PTR Palanivel Thiaga Rajan, Tamil Nadu Finance Minister

Tamil Nadu Finance Minister PTR Palanivel Thiaga Rajan calls the GST Council ‘poorly designed’, explains how lack of knowledge hinders governance, touches upon his run-in with Jaggi Vasudev and lays out DMK’s federalism precept. The session was moderated by Govt Editor (Nationwide Affairs) P Vaidyanathan Iyer.

P VAIDYANATHAN IYER: In your speech on the GST Council in Might, you described it as a rubber-stamp council. You additionally spoke about excessive focus of powers with the Centre. Do you assume a worsening of presidency funds because of the extended slowdown additionally led to a state of affairs the place states are feeling the brunt?
There are three-four totally different elements. The primary is the Union-state relationship, and like every relationship, it will get frayed over time, and the cracks are extra distinguished in instances of stress. So, the mix of a deteriorating financial system and the Covid disaster has made it inarguable that the connection is just not the place it must be. And the irony of it’s, I don’t need to go far for justification of my quotations — I simply have to have a look at the reign of Narendra Modi as Chief Minister of Gujarat. You can find each motion taken by the Union authorities by way of fiscal relationship with states is immediately in contradiction to the statements made (by him) when he was the CM.

The query of the GST Council is extra nuanced. The assemble is just not well-thought-out, the frenzy to execute it for the sake of the same old showmanship and dramatic impact that we’ve got now seen with the four-hour discover for the lockdown and the in a single day demonetisation… There have been a whole lot of adjustments for the reason that introduction of the GST Invoice, we’re nonetheless taking part in catch-up. The truth that we’re doing so four-and-a-half years later…

In my restricted understanding of 4 months, I perceive that the GST Council solely has an advisory position. It could go forward and resolve a brand new charge, however for it to take impact, the state has to cross an ordinance or make adjustments in its personal business tax guidelines.

In my view, there was a deterioration in Centre-state relations. A whole lot of it’s avoidable. The factor that basically hurts the nation is that focus of energy is going on within the palms of people that both don’t wish to use it or don’t know use it. They take the ability away from different folks after which do a really, very poor job of utilizing that energy. The truth that the GST Council is so poorly designed provides to this.

P VAIDYANATHAN IYER: You may have spoken of the breakdown of belief between the Centre and states. Is it solely associated to fiscal federalism or would you wish to be extra particular?
I offers you two very concrete examples. The primary dangerous religion is the entire pretence of shifting devolution to states from 32{c34e2c9cd63a11c97fab811dbaaefe0cfbb1edd2527888e1a44d36f3491ee811} to 42{c34e2c9cd63a11c97fab811dbaaefe0cfbb1edd2527888e1a44d36f3491ee811} (of divisible tax pool). For those who take a look at any evaluation by any unbiased physique, the so-called devolution has not resulted in any actual devolution. They’ve moved a lot of the cash into the indivisible cess bucket that we don’t get any of the cash. The end result of it’s that the amount of cash we get from the Union in grants and subsidies is larger than what we get as share of the taxes. If we get it as our share of the taxes, we get to legislate on how we wish to spend it. That’s clearly in opposition to any precept of federalism.

Then there’s the absurd logic of why the Union authorities shouldn’t have the 14{c34e2c9cd63a11c97fab811dbaaefe0cfbb1edd2527888e1a44d36f3491ee811} minimal compensation scheme written into the legislation. It stated we are able to’t pay 14{c34e2c9cd63a11c97fab811dbaaefe0cfbb1edd2527888e1a44d36f3491ee811} as a result of there’s not sufficient cash, that the system is designed such that solely the cess collected on GST is the idea of paying compensation. About the identical time, the CAG report comes out saying that the primary two years, you collected round Rs 40,000 crore extra in cess than you needed to pay to the states, and as a substitute of letting it lie within the account, you took it again into the Union authorities’s tax pool with out sharing it. So that you used the cess logic to gather it, not share it, and also you didn’t use it for the aim for which it was for use…

P VAIDYANATHAN IYER: The DMK was a part of the NDA-I authorities. What has modified within the NDA, BJP or the DMK’s personal philosophy that has pulled the 2 events aside?
Proper now, the hole between the DMK’s place and the Union authorities, moderately than the BJP — I don’t assume it’s only the BJP we’ve got a problem with… Let me say, the DMK’s place has remained unchanged. We now have at all times been federalists, for devolution of powers not simply from Union to states but in addition from states to decrease rungs of energy. However the BJP’s place has modified dramatically. The identical PM and House Minister when in Gujarat have been the best federalists. Now, they’ve turn out to be the best centralists, at the very least for the reason that days of Prime Minister Indira Gandhi. They wish to management every thing, from meals coverage to training to taxes to bogs. So, it’s extra this authorities moderately than the BJP at some stage.

At one other stage, after all, the notion of secular, social justice events is sort of totally different from events pushed by Hindutva philosophy. However even there, that philosophy has not remained fixed. Most individuals would really feel that the administration of Vajpayee was totally different from the administration we see at the moment.

LIZ MATHEW: Within the latest Parliament session, the DMK was a silent associate to the Opposition protests. Do you assume that like Mamata Banerjee, who has taken an initiative, the DMK might take the lead in bringing all events collectively, at the very least on points you will have raised at the moment?
I’m very, very junior within the social gathering and at some stage, I’m not able to touch upon the DMK’s place on the nationwide stage. Nonetheless, I’ll say that the way forward for this nation lies in regional events and state governments. Anybody who has any understanding of the complexities, variety of this nation, notions resembling ‘One Nation, One Taxation’… all these will not be executable. And if they don’t seem to be executable, they may fail, it doesn’t matter what you do, regardless of how many individuals you get into this cult-like perception.

We’re seeing it fail day by day. You’ll be able to’t use the Swachh Bharat funds as a result of you possibly can’t go and construct the bogs your self. This notion of 1 nationwide coverage is inherently self-defeating. It’s a query of how lengthy and after how a lot ache.

Even the idea of nationwide events, to me, is contradictory. The BJP is pro-beef within the Northeast and Goa, however you will get killed in some BJP-ruled states on the suspicion of even carrying beef… The Congress is in opposition to some events elsewhere, we’re all in a coalition right here. So the BJP could also be robust in 10-12 states, in the remaining, they both purchase energy, as a result of they management the Union, or the folks… I’ve advised my social gathering chief too that we are able to present what good governance appears to be like like, what data-driven governance appears to be like like, actions pushed by your philosophy… With restricted powers we are able to obtain nice outcomes in comparison with these with limitless energy who will not be capable of obtain something. Our honourable CM (M Okay Stalin) could be very clear about his values…

AANCHAL MAGAZINE: You talked about GST compensation dues. For this 12 months, the quantity has been estimated based mostly on projections of progress. Is that this truthful, on condition that dues of final 12 months have additionally not been cleared? My second query is concerning your very public spat with the Finance Minister of Goa and different BJP-ruled states. Different finance ministers have additionally stated their views will not be heard on the GST Council.
The system is designed for idiosyncratic threat, that’s to maintain it if a state faces an issue. However when you will have systemic threat, when states and the Union go down, then your entire compensation mechanism is designed to fail. We’re on this state of affairs as a result of your entire financial system has failed… Like different elements of the GST, this isn’t nicely thought out.

On the problem with the Goa FM, I had just one concern. On the GST Council meet, we spent an hour-and-a-half discussing what’s for ratification, what’s for approval, and what’s for info. Ministers like Mr Badal (Manpreet Badal, Punjab Finance Minister) raised the purpose that if it isn’t to be accepted by us, however simply knowledgeable to us, does it have the load of legislation? As a result of the rule is that we as elected representatives need to approve this… That’s all he stated, that change the wording of ‘for info’ to ‘for approval’, in order that we are able to approve it and you’ve got the luxurious of a authorized type of help. However this (Goa) minister went off on a tirade, about ‘anti-national’, ‘this being a war-like state of affairs’. It was nonsense, atrocious as a result of he was casting aspersions on the integrity, competence, patriotism of people that have been elevating actually legitimate questions. I obtained in and stated it’s atrocious that you’ve got these council conferences the place one minister, that too from a tiny state, will get to solid aspersions on the validity of different individuals who symbolize hundreds of thousands of individuals. At this level, Ms Nirmala Sitharaman castigated me, saying that on this Council, there aren’t any small states or large states. Solely, quarter-hour later, over ease of doing enterprise, the BJP’s satellite tv for pc states made the argument of being small states. I advised Ms Sitharaman, ‘Ma’am you simply reprimanded me saying there aren’t any large states and small states’… The Goa minister got here out and held a press convention and accused me of all type of issues.

P VAIDYANATHAN IYER: Going ahead, how do you see variations of the type you speak about being resolved?
I’m not saying whether or not it may be resolved or not. However the lack of making use of knowledge is definitely a shortcoming that may be fastened. As a result of the very subsequent assembly we had the identical dialogue once more, on tax charge slabs. And once more, there was no knowledge… I can sense that even BJP states are beginning to chafe beneath both the precise diktat to say sure to regardless of the Union says, or the implication to be extra loyal than the king. As a result of certainly no CM needs to lose their capability to behave, their constitutional powers that they should ship to the folks, which is what they obtained elected for…

So this notion of centralisation is just not concerning the BJP or DMK, it’s antithetical to each state authorities, of each political social gathering. The distinction is that at the moment’s BJP is ready to hold its state chief ministers and ministers beneath such an oppressive thumb… However I don’t assume that could be a everlasting characteristic.

ARUN JANARDHANAN: Public debt has been rising through the years. What’s your plan for tackling it — stabilising and lowering it or exploring new income fashions?
The decay of the final 10 years has been horrendous… We got here to workplace with an alleged debt of Rs 5,70,000 crore hanging over our heads. However we’re about Rs 9 lakh crore of debt. And but, we stored our phrase. The Chief Minister stated we’ll give Rs 4,000 per ration card… Right here is the place the issue units in…. Even the Rs 4,000 that we gave to card holders, it was very clear that there have been individuals who didn’t should get that cash who nonetheless have the cardboard. We don’t know the way our knowledge methods are that dangerous.

In some instances, our knowledge methods are dangerous due to the dearth of federalism. For instance, the Co-WIN portal data all of the vaccinations however after we go to do a serosurvey overlaid with the vaccination penetration to start out getting ready for that third wave, we don’t have that knowledge… If I wish to goal subsidies and I wish to know who all shouldn’t get the equal of Rs 4,000, the very first thing I’d say is, ‘Whichever household has earnings tax payers, shouldn’t get it’. However I don’t have that knowledge. We’re fully constrained by this centralisation of every thing and we’re not capable of administer correctly due to lack of knowledge. A few of that’s our personal fault, a few of that’s the nature of design of the federal government.

In order that’s the one concern I’ve. I’m not fearful about the place the cash will come from, however concerning the rotten, rotten system… the federal government’s capability to manage has been severely eroded. It’s very laborious to show this round.

ANANT GOENKA: You come from a personal sector background. How typically do you discover that at odds with politics, the place you need to do issues which can be politically right versus issues which can be economically right.
There are most likely two stage of variations. One stage is that as an funding banker or a worldwide banker, you’re a capitalist to the core. As a politician, as a Dravidian, as an Indian, we’re all socialists to a point or different and rightfully so. In order that was not a tough transformation, as a result of it was a special context. The a lot tougher transition is that we are attempting to battle a system that’s damaged…

In a business enterprise, after you have found out what’s the proper factor to do, you probably did it, there was no resistance. Right here you could find out what’s the proper factor to do after which discover on the market are every kind of obstacles. That’s the actual problem I face every day.

P VAIDYANATHAN IYER: The late TDP chief N T Rama Rao had described the Centre as a ‘conceptual fable’. What has modified over the past 10-15 years between the Centre and states inflicting the connection to tilt a lot on one facet?
I see very clear roles for the Union. The Union must be in control of international coverage, defence, inter-state commerce, worldwide commerce, commerce coverage, vaccine procurement. I’m not a type of abolitionists who would say there must be no Union. There’s a very clear want for a reliable, purposeful and {powerful} Union authorities. I’m simply saying you possibly can’t resolve which college wants a rest room sitting in Delhi; we are able to barely do it sitting in Chennai. We have to devolve that energy right down to the panchayats and the native our bodies.

However when you take a look at the type of centralising tendencies… the issue began in the direction of the second time period of the UPA and has tremendously accelerated within the seven years of the NDA govt…. Throughout the preliminary lockdown easing, the Union House Ministry was making an attempt to inform us after we might or couldn’t open barber retailers. How does it make sense to have a nationwide coverage on barber store opening?

(This centralisation) is a pattern that’s doomed to fail. The query is, how a lot injury does it do earlier than it fails as a result of the extra you attempt to centralise, the extra you will have dangerous outcomes.

P VAIDYANATHAN IYER: Your public run-in with Isha Basis’s Jaggi Vasudev confirmed you’re a robust votary of the State being the custodian of temples.
I don’t fear about whether or not my views are in opposition or concurrence with somebody like Jaggi Vasudev… However there are elementary issues with the notion you can in some way take away the hand of the federal government from traditionally and culturally necessary artefacts.

PRASANTA SAHU: Many states have complained that tax revenues haven’t grown beneath the GST regime. The compensation mechanism is coming to an finish in June subsequent 12 months, which is ready to tug down revenues additional.
Sure, particularly as a result of the Union authorities goes to gather cess and particularly as a result of lots of issues have been reset due to two years of surprising macro threat or failure. I be a part of with different states within the notion that the interval of compensation ought to prolong… To be truthful to the Honorable Union Finance Minister, she has promised a particular GST Council session on the compensation.

If a state like Tamil Nadu have been to run its funds correctly, I’m not certain we’d be eligible for any compensation as a result of if the bar is 14{c34e2c9cd63a11c97fab811dbaaefe0cfbb1edd2527888e1a44d36f3491ee811} year-on-year progress, we have been most likely doing that within the gross sales tax/VAT regime.

All of us agree that the GST moved from a production-based tax to a consumption-based tax so the GST inherently deprived giant manufacturing states. However Tamil Nadu is a bit distinctive as a result of we’re excessive producers in addition to have excessive private consumption as a result of we’ve got a a lot much less stratified society than, say, Gujarat or Maharashtra. So our iGST out and in is anticipated to be roughly flat.

However we discover our enforcement system is significantly better than in different states. So we’re repeatedly discovering giant gaps between incoming iGST and outgoing iGST — we’re paying out a few extra crores a 12 months than what’s coming in. These are all of the variables that fear us extra. After all, we’re philosophically for the extension of the compensation.

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Concept Trade| A reliable, {powerful} Union govt is clearly wanted… However can’t rule which college will get rest room sitting in Delhi: Tamil Nadu Finance Minister PTR Palanivel Thiaga Rajan