on petrol last year. This did not have to be given to States. If this were general tax, the State would have got ₹3,000 crore at least.
He alleged that the Central regulatory agencies such as the Comptroller and Auditor General (CAG), Income Tax, and Enforcement Directorate (ED) were being used to weaken the State’s interests.
The ED probe for alleged Foreign Exchange Management Act (FEMA) violation by the KIIFB was an attempt to derail development as no clear reasons had been given for such actions. The KIIFB had issued ‘masala bonds’ observing all FEMA regulations and with the Reserve Bank of India (RBI) nod. Like KIIFB, other Central entities too had issued masala bonds, but no allegation of FEMA violation had been levelled against them.
