Haryana Government asks Centre to give full CST compensation to states 2013-14 onwards

New Delhi, December 27, 2014 :  The Haryana Government has  asked the Centre to give full CST compensation to states 2013-14 onwards, relax their fiscal deficit limit to 3.5 per cent of GSDP, increase borrowing limits, encourage public expenditure on infra and put premium on growth and efficiency in the devolution of taxes.

Speaking at the pre-Budget meeting of Finance Ministers of states and Union Territories with the Union Finance Minister, Arun Jaitley, in New Delhi on Friday, Haryana Finance Minister, Capt Abhimanyu, said that devolution of taxes should be devised to encourage growth and fiscal  discipline. Negative weightage should not restrict allocation of funds to states like Haryana which have invested in economic growth, he added.

Congratulating Jaitely for creating a positive economic environment which is fostering macroeconomic stability and growth in the country, he said, “The future looks more positive as inflation has been tamed, bringing substantial relief to people. I am convinced that under Jaitely’s able leadership the Indian economy shall now grow faster\ and attain new heights.”

The new Government in Haryana has been elected with a clear popular mandate. It aims to live up to the aspirations and expectations of the people who desire accelerated development, expanded opportunities for employment and a better quality of life. “The present fiscal health of the Haryana Government is not robust enough to meet these vast expectations and we hope for your support in this regard through policies and budgetary initiatives”, he said, pleading for necessary steps in the Union Budget: Capt Abhimanyu asked him to encourage public expenditure in infrastructure development; increase the states’ borrowing limits to facilitate use of available growth opportunities and earmark specific market borrowing limit for infrastructure related initiatives. The fiscal deficit limit for states may be relaxed to 3.5 per cent of the GSDP to channelise additional resources to states for at least three  years, he demanded.

Haryana has a location advantage as it abuts the nation’s capital. There is a huge potential for growth for the manufacturing and services sector. Haryana can tap this potential by improving the business environment and the ease of doing business to facilitate the growth of industry, trade and commerce. While these initiatives will take some time to fructify into new enterprises, the exiting enterprises should be encouraged to expand operations and give more direct employment.  “I would therefore request you to consider providing tax deferment incentives for business enterprises and industries if they exceed their present employment index to an equal  level” the Finance Minister said. The 14th Finance Commission Report has been received and a new scheme of devolution would be worked out on the basis of its recommendation. “I hope the method of devolution will be more encouraging to growth and fiscal discipline and negative weightage does not restrict allocation of funds for States like Haryana which have invested in economic growth in the past”, Capt Abhimanyu said. Congratulating the FM for the revolutionary step of introducing the GST Bill in Parliament, he expressed the hope that the new era would result in a spurt in economic activities and a transparent and easy tax structure while protecting the interests of states which have so far led the manufacturing and intra-national trade. The NDA Government has taken the step of far reaching consequence I deciding to replace the Planning Commission with a representative and federally responsive body.

This step will become more productive if the present system of devolution of central funds to states becomes more rational and allows substantial decentralized planning. “I propose that 50 per cent of all sectoral central sector scheme (CSS) funds be released as flexi-funds in 2015-16 and in three year  the entire allocation be given to states as sectoral resources, giving them freedom to formulate schemes to suit their respective needs for each sector”, Capt Abhimanyu said.

The future devolution of the Central Plan Assistance should be on a formula improved upon the Gadgil-Mukherjee formula. Time has come to revisit the efficacy of transfer of financial resources under Gadgil-Mukherjee formula which is loaded in favour of population and backwardness and handicaps transfer of resources to better performing States like Haryana. With a view to introducing GST in the country, the rate of CST has been gradually reduced from 4% to 2%.  The current CST rate of 2% was applied from June 1, 2008.  Haryana is an important manufacturing and exporting state and a substantial part of its tax revenue comes from CST.  Haryana has invested massive land and capital resources for creation of manufacturing infrastructure which is  contributing greatl to the national economy Maintenance of this manufacturing base requires huge expenditure every year. It was assured by the Central Government that the States would be fully compensated for the loss on account of reduction in the rate of CST.  No compensation has been given to Haryana in respect of the financial years 2011-12 to 2013-14.  Besides, an arrear of about Rs. 750 crore is yet to be paid in respect of the years prior to 2011-12. “The Empowered Committee of State Finance Ministers had unanimously agreed last year that 75% of the compensation in respect of 2011-12 and 50% of the compensation in respect of 2012-13 would be paid to the states.  As per the agreed formula about Rs. 4,150 crore is due to be given to Haryana.  I request the Union Finance Minister to make a suitable provision for releasing the CST compensation to the states pertaining to 2011-12 & 2012-13 in the Union Budget for the year 2015-16”, Capt Abhimanyu  said, adding that full CST compensation may

be provided 2013-14 onwards as the states are suffering a heavy loss of revenue due to reduction in CST rates from 4% to 2%. The Haryana Government undertakes the task of facilitating socio-economic development of women, Scheduled Castes and other

backward sections through group specific finance corporations fo  income generating schemes, job-oriented training, education loans and related activities.  These corporations have run up NPAs and losses and need to be recapitalized to resume activities. “I would request you to kindly provide one-time grant of Rs 500 crore to put on track these welfare-oriented corporations in Haryana. This would go a long way in taking forward our goal of skilling and training entrepreneurs and ensuring social equity”, Capt Abhimany demanded.

(SK Vyas/Jalandhar)

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