TAMIL NADU Finance Minister PALANIVEL THIAGA RAJAN said in an interview to SUNNY VERMA that the Centre has, over the past seven years, steadily increased its control over state governments" spending power, which is leading to a lot of inefficiencies, Edited excerpts:
On Centre-state fiscal relations
I’ll give you some history. The problem begins with a fundamental, anti-federal, anti-state, authoritarian approach of Delhi. It’s an old saying in politics that where you stand depends on where you sit, implying that where you stand on the issues based on whether you sit in Opposition, in the House or out on the street, etc. That saying cannot be more apt, there's a classic example for that saying being true, which is our current Prime Minister (Narendra Modi). As a Chief Minister, he was the greatest vocal, even may be overshadowing Jayalalithaa (former Tamil Nadu Chief Minister herself. Since he has become Prime Minister, it has gone 180 degrees. It is not possible to change any more dramatically than that. Complete, complete opposite, completely decimating states’ rights in every way. This is by far, the most authoritarian power grab in the history of India.
Directly, directly, directly- it couldn’t be more directly – in contrast to evert word he spoke for states’ rights when he was Chief Minister of Gujarat for 13 years. This is the underlying context. See, they do it bit by bit, bit by bit, insidious creeping. So, they started ramping up the Centrally-sponsored schemes like crazy, up to Rs 4-6 lakh crores of direct benefits and centrally sponsored scheme transfers. They have this tendency to do publicity value, they are geniuses at marketing and very, very low moral character. That is, to say. they will start one scheme, they will say subsidy for X. at first, they will give 70 percent, the state will give 30 percent and they will put the Prime Minister’s picture and everything. Second year, they will give 50 percent and say state puts 50 percent. Third year, they will give 20 percent, states give 80 percent. Fourth year they say states has to continue but we will give zero, right. It will still be called ‘PM xyz’ scheme. So, this is a kind of my name but your money kind of game.
The next point is in the actual administration of things like dams, ports, roads, state boundaries, education, health, exams, cooperatives- all of these are state’s subjects, 100 percent state subjects, some of them concurrent list (of the Constitution) subjects. (They) bring an overarching legislation, ram it through Parliament with no debate, no committee, basically, take control of things that they have no business taking control of, which are completely antithetical to states’ rights. Now comes the really sad part. It is an undeniable tenet of democracy that the closer you are to the people. the more accountability is built into the system.
So, this is a fundamental tenet that if you have power and decision making allocated to the nearest point to the people, then you can get accountability and increase the likelihood of delivery of results. If you take it far away from the people, you inherently have a problem because then be very difficult to have any connectivity between the decision maker and beneficiaries of the decision. So, this is the sad part as they keep taking the power more and more away from states and local bodies to the Union; they are inherently creating problems of complexity in two or three ways. One, they are reducing accountability of government to the people. Without involving the states and local bodies, they simply cannot effectuate policy. They don’t have enough employees; they don’t have data and they don’t have enough reach. If you empower yourself, you can use it vindictively, you can use it negatively, you can cut off something- its like a rope, you can use it to choke, strangle or hold somebody, but you cannot push on a rope. You cannot create something by having a rope. Look at all the audit reports on Swachh Bharat, on krishi kalyan, they say the money goes some toilets are built but there is no water supply. The water supply cannot be continuously monitored from Delhi, right, water supply is a municipal subject. It's not even a state subject.
So you build all this, but if there is no water supply, what happens is you've just wasted the money.
Centre's creative accounting
In the context of all this, I say that, therefore, they have taken two accounting tricks, what I called as exquisitely creative accounting. Because of Article 293 (3), the previous AIADMK government, which was a coalition partner of the BJP, never felt like taking it (the Centre’s loan) because, at that time, it was very clear that it was just bait, because the amounts were trivial, around Rs 300 crores or 500 crores for Tamil Nadu…in that immediately even the previous regime saw the concern that they would use this to trigger Article 293(3), because it is not repayable in advance. It locks you for 50 years. You know, and I know, how to do time value of money. So, if I give you Rs. 100 today and, I saw, pay it back to me as two rupees a year for the next 50 years. Effectively, in today’s money, you are only paying back about Rs. 15 or 20 because, 50 years from now two rupees is worth nothing, because of inflation. So, at some level, the difference between a 50-year, not interest payable, equal instalment repayment loan and a grant is not that big. But the difference being why should they say not pre-payable, then we start questioning the intent.
Why should it be in the Union's interest that you cannot prepay? On what logic does it make sense? What purpose is served by not allowing prepayment? If I'm the lender, I should be the happiest if it's prepaid because I'm getting it in advance where it actually means something. Prepayment should have been in the interest of the borrower by a lot, by a margin of thousand, but when it's not allowed the question arises if there is an ulterior motive here.
(When our government came into office) and we had this discussion, it was very clear that the AIADMK had taken that stand and I thought if even the AIADMK have figured that out, we should follow too. And there is a different issue, a Rs 300 crore loan doesn't do anything much for a state like Tamil Nadu, where annual budget that time was probably Rs. 3 lakh crores and capital expenditure well north of Rs. 30,000 crores. So, an additional Rs. 300 crore is less than 1 percent of capex.
Source: Indian Express