Kerala's demand rejected; will not to interfere in credit limit cuts, says Finance Commission

THIRUVANANTHAPURAM: Chairman of the 16th Finance Commission Arvind Panagariya told the Chief Minister that the Commission cannot interfere in the central action of reducing the credit limit of Kerala. The commission was holding discussions with the cabinet members as part of the steps to determine the central assistance including the central share.

Chief Minister Pinarayi Vijayan presented Kerala's demands in a detailed petition. The Chief Minister pointed out that the Center had imposed restrictions on the borrowing limit and it had to be questioned legally. Commission member Manoj Pandey asked how far the case had reached. The Chief Minister said that the case is in the Constitution Bench and even the loan sanction of 13000 crores due to the state has been blocked by the Center because of the case and a special petition had to be filed to get this. The Chief Minister requested that a recommendation be made against the Center's interference in borrowing. The chairman of the commission immediately replied that the finance commission has no role to play in the central process of controlling loan approval. The central government is constitutionally empowered to control the borrowing by states. The ultimate responsibility of the loan rests with the central government. Therefore, the centre will be able to control the credit without leaving the limit. Arvind Panagariya also stated that suggestions to ensure the financial stability of the states will be included as recommendations.

The Commission also rejected the demand to increase the share of taxes given by the Center and to include cess-surcharge revenues in the divisible pool. If the tax share is increased, the income of the centre will decrease. Cess-surcharge is collected to avoid it. If this is also included in the divisive pool and shared with the states, the central government will be in crisis. This is a problem faced since the 13th Finance Commission. Earlier, 32 percent of the divisive pool was shared with the states. The cess and surcharge was to solve the financial crisis that arose when it was increased to 41 percent, the commission pointed out.