Karnataka Congress Calls For Chalo Delhi: Why Southern States Are Protesting Against Centre

Karnataka Congress' MPs and MLAs are set to stage a protest in Delhi on Wednesday over the issue of tax devolution and grant of funds to the state. Karnataka Chief Minister Siddaramaiah confirmed at a press conference yesterday that the party will protest against the "injustice" caused to the state by the 15th Finance Commission.

Speaking at the conference on Tuesday along with Congress state president DK Shivakumar, Siddaramaiah said, "On February 7, all ministers, MLAs of both Houses of the legislature, and MPs, will demonstrate against the government of India for the injustice caused to Karnataka by the 15th Finance Commission, and against several other issues concerning the state, including grants from the Centre."

The protest comes just days after Congress MP DK Suresh sparked a major row over his "separate nationhood" for south India comment. Reacting to the interim budget presented by Finance Minister Nirmala Sitharaman on 1 February, Suresh said, "We are seeing our share of money being distributed in north India. If we do not condemn it today, then in the coming days, a necessity will arise to put forth a proposal for a separate nation."

(What Southern States Fail To Acknowledge In The Debate Over More Funds| Read Outlook Business' Cover Story In February Edition)

Prime Minister Narendra Modi had criticised the statement during his speech in the parliament recently. He said that it is shocking some people are talking about dividing the nation.

This is not the first time the issue of tax devolution and grants have been raised by the southern states. In the past, Tamil Nadu, Kerala and Telangana have also criticised the recommendations of finance commissions and grant of funds by the centre.

Why Are Southern States Unhappy?

The government sets up the finance commission every five years to decide on the matter of resource allocation between states and union territories. The last commission, the 15th Finance Commission, was set up in 2017 and it tabled its report in 2021. The recommendations stay in effect for five years, which in this case would end in 2026.

The finance commissions allocate funds on the basis of several criterion, which include population and difference in per capita income. While post 1971, the finance commissions relied on the census of 1971 to make their decisions, the 15th Finance Commission used the 2011 census data for its fund allocation formula. Southern states opposed this decision, saying it will punish them for controlling their population during this period.

For instance, Karnataka's share in India's population has gone down from 5.34 per cent to 5.05 per cent while Tamil Nadu's share has declined from 7.52 per cent to 5.96 per cent. These states have also seen their share decline in the funds allocation by finance commissions.

Fifth finance commission, which covered the 1971 period, allocated 6.98 per cent and 4.65 per cent to Tamil Nadu and Karnataka, respectively, in total transfers of tax and grants in aid from Centre. However, this declined to 4.05 per cent and 3.67 per cent in the 15th Finance Commission.

Given the fact that dependence of states has increased post the GST regime which eliminated states' value added taxes, the southern states have been protesting against their dwindling share in the total fund transfers.

Kerala has taken Centre to Supreme Court over the limit on borrowings imposed by the government on individual states. The next hearing in the case will be held on 13 February. In his budget speech, Kerala Finance Minister KN Balagopal said, "Kerala cannot remain a mute spectator against the hostile approach of the central government which is pushing the state towards the worst financial crisis in its history.”

Last year in October, Tamil Nadu Finance Minister Thangam Thennarasu said that Tamil Nadu is not getting its fair share. He accused the Centre of "betraying" the state on this matter.