Modi Govt Should Have Consulted States Before Imposing Additional Terms On The Finance Commission, Says Ex PM Manmohan Singh

NEW DELHI—The Narendra Modi government’s decision to “impose” additional terms of reference on the Fifteenth Finance Commission towards the end of the latter’s term is “odd” and “not good for the federal polity and Indian Federalism”, former Prime Minister Dr. Manmohan Singh said on Saturday. 

He emphasised that if the Centre did not take state governments on board, there will be a “strong feeling” among them that the Modi -led administration was trying to “rob” them of their “due resource allotment”. 

Singh was speaking at a national seminar organised by Kerala Finance Minister Dr. Thomas Isaac to discuss the implications of the additional terms of reference on the states. On July 29 this year, the Fifteenth Finance Commission was asked by the Finance Ministry to explore whether a “separate mechanism” for funding defence and internal security needed to be set up and how it could be “operationalised”. This was in addition to the original terms of reference, which were issued in November 2017.

According to this report in The Economic Times, the practical meaning of this would be the creation of a separate national fund for internal security and a cut in the share of the tax revenues paid by the centre to states. 

This has added to the existing controversy surrounding the finance commission, which has faced criticism in the recent past  by the southern states who were apprehensive about a cut in their share of tax revenues.

Finance commissions are constitutionally mandated bodies formed every five years to recommend how the net proceeds of taxes should be divided between the states and the central government. 

With a slowdown in tax collections , primarily due to underwhelming indirect tax collections from the Goods and Services Tax, the Modi government is looking to meet its revenue shortfall through various means. For, the shortfall has a potential impact on the centre’s ability to spend on various welfare policies as well as defence requirements.  

Notwithstanding this, since the economic slowdown is persistent, the government is under pressure from various sectors to reduce tax rates. 

It is in this backdrop that the controversy between the Modi government and state governments is playing out. At the seminar, in his brief speech, Dr. Singh suggested that if the Modi government wanted to add new terms of reference, it should have evolved a consensus with Chief Ministers before making a decision. “Co-operative federalism demands give and take and therefore it is very important that the central government should take initiative to consult states as often as necessary to carry them along rather than imposing its views,” he said. 

This was the second time that the former Prime Minister had spoken out about economic issues last week. In an interview published two days before, he had criticised the Modi government ’s handling of the economy and blamed demonetisation and the GST for the slowdown on being asked if he supported the same view given by the former Chief Statistician Pronab Sen in an interview with HuffPost India. 

Dr Singh closed his remarks by observing that at the “fag end of the commission’s work, it is sure odd for the government to come up with additional terms of reference because most state governments have already gone to the commission stating their requirements.” He said the Modi government should have take note of this situation.

To “impose” another term of reference on the commission, Dr. Singh felt, would “complicate its work, and that certainly is not good for the federal polity and for Indian Federalism that we all desire to flourish in our country.” 

Apart from the former Prime Minister, among the others who spoke at the national seminar included Rajya Sabha MP Jairam Ramesh, Communist Party of India (Marxist) General Secretary Sitaram Yechury, Delhi Finance Minister Manish Sisodia and former finance minister of Jammu and Kashmir Haseeb Drabu. 

Rajya Sabha MP Jairam Ramesh said, Modi has “converted cooperative federalism into competitive federalism, convenient federalism, combative Federalism and coercive Federalism. So it is the 5 Cs of Federalism.”

One of the examples of what he termed as “convenient federalism” relates with the recently appointed parliamentary committees. “This morning it was announced in the newspapers that the second largest opposition party in the Rajya Sabha, which is the Trinamool Congress, has been denied the Chairmanship of a standing committee, which is its by right. The chairmanship was given to political parties which have two MPs, six MPs and seven MPs whereas the Trinamool has 13 MPs. Going by the principles of cooperative federalism, what was its by right was denied to it,” said Ramesh. 

CPI(M) General Secretary Sitaram Yechury sought to link the situation regarding the latest finance commission with the Rashtriya Swayamsevak Sangh’s Hindutva project. “To convert a secular democratic republic into a Hindu Rashtra, that the RSS is seeking to do, will require a unitary state. Federalism is, therefore, antithetical for the entire ideological project of the RSS,” he said. “We are seeing today, not only in the arena of fiscal federalism, but overall also is an attack on the states. What we have seen in Kashmir, how a state can be dissolved and union territories formed, all these things constitute part of this agenda.”

About the specific proposal to set up an internal security fund, Yechury felt, “In the name of building a security state, what we see is that everybody should share the burden of maintaining a security state. In this way, the state’s rights are curtailed.”

On his part, former Jammu and Kashmir Finance Minister Haseeb Drabu termed the additional terms of reference “most regressive” in the history of finance commissions of India. He explained that, unlike the initial terms of reference issued in November 2017, the additional terms of reference, “is actually a diktat” and the language of its drafting reflects that.

Delhi Finance Minister Manish Sisodia spoke in a different vein. He stressed on the fact that Delhi needed to be identified as a state first. “Considering the contribution to the centre, for the future of Delhi, it is important that Delhi should be given the status to be a part of the list,” he said. 

Kerala Finance Minister Thomas Isaac explained the reason why the national seminar was organised. “It was an attempt to get this issue of centre-state relations into the mainstream discussion and focus,” he said. In his view, this was important because the “larger context” of what is happening in India is that “federal principles are very clearly undermined.”