Pinarayi writes to Modi seeking extension of GST compensation; Balagopal slams union govt policies

CM Pinarayi Vijayan and PM Modi. Photo: File

Thiruvananthapuram: Chief minister Pinarayi Vijayan on Thursday wrote a letter to prime minister Narendra Modi seeking extension of the GST compensation to the states.

Several states asked for the extension of the scheme in the GST Council meeting held in June. It is a justifiable demand, CM said. He requested the PM to extend the compensation to next five years.

The compensation scheme was enabled in 2017 when the GST was implemented to make up for the loss of states in implementing the unified tax scheme across the country. The scheme ended this year.

In the letter, the Chief Minister stated that there is a considerable merit in the request of Kerala and other states in requesting that the provision for compensation to bridge the shortfall in growth of GST revenues may be continued for another five years.

"As is known to all concerned, a larger share of State taxes were merged in GST vis-a-vis that of the Union. Still, the GST rate was equally apportioned between the States and the union, in spite of recommendations by experts that the ratio of apportionment should be in the ratio 60:40 between States and the Union", the Chief Minister said in the letter.

Meanwhile, finance minister K N Balagopal said that the central government's policies are "cutting down" the financial rights of the states, obstructing their liquidity management and adversely affecting the "fiscal federalism" of the country.

He said this in the assembly in response to opposition allegations of fiscal mismanagement in the southern state.

Laying the blame for the financial problems being faced by the state on the doorstep of the Centre, the minister said the union government was trying to limit or control the borrowings by the states, like Kerala, and it amounted to "suffocating" them.

He said that while the Centre was considering off-budget borrowings by the states as part of their debt, similar borrowings of lakhs of crores of rupees by the Union government, for various NHAI projects, were not being considered as such.

"They are bringing in controls to limit borrowings by the states. On top of that they have been delaying payment of GST compensation to the states," he claimed.

He further said that while the Centre takes away 64 per cent of the states revenues, the states are expected to bear 63 per cent of the expenditure of the nation.

Balagopal noted that several states have asked the Centre to allow them to borrow more.

His submissions were made in response to an adjournment motion moved by Congress MLA Mathew Kuzhalnadan raising concerns about the stability of the state-run social security pension distribution company and how its liabilities could affect the general public.

Kuzhalnadan claimed that the state in 2018, when it created the company, had said that it would be guaranteeing the loans availed by the entity. However, in 2022, the government issued an order saying it would not be doing so.

He contended that it was a matter of concern for the nearly 57 lakh beneficiaries of the social security pension.

The MLA alleged that the state government took the step after the Centre asked it to provide details of its off-budget borrowings also when it went to the union government for permission to avail loans.

He also alleged that borrowings by entities like Kerala Infrastructure Investment Fund Board (KIIFB) were responsible for the huge debt burden of the state.

Refuting the allegations, Balagopal said the pension disbursal company was created for liquidity management, to pay pensions, which was an issue due to non-timely payment of GST compensation by the Centre.

He also claimed that the state government was guaranteeing loans availed by that company as well as other state-run entities and it was a sovereign guarantee and alleged that the opposition was trying to mislead the public.

He said there was no need for people to be concerned about the functioning or stability of the pension distributing company which was working perfectly fine.

The minister also said that the state government will not forsake its responsibility to provide social security pension to those eligible.

In view of his submissions, Speaker M B Rajesh declared that the adjournment motion was rejected.

Subsequently, Leader of Opposition (LoP) in the Assembly V D Satheesan claimed that the 2022 government order clearly states that it was not going to be responsible for liabilities of the pension distributing company.

He further said that the economic situation in the state was being led to a "dangerous" situation by the fiscal mismanagement of the government and staged a walkout with other members of the opposition over non-discussion of the issue raised by them in the adjournment motion.

Satheesan claimed in the House that the fiscal indicators of the southern state indicate its "fiscal vulnerability" and alleged that entities like KIIFB would only contribute to its increasing debt.

(With agency inputs)

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