States demand more funds from the Centre to fight Covid-induced losses

Tamil Nadu joined other states in demanding a reduction in the proposed GST for textile and footwear up to Rs 1,000

Amid Rising unemployment, inflation and the uncertainties attached to the new Omicron wave, fund starved-states at a pre-Budget meeting with Finance Minister Nirmala Sitharaman demanded a bigger pie in central grants and extension of GST compensation for another five years.

Most of them also demand FM to spread the ambit of MSP to every crop and increase wages under MGNREGA.

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Tamil Nadu, which said its dues to the tune of over Rs 20,000 crore have not been paid by the Centre, demanded that it be allowed to borrow from the market unconditionally upto 5% of the state's gross domestic product. It also demanded a comprehensive economic package for small and medium industries which were severely damaged by the Covid pandemic.

"Union Government’s pre-conditions for availing additional borrowing limit of 1% (0.5% for capital expenditure and 0.5% for power sector reforms) of the GSDP, adversely affects the State finances and its patterns of expenditure," R Palanivel Thiagarajan said.

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It joined other states in demanding a reduction in the proposed GST for textile and footwear up to Rs 1,000. The GST Council meeting on Friday is expected to discuss the matter. Sources in the government said it may be deferred.

Kerala Finance Minister K N Balagopal said, "state's share of central divisible pool is declining drastically since the time of 12th Finance Commission. Kerala is getting penalised for its economic and demographic performance". He demanded increased allocation for the state under centrally sponsored schemes.

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“There has been a loss of revenue to the States due to the GST tax system, the Centre has not made arrangements to compensate the loss of revenue of about Rs 5,000 crore to the State in the coming year, so the GST compensation grant should be continued for the next five years after June 2022,” Chhattisgarh Chief Minister Bhupesh Baghel said.

“Many states have asked for this. We have also asked to extend GST compensation. If it is not extended, the finances of many states will be in a bad shape,” Delhi Deputy Chief Minister Manish Sisodia said after pre-Budget consultation.

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