Thiruvananthapuram: Finance minister K N Balagopal, in a statement read out in the Assembly on Thursday, listed the various means allegedly employed by the Centre to sabotage the federal structure of the Constitution.
According to the finance minister, here are the three major methods employed by the centre to subjugate the states: Faulty interpretation of Constitutional provisions, reduction of central transfers, and the unleashing of central agencies like the CAG, Income Tax Department and the Enforcement Directorate.
He said the Centre's move to squeeze fund transfers had already smothered the finances of Kerala. He said there had been a reduction of approximately Rs 7000 crore in the revenue deficit grant. The Centre has also refused to extend the GST compensation of over Rs 12,000 crore Kerala had been receiving.
On top of this, he said the Centre had brought down the borrowing limit of states to 3.5 per cent from the 5 per cent it was during the pandemic.
To make matters worse, he said the guarantee given to special purpose vehicles like Kerala Infrastructure Investment Fund Board (KIIFB) and Kerala Social Security Pension Limited (KSSPL) has now been accounted for as state government debt. Over Rs 14,000 crore is now considered as the government debt this way, he said.
"As a result, there has been a reduction of Rs 3578 crore in Kerala's borrowing capacity," the minister said.
All of these together would deprive Kerala of a massive Rs 23,000 crore this fiscal compared to 2021-22 fiscal.
Balagopal said this would adversely affect Kerala's development plans and also the spending envisaged under health, education and various welfare projects like the Life Mission and social security pensions.
Balagopal said the Centre's stifling measures did not happen overnight. In August 2017, he said the Union Finance Ministry issued an order throwing to winds a tradition that had existed for over 70 years.
Through the order, funds in the state's Public Account, which includes temporary deposits by government employees and departments, were included within the state's borrowing limit. "This was a blatant violation of articles 266 and 283 of the Constitution that granted states full control over their Public Account," the minister said.
This is not all Balagopal said that this year the Union Expenditure Ministry had wrongly interpreted articles 293(3) and 293(4) of the Constitution, which controls the borrowings of state governments, to include government agencies and statutory bodies within its ambit.
Balagopal said the irony was that such control had not been exerted on Central government institutions created to achieve the Centre's development and governance goals.
He said the Reserve Bank of India, too, has been pressed into action to cut the wings of states. He said an RBI circular issued on June 14 this year stated that banks should offer financial assistance only to those projects that could assure repayment from their own operations. Balagopal called this highly discriminatory.
"If this logic is applied, a project like the Vizhinjam Transshipment Terminal, which has viability gap funding from the State budget, cannot be taken up by the Kerala government," he said.
Balagopal said this was a case of the RBI breaching its jurisdiction. Again, Balagopal pointed out that such RBI controls were not applicable to Central PSUs, agencies and corporations.
He said the ED was harassing KIIFB officials in the name of masala bonds. KIIFB had mobilised Rs 2150 crore of foreign funds through masala bonds, the first state agency in the country to do so. But the ED has been relentlessly summoning KIIFB officials citing Foreign Exchange Management Act (FEMA) violations. "But what I understand is that there was no clarity on what the ED was investigating or the purpose of the questioning," Balagopal said.
He said such summons served on the eve of the 2021 Assembly polls were leaked out to the media before they were received by KIIFB officials. "This clearly revealed the Centre's political motives," the minister said.
He said the latest instance of the misuse of the ED was the serving of summons to the former finance minister and KIIFB vice chairman T M Thomas Isaac. "The media got hold of the summons before even Isaac received it," Balagopal said.
The Income Tax Department was also let loose on KIIFB. He said that the IT officials ignored the three-way agreement made among the secretary of the concerned government department, the head of the special purpose vehicle formed for the project and the KIIFB CEO and constantly harassed KIIFB officials in the name of imagined violations.
