Chennai: Tamilnadu Chief Minister Edappadi K Palaniswami today termed as ‘unreasonable’, the Centre needlessly demanding conditionalities to the additional borrowing requirements of the State to offset the shortfall in revenues due to the COVID-19 lockdown.
In a letter to Prime Minister Narendra Modi, he said needlessly onerous conditions have been attached to the additional borrowing limits that have been approved for State Governments vide 17 May letter from the Union Finance Ministry.
Observing that the States sought the additional borrowing limit, beyond three per cent of GSDP mainly because of the significant shortfall in revenues due to the lockdown imposed in the wake of the Covid 19 pandemic, he said there were also large additional expenditure commitments.
“These are borrowings by the State Government, which have to be repaid from future tax revenues of the States and are not grants from the Centre”, he pointed out.
“To attach needlessly demanding conditionalities to the additional borrowing requirements appears to be unreasonable”, he added.
Palaniswami said aggressively pushing a reform agenda on which a consensus was yet to be developed at a time when States have approached the Centre for additional borrowing out of sheer desperation, was not in keeping with the spirit of co-operative federalism.
Ideally, the proposed reforms ought to have been discussed in detail with the States, a consensus developed depending on the specific conditions in each State and the reforms linked to special Central Covid grants, and not to additional borrowing by the State, he said, adding, linking the Central Government’s power under Article 293(3) of the Constitution to permit additional borrowing by the States to conditionalities, was unprecedented.
The Chief Minister said in Tamilnadu’s context, while in some of the four major areas of reform required by the Union Government to avail the additional borrowing, the State Government has already undertaken the reforms without expecting any financial assistance, there were some areas, most specifically in the area of power distribution reforms, which were politically sensitive.
“These issues have been repeatedly raised by me in communications to the Prime Minister as well. I have raised the issue in the context of the proposed changes in the Electricity Act,” he said.
Imposing needlessly onerous conditions on borrowings will constrain the State Governments in finding funds to meet essential expenditure in the wake of a serious financial situation.
“I am confident you will appreciate and understand the difficulties that States face at this time and instruct that the necessary changes be made to the relevant guidelines”, he added.
Palaniswami, however, thanked the Prime Minister and the Centre for having announced the five tranche economic relief package, which would help to revive the Indian economy.
The additional allocation for MNREGA and for establishing Infectious Diseases Blocks in district hospitals and public health laboratories at the Block level were very significant measures, he said.
While welcoming this initiative which combines fiscal sustainability with what was required for different sectors, the Chief Minister drew Modi’s attention to the needlessly onerous conditions that have been attached to the additional borrowing limits approved for State Governments
Since a consensus wais yet to emerge on these issues, he urged Modi to instruct the concerned Ministries to remove the requirements to reform the power sector from amongst the proposed conditionalities and also to allow greater latitude to States in implementing a reform agenda.
