Punjab CM Badal calls for "Economic Federalism" Demands 50% share in Central taxes

CHANDIGARH: The Punjab Chief Minister Parkash Singh Badal on Thursday urged the 13th Finance Commission to grant a "special agriculture and industry package" for the state in view of the extra-ordinary contribution of Punjab to the national food kitty as well as the constraints suffered by it due to industrial concessions given to the neighboring states.



He also called for "economic federalism" to help the states in accelerating development initiatives in line with national objective.

The Chief Minister demanded that the states should get at least 50% of the gross central receipts from taxes and other resources.   

Making an impassioned plea before the Commission headed by its Chairman Dr. Vijay Kelkar, the Chief Minister also demanded that the belt touching a live and hostile international border with Pakistan be treated as "a special national zone" where people must be compensated on the development front for the sacrifices they have been making "in the overall national interest."

Badal also called for recasting the formula for devolution of central funds to the states to make it commensurate with the contribution of each state to the central taxes rather than making it dependent on the size of population or geography.He stated that the percentage of Scheduled caste population in the state should be given atleast 15% weightage while 10% weightage should be accorded to the international border while devising an objective formulate for devolving funds to the states.  The share of the State in tax devolution had constantly gone down with successive Finance Commissions and this decline in share of the State in Central taxes was the main cause of State's fiscal woes.

Badal said that in the matter of tax devolution, the past Finance Commissions have not fully recognized the expenditure commitments of the States and not recommended  a fair share to them. The Eleventh Finance Commission recommended the States' share at 29.5 per cent and the Twelfth Finance Commission increased it marginally to 30.5 per cent. He strongly pleaded that the percentage share of States in the net proceeds of Central Taxes should be fixed at 45 per cent for the period 2010-15 from the prevailing 30.5 per cent. The total transfer to the States should be at least 50 per cent against 38 per cent of the Central gross revenue receipts under the Twelfth Finance Commission.  To enhance tax devolution to the States, all surcharges which were levied by the Central Government should be made a part of divisible pool. If there was a legal or Constitutional disability in this regard, the surcharges should be merged with the relevant tax or duty, said Badal.

Highlighting the grim financial scenario of the Panchayati Raj Institutions and Municipalities, Badal urged the Commission to provide Rs. 5000 crore during the Five Year period (2010-15) for provision of civic infrastructure in rural areas of the State, besides Rs. 4600 crore for five year period to meet 75 per cent of the cost of development works in urban areas e.g. roads and bridges, water supply, sewerage system, sewerage treatment plant etc.  He however, said that the 73rd and 74th Constitutional Amendment Acts, 1992 constituted an important milestone in the history of democratic decentralization but in true spirit the commission should dole out funds liberally to the state to make the PRIs and local bodies fiscally and economically viable and sustainable. 

In another significant suggestion,Badal opined to decentralize the planning process and stated that pan Indian criteria for centrally sponsored scheme needed to be reviewed. The Planning Commission should only draw up a strategic plan for the country and the States should be left to draw up their own development plan programmes keeping in view the resources allocated to them.  Further, the existing system of schematic assistance to the States under the various Centrally Sponsored Schemes should be dispensed with. The States were in a better position to formulate the schemes as they could understand their felt needs and ground realities.  All such schemes in the State domain should be transferred to the States with funds.

Referring to the Calamity Relief Fund (CRF), Badal suggested widening the scope of CRF so as to include frost and water logging in addition to existing calamities.  The quantum of Calamity Relief should be made commensurate with actual loss suffered and allocation from the Fund to individual States should be fixed on the basis of value of farm produce generated from the soil and not by mere size of the State and past expenditure incurred on calamities.  In addition, inflation should be fully accounted for.  In view of difficult fiscal situation of the States, the share of States towards CRF be reduced from 25 per cent at present to 10 per cent.

The Chief Minister impressed upon the commission to recommend grants-in-aid to the individual States facing special problems of national concern which could not be tackled without financial assistance from the Centre. He asked for a special package for revamping its old canal system and to undertake major initiatives to check the problems water logging and salinity in the south-west region due to leakage from Rajasthan canal and Sirhind feeder.He urged the Commission to provide 90% of the cost i.e. Rs.12743.42 crore as grants-in-aid to incur expenditure on this count against the total requirement of Rs. 14159.35 crore worked by the state government for maintenance, repairs, deepening, widening and expansion of Water Resources Infrastructure in the State, for the five year period of 2010-11 to 2014-15 as this would facilitate more foodgrain production in the State and consequently save the country from having to resort to  costly foodgrain imports. Due to its limited financial resources, it was not feasible for the State Government to arrange these funds, said Badal. 

Likewise, the Chief Minister also pleaded the state's case for allocation of more funds in view of free power to the farm sector for which the state was providing more than Rs. 2000 crore per year to Punjab State Electricity Board as power subsidy. He also asked the Commission to provide grant of Rs. 2055 crore over a period of five years for provision and maintenance of social and economic infrastructure in 18 out of 42 Blocks of the four districts of Amritsar, Ferozepur, Gurdaspur and Tarn Taran situated along the active 553 KM international border with Pakistan under the Border Area Development Programme (BADP).  The government of India was providing around Rs. 20 crore for creation, up gradation and maintenance of infrastructure.  The existing grants under BADP to Punjab were too meager to cater to the basic requirements of border areas.

The Chief Minister also referred to the Kandi area of Punjab being the sub-mountainous tract that constituted the most backward region of the State and urged the Commission to provide Rs. 761 crore for development and providing social and economic infrastructure in Kandi Area for the five year period (2010-15).

The Commission was also requested to provide Rs. 1250 crore for the five year period, for providing physical facilities, drinking water, toilets, maintenance and provision of additional classrooms, boundary walls in girl schools, to supplement the efforts of the State Government to encourage girl education, besides Rs. 500 crore to supplement the efforts of the State Government in order to improve the economic lot of scheduled caste population in the state which was the highest in the country and also sought Rs. 250 crore to address the issue of adverse sex ratio in Punjab which had not only posed serious imbalance in the society but was also a cause of concern with grave socio-economic implications. 

Badal assured the Commission of his government's absolute, un-compromising and missionary commitment to the fulfillment of the ideals, objectives and goals which the Commission has set before our Country.  "In fact, Punjab will be the flag-bearer in taking the country towards the achievement of the goal of inclusive development.  But for this, we need your support", said Badal.

The Chairman of the Commission Dr. Vijay Kelkar assured Badal of a sympathetic view and support especially in the wake of problems relating to agriculture and dilapidated irrigation infrastructure. Dr. Kelkar was accompanied by other members of the Commission including BK Chaturvedi, Dr.Indira Rajaraman, Sanjiv Mishra and Dr.Atul Sharama and the Secretary Sumit Bose Secretary. 

Winding up the discussions, Chief Secretary RI Singh responded to the queries and concerns raised by the Commission members about revamping of Irrigation infrastructure, roads and bridges network executed by Punjab Infrastructure Development Board in PPP mode, initiatives in agriculture, horticulture, dairy farming, civil aviation, skill development and quality education.  He outlined some of the initiatives taken by the state government for ensuring better utilization of the state's scarce resources as well as some pioneering efforts in fostering public-private partnerships in agriculture, infrastructure development and education. 

On the occasion, a detailed presentation was made on the state's financial and economic position as well as issues related to irrigation and power. 

Later addressing the media persons, the Chief Minister said that the terror strikes in Mumbai were already having an adverse spiral economic effect on Punjab because of this mounting tension on the border.  He said that we were hoping to step up trade actively through Attari border but reports of movement of Pakistani troops towards the border would dampen these hopes.

Prominent amongst others who attended the meeting included Industries & Local Government Minister Manoranjan Kalia, Finance Minister Manpreet Singh Badal, Rural Development & Panchayat Minister Ranjit Singh Brahmpura, Chief Parliamentary Secretary Finance and Planning  Raj Khurana, Deputy Chairman Planning Board Dr. JS Bajaj, Chief Minister's Media Advisor  Harcharan Bains besides Chief Secretary  RI Singh, Principal Secretary Finance SC Aggarwal, Financial Commissioner Taxation SS Brar and Principal Secretary to Chief Minister DS Guru besides other senior functionaries of the state government.