Green Challenge of Dr. Gaurav Uppal, Resident Commissioner Telangana Bhavan

Sri Harish Rao,Hon' Minister for Finance speaking at prebudget discussion meeting chaired by Hon' Union Minister for Finance Smt. Nirmala Seetharaman .Mr Ramakrishna Rao, Principal Secretary, Finance Department & Dr. Gaurav Uppal , Resident Commissioner have participated

SPEECH OF SHRI T. HARISH RAO, MINISTER FOR FINANCE, GOVERNMENT OF TELANGANA AT THE PRE-BUDGET MEETING OF THE UNION FINANCE MINISTER ON DECEMBER 18, 2019 AT NEW DELHI 

Hon’ble Union Finance Minister Smt. Nirmala Sitaraman ji, distinguished fellow State Finance Ministers, Ofϐicials of the Union and State Governments: 

1. At the outset, on behalf of the Government of Telangana and on my own behalf, I thank the Hon’ble Union Finance Minister for convening this meeting to seek the suggestions of the State Governments on the preparation of the Union Budget for 2020-21. I consider this as an important forum for the States to put forth their concerns. 

2. One of the main concerns today is decelerating growth of GDP since 2016-17. From 8.2% in 2016-17, the growth of GDP decelerated to 7.2% in 2017-18 and further to 6.8% in 2018-19. The growth of GDP in Q2 of the current year (2019-20) is just 4.5%, the lowest since 2013. The current 2 economic slowdown is quiet unique. While the inϐlation is low, and external imbalances are modest, the decline began with a loss of conϐidence not among foreign investors, but among the country’s domestic investors and consumers. 

3. The growth has been hit more by domestic developments such as stalled investments, improper implementation of the GST, collapse of the NBFC sector, higher rates of unemployment resulting in decline in consumption and high non-performing assets in the public sector banks resulting in low credit growth. 

4. The slowdown in the economy has made it difϐicult to achieve the target of $5 trillion economy by 2024-25. Because of the slippage in growth, the economy needs to grow at more than 10% in the remaining years. We need to address this issue head on. 

5. Our Government’s suggestions for the Union Budget 2020-21 are in two parts; Part-I covers the issues concerning the national economy and those common to all the States and Part-II covers issues specific to the State of Telangana.

I. Suggestions on Issues Concerning the National Economy and Issues Common to all the States Empowering States 

6. To address the current slowdown, there is an imperative to empower States in terms of both ϐinancial resources and autonomy as States are the drivers of economic activity. With the exception of macroeconomic policies, much of the action in developing both physical and social infrastructure and providing an investor-friendly eco system lies in the sphere of States. 

Rationalization of CSS 

7. The Cabinet Resolution constituting the National Institution for Transforming India (NITI Aayog) has articulated that ‘The States of the Union do not want to be mere appendages of the Centre. They seek a decisive say in determining the architecture of economic growth and development. The onesize-ϔits-all approach, often inherent in central planning, has the potential of creating needless tensions and undermining the harmony needed for national effort’’. One of the main mandates of NITI Aayog is to foster cooperative federalism through structured support initiatives and mechanisms 4 with the States on a continuous basis, recognizing that strong States make a strong nation and to build ‘Team India.’ There is no action in this direction, even after ϐive years. 

8. The Sub-Group of Chief Ministers on Rationalisation of Centrally Sponsored Schemes had recommended in 2016 that the focus of CSS should be only on those Schemes that comprise the National Development Agenda where the Centre and the States would work together in the spirit of Team India and that the list of CSS should be pruned. Contrary to the recommendations, the Centre has grouped the CSS under 28 umbrellas with the components remaining the same and increased the matching contribution of States. 

9. The Sub-Group also recommended that the funds for optional schemes should be allocated to States by the Ministry of Finance as a lump sum and States would be free to choose which Optional Schemes they wish to implement. There are practically no optional schemes. Spreading resources too thinly on many components of one-size-ϐits-all CSS has very little impact at the ground level.

10. I request the Hon’ble Union Finance Minister to implement the recommendations of the Sub- 5 Group in their true spirit in the Budget 2020-21. In addition, the criteria for allocation of funds to States under CSS may be made based on objective criteria. 

GST Compensation and IGST 

11. There are a number of concerns with regard to the implementation of GST, which need to be addressed urgently to restore the trust reposed by the States in the Union while agreeing to the introduction of GST even at the cost of autonomy for the sake of tax harmony across the country. GST has subsumed around 31 per cent of the gross tax revenue of the Centre and 47 per cent of own tax revenue of States. Thus, the States have lost more ϐlexibility. 

12. There are concerns with regard to accounting, compensating States and the sharing of Integrated Goods and Services (IGST) with States. In terms of Article 269-A, the States’ share of (IGST) shall not form part of the Consolidated Fund of India. Similarly under section 10 of the GST (Compensation to States) Act, 2017, the proceeds of the Compensation Cess shall be credited to a non-lapsable Fund known as the Goods and Services Tax Compensation Fund, which shall 6 not form part of the Public Account of India. Contrary to these provisions, there are instances of Centre resorting to crediting proceeds of IGST and Compensation Cess to the Consolidated Fund of India and the Public Account, respectively and using these proceeds as a ϐloat for meeting its expenditure. 13. As pointed out by the C&AG in the Audit Report for the year 2017-18, following the huge unsettled balances in the IGST, an amount of Rs.35,000 crore was distributed to States in January, 2017 on an ad hoc basis taking the 2015-16 revenue of the States from the taxes subsumed into GST as the basis. Even after this settlement, there was a balance of Rs. 1,76,688 crore left in IGST at the end of the year. The Centre had distributed Rs. 67,998 crore under IGST to the States/UTs, instead of 50 per cent but by adopting Finance commission formula for devolution of Central taxes. This was against the provisions of the Constitution as Article 270 (1) excludes IGST from the list of taxes and duties to be devolved to the States. Furthermore, as observed by the C&AG, distribution of IGST using Finance Commission formula has impacted the distribution of IGST funds among the States in a manner quite different from the ratio in which 7 funds would have gone to the States in normal course as ITC cross utilization or apportionment is based on place of supply concept. 

14. Of late, there have been undue delays in compensating the States on the revenue loss suffered by States following the implementation of GST. This delay is mainly on account of the shortfall in the Compensation Fund because of the fall in the collections of GST and consequent revenue yield from compensation cess. While acknowledging the receipt of GST compensation two days ago, I earnestly request the Hon’ble Union Finance Minister to settle the dues in future without delay. 

15. Thus, there are a number of concerns with regard to the implementation of GST, which need to be addressed urgently to restore the trust reposed by the States in the Union while agreeing to the introduction of GST even at the cost of autonomy for the sake of tax harmony across the country. \

Tax Amnesty 

16. There is a need to bring out an attractive tax amnesty scheme with a low rate of tax on evaded 8 income and to park the declared money for a period of 10-years in National Investment Fund to assist the State. After the lock-in-period of 10 years, the money can be given back to the declarant in a phased manner. Thus, the investment needs of the States for kick staring the growth momentum can be met.

Linking MGNREGA with Agriculture 

17. MGNREGA needs to be linked with the agriculture sector for better synergies 

Pruning Centre’s Expenditure on State and Concurrent Subjects

 18. The expenditure by the Centre on the subjects in the State List increased from an average of 14 per cent to 20 per cent and on subjects in the Concurrent List from an average of 13 per cent to 17 per cent between 2002-05 and 2005-11. This is indicative of the ϐiscal space available with the Centre vis-à-vis the States. Pruning this expenditure and transferring the resultant States will enable States to spend more on infrastructure to revive demand and there by contribute to the achievement of $5 trillion economy by 2024-25. 9 

II. Suggestions on Issues Speciϐic to the State of Telangana

Assistance for Backward Areas

19. The new State of Telangana had suffered gross injustice in the erstwhile State of Andhra Pradesh as a result of which nine out of the ten districts were covered under Backward Regions Grant Fund (BRGF). Section in terms of under spending in relation to the resources generated and neglect of the irrigation sector. Under section 94 (2) of the AP Reorganisation Act, the Centre is mandated to support the programmes for the development of backward areas in the successor States, including expansion of physical and social infrastructure. The amount of Rs. 450 crore for the year 2019-20 is yet to be released. I earnestly appeal that the Hon’ble Union Finance Minister may ensure its release within this month. 

Assistance for Mission Bhagiratha and Mission Kakatiya 

20. To make up for past neglect and taking into account the long pending just aspirations of people which remained suppressed, the new State of Telangana has taken up a number of 10 developmental programmes. The notable among the developmental programmes are Mission Bhagiratha to provide safe piped drinking water to every household in the State and a number of major and medium irrigation projects to irrigate about one crore acres of land and Mission Kakatiya to restore over 45,000 irrigation tanks, These initiatives have been commended by NITI Aayog as well as by a number of national and international organisations. 

21. The NITI Aayog has recommended release of special assistance of Rs.19,205 crore for Mission Bhagiratha and Rs.5,000 crore for Mission Kakatiya over a period of three years. The Ministry of Finance has not considered this recommendation on the ground that these are long gestation projects. I may reiterate that both these projects are short gestation projects almost nearing completion. I request you to appreciate the fact that Mission Bhagiratha has been conceived and completed before the ‘Har Ghar Jal’ was launched by the Union. The State should not be deprived of the beneϐit for its early initiative. I earnestly appeal that provision as recommended by NITI Aayog may be made in the Union Budget 2020-21. 

Assistance for Kaleswaram Lift Irrigation Project 

22. Kaleswaram is the the major lift irrigation projects taken up by the new State to provide irrigation to parched lands at an estimated cost of nearly Rs. 1 lakh crore. The expenditure on the project is met through borrowings, which is burdensome on the State. There is merit in treating it as a National Project with adequate funding. I request that adequate provision may be made in 2020-21. 

Integrated Steel Plant

23. The AP Reorganisation Act, 2014 provides for establishment of an integrated steel plant. This may be expedited as the issue is pending for more than five years. 

"I am very conϔident that the Union Government will take into consideration our suggestions in the spirit of cooperative federalism and making India a $5 trillion economy by 2024-25 by empowering States. I conclude by once again thanking the Hon’ble Union Finance Minister for making it convenient to meet the State Finance Ministers and seeking their views on the formulation of Union Budget 2020-21. "