PM Modi Tried To Cut Tax Funds Allocated To States: Report (Image: X @narendramodi)
Al Jazeera from The Reporters’ Collective has made shocking revelations against Prime Minister Narendra Modi in a recently published report. As per this report, PM Modi has held “backdoor negotiations” with the Finance Commission of India to cut tax funds allocated to states. However, the head of the commission resisted this controversial suggestion.
As per the Al Jazeera report, titled “As PM, India’s Modi secretly tried to massively cut state funds,” these revelations were made by BVR Subrahmanyam, the CEO of the government think tank NITI Aayog. BVR Subrahmanyam revealed this last year while speaking as a panelist at a seminar on financial reporting in India. The seminar had been organised by the Centre for Social and Economic Progress (CSEP), a public policy think tank.
During this seminar, the NITI Aayog CEO reportedly revealed how the federal budgets are “covered in layers and layers of attempt to cover the truth.” The Al Jazeera report also mentioned that BVR Subrahmanyam was the “liaison” in the “backdoor negotiations” between PM Modi and YV Reddy, the chairman of the Finance Commission.
According to the Indian Constitution, the Finance Commission decides what percentage of money the federal government should share from its tax collections with the states in the country. The Finance Commission is constituted every five years by the President of India to review the state of the finances of the Union and the States. The Constitutional Body suggests steps for maintaining a stable fiscal environment. The Fourteenth Finance Commission (FFC) was constituted in 2013 under the chairmanship of YV Reddy. During the same period, Narendra Modi was serving as the chief minister of Gujarat and was campaigning for the post of prime minister. The Al Jazeera report says that during the same time, PM Modi made headlines for asking the finance commission to provide a 50 percent share of central taxes to states.
The FFC submitted the report in December 2014. In the report, the commission recommended that states should get 42 percent of the share of central taxes. Notably, this is a rise from the 32 percent they had been receiving until then. However, Prime Minister Narendra Modi and the Ministry of Finance reportedly wanted to “keep the states’ share of taxes down at 33 percent.” As per the constitutional provisions, the federal government cannot argue, debate, or negotiate with the finance commission, formally or informally. This means the government can either accept the recommendations of the commission or reject them and constitute a new commission.
Al Jazeera says that PM Modi “tried off-record parleys” with YV Reddy to pare down FFC”s recommendations on the revenue share. BVR Subrahmanyam said that he was the only other person in that conversation, which lasted for two hours. BVR Subrahmanyam also recalled that YV Reddy was “unyielding.” Finally, the Centre had to accept the recommendations of the commission.
Al Jazeera also mentioned in its report that the Reporters’ Collective verified that there had been a delay in accepting the commission report and conversations about “potentially altering it.” Al Jazeera has corroborated it with another economist who was working for the government during that period. According to the report, the Centre had to rehash the entire budget with a small portion of tax revenue and ended up “slashing allocations for several welfare schemes.” “The budget was written in two days that year. Two days because this recommendation is accepted so late,” BVR Subrahmanyam recounted, as quoted by Al Jazeera. The NITI Aayog CEO also said that they have reduced the allocation for the central Ministry of Women and Child Development due to the situation. BVR Subrahmanyam also said that the budgets of the states and federal government were untrustworthy.
At the same time, as per the report, the federal government steadily increased the collection of a class of taxes called cess and surcharges. Notably, states are not entitled to any portion of this section. Al Jazeera, citing the data, says that the amount of cess and surcharges collected by the federal government has grown since 2015.
