Jharkhand Chief Minister Hemant Soren has written to Prime Minister Narendra Modi highlighting the “withering trust” between the Centre and the states over Goods and Services Tax compensation, PTI reported on Saturday. Soren asked Modi to intervene in the matter to reinforce the trust in the “spirit of cooperative federalism”.
Soren claimed that the states have been deserted by the central government. “Reluctance and inability of the GOI [government of India] to give full compensation to the states is betrayal of the commitment it made in the Union Parliament and also in all the council meetings held so far (sic),” the chief minister said in his letter dated September 4.
On August 29, the Union Ministry of Finance had put forth two options before states to meet the shortfall of Rs 2.35 lakh crore in GST compensation for 2020-’21. The first option is that the states may borrow the full compensation deficit of Rs 2.35 lakh crore via a special window in consultation with the RBI. The second option entailed borrowing the entire projected shortfall of Rs 2.35 lakh crore this year, facilitated by the central bank.
Soren called the Centre’s move an “act of sovereign default” that runs against the very spirit of the cooperative federalism. In his letter, Soren also referred to Modi’s speech at the launch of the GST in July 2017. “I echo your sentiments but you would agree that India as a nation can grow only if its constituent states also grow and become self-reliant,” he said. “But reluctance of the central government to fulfil its constitutional obligations regarding GST compensation goes against the interests of the states and the spirit of cooperative federalism.”
He pointed out that Jharkhand contributes nearly Rs 5,000 crore from the mineral sector alone to the compensation fund. “What we get in return is just a paltry sum of nearly Rs 150 crore as monthly compensation,” he added. “And now we are being asked to borrow at a time when the state is hard pressed to fulfil salaries of government servants.”
The chief minister highlighted the poor state of his state’s economy, worsened by the coronavirus pandemic. “At this critical juncture we naturally expected you to give us more than just the admissible compensation,” said Soren. “We also expected you to announce that the GST compensation would continue even beyond the original period of five years.”
Soren is the latest non-NDA (National Democratic Alliance) chief minister to come out against the Centre’s options. On September 2, West Bengal Chief Minister Mamata Banerjee wrote to Modi and said the denial of Goods and Services Tax compensation to the states was as an “insufferable blow to federalist policy of our nation”.
The Kerala and Chhattisgarh governments have asked the Centre to take loan and clear dues. Delhi Chief Minister Arvind Kejriwal had also written to Modi to consider more “legally viable and sustainable” options for providing compensation to states amid the financial crisis. He had also suggested that the GST Council should consider authorising the Centre to borrow on its behalf and extend the period of collection of cess beyond 2022. Similarly, Puducherry Chief Minister has also said the Central government was bound to compensate the states for loss of revenue.
Meanwhile, Bharatiya Janata Party-ruled Karnataka has decided to go with the first option given by the Centre.