States demand more autonomy in use of central funds

The governments of India's states on Friday sought the release of more funds from the centre and a greater say in the implementation of the central government's development schemes.

Apart from seeking decentralisation of centrally sponsored schemes (CSS), the states, in a pre-budget meeting with finance minister Arun Jaitley, suggested that the borrowing limits under the FRBM Act should be hiked to raise more money to finance infrastructure.

"We will take all these suggestions into consideration while formulating policies for the union budget," Jaitley told journalists after a four-hour meeting with state finance ministers.

States have also demanded that the budget for 2015-16 should make adequate provisions for central sales tax compensation to them for the early rollout of the goods and services tax (GST), for which a Constitutional amendment bill was tabled in the Lok Sabha last week.

The AIADMK-ruled Tamil Nadu opposed the introduction of the GST bill without a consensus on critical aspects like revenue neutral rates and bands, compensation methodology and thresholds. "This is not acceptable to us. We would rather suggest that the government of India should permit the empowered committee of state finance ministers to decide on these issues before enactment of the bill," chief minister O Panneerselvam said during the meeting.

Telengana, ruled by NDA ally TDP, sought provision in the budget for compensation of revenue loss suffered by states due to reduction in CST.

Kerala finance minister KM Mani said the concerns of the states should be addressed at the earliest, while BJP-governed Gujarat demanded that 1 per cent additional tax above the GST rates should continue until advised to the contrary by the states.

At the meeting, Jaitley said the biggest challenge before the country was to increase the growth rate as it would boost both economic activity and revenue collections.

"As per different estimates, our growth rate would be above 6 per cent during 2015-16," he said. "The service sector has shown good growth while growth in manufacturing sector is a bit patchy. India is likely to clock a growth rate of 5.5 per cent in the current year, bettering 4.7 per cent of 2013-14," Jaitley added.

Jaitley also told journalist that there was overwhelming support for the centre's GST proposal, which was arrived at in consultation with states.

"The states are of course anxious that CST compensation be paid to them expeditiously", he added.

"There was a lot of discussion on infrastructure projects and in the present stage to give boost to the economy, funds are required and therefore funds should be made available at affordable interest", Jaitley said.