Kejriwal writes to Sitharaman, flags Delhi's 'frozen' share in central taxes

Ahead of constitution of the 16th Central Finance Commission, Chief Minister Arvind Kejriwal has written to Union Finance Minister Nirmala Sitharaman, flagging Delhi's "frozen" share in central pool of taxes even as he demanded that Delhi be treated as a "unique case".

Alleging "stepmotherly and unfair" treatment by the Centre, Kejriwal said Delhi's share in central pool of taxes was "frozen at astonishingly low" amount of Rs 350 crore for the last 23 years.

"Had Delhi been treated in an unbiased manner, its share would have been Rs 7,378 crore," he said in his letter to Sitharaman.

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He said Delhi's share was frozen at Rs 350 crore since 2001-02. "It was reduced to zero in 2022-23 when Delhi's budget was increased eight times as compared to 2001-02, to the tune of Rs 73,760 crore," he said.

"It is even hard to imagine that this is happening despite Delhiites paying 1.78 lakh crore as income tax in a financial year (2021-22), the second highest among all states and Union territories in India after Maharashtra," the CM said.

Kejriwal also said that the Municipal Corporation of Delhi (MCD) has been facing "extreme unjust behaviour" over the last few years, with it receiving nothing from the Central government.

The chief minister said it was understood that since Delhi's name has been removed (for being a Union Territory) from the 'Terms of Reference' of the Finance Commission, it does not fall under the purview of tax devolution and hence, is not treated like other states.

"But Delhi is a special case of 'Union Territory with Legislature' and has the character of the state as well, with Delhi managing its finances similar to other states," he stated.

Kejriwal requested the Union finance minister to consider Delhi as a "unique case" and include it in the 'Terms of Reference' of the 16th Finance Commission, and added it was high time that justice was done and Delhi got its reasonable share similar to what other states get.

The Central government is likely to set up the 16th Finance Commission this year to suggest, among other things, the ratio in which tax is to be divided between the Centre and states for five years, beginning April 1, 2026.

The Delhi CM said that the 14th and 15th Finance Commissions allocated grant- in-aid -- Rs 2,87,436 crore for 2015-2020 and Rs 4,36,361 crore for 2021-26, respectively -- for the local bodies in the country. This amounts to Rs 500 per capita per year to the urban local bodies, he said.

"The MCD currently caters to two crore Delhiites and is responsible for providing primary education, healthcare facilities, and solid waste management, similar to what urban local bodies in other states perform. Based on the above recommendations of Central Finance Commissions, the cash-starved MCD would have received additional Rs 7,000 crore since 2015," Kejriwal said.

"As you know, the 16th Central Finance Commission will be constituted shortly and its recommendations will cover the five years commencing from 1st April, 2026. Since the Finance Commission plays a crucial role in the fiscal federalism of India, I want to draw your attention towards the discrimination that the people of Delhi are facing for the last 23 years," Kejriwal charged in his letter.

He said the Centre's "stepmotherly and unfair treatment" towards the Delhiites has been flagged innumerable times by the Delhi government with requests to give Delhi its "legitimate share" in the central taxes, but no action has been taken in this regard.

The CM said Delhi enjoys a "sui generis" status among all states and Union territories in India. While it falls in the broad category of a Union territory with legislature, it has been working similar to other states in financial matters, he said.

The funding pattern of Delhi's budget is more or less at par with the other states, financial transactions of Delhi government are met out of its own resources, funds are devolved to the MCD out of net proceeds, he pointed.

"But despite this, the Government of NCT of Delhi neither gets legitimate grants in lieu of share of central taxes nor any share to supplement the resources of its local bodies as is the case with other states," he complained.

In his letter, Kejriwal claimed that Delhi's neighbouring states with similar population like Haryana and Punjab got Rs 10,378 crore and Rs 17,163 crore in 2022-23 as their share from the central pool of taxes.