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"Minor incentives will not do," Isaac told reporters here.
Yesterday, Prime Minister Narendra Modi in Chennai, while speaking at a function, stated that the Centre had suggested to the Finance Commission to consider incentivising states working on population control.
Refuting charges that the Terms of Reference of the 15th Finance Commission were biased against certain states, Modi had also said the issue was being raised by "vested interests".
Speakers at the meeting had opined that the terms of reference (ToR) were in contradiction to the principles of federalism enshrined in the Constitution and would result in revenue loss to performing states.
Tamil Nadu did not participate in the meeting.
"Is the Prime Minister arguing that the additional allocation of 2-3 per cent the states will get, will neutralise the severe loss they will make from 91 per cent of tax devolution? It is absurd," Isaac told reporters here.
Isaac said he was "very happy" that the prime minister had "acknowledged that there is a problem".
"If you are using the 2011 population for tax devolution, some states like Tamil Nadu, he doesn't recognise us, but he has recognised that TN might make some loss. Because he is suggesting that if there is some loss, it will be neutralised by the incentive system," the Kerala Finance Minister said.
The ToR says certain criteria, particularly how states with lower fertility can be incentivised, he pointed out.
"Very well. But there is one basic fact, that he is hiding. It is very unfortunate. He does not bring out all facts," Issac opined.
Ninety-one per cent of the last Finance Commission's award was accounted by tax devolution, which is to be on the basis of 2011 population criteria, he said.
"While the prime minister is now arguing that incentive account for 2-3 per cent of the total award. It is absurd," he said.
"We have also decided to call other states like Tamil Nadu, particularly West Bengal, Odisha and Punjab for the meeting," he said.
The plan is to hold a seminar in Delhi after the meeting, he added.
"We are going for a public debate and we will hold discussions," Isaac said adding the plan is to scale up pressure.
The state has succeeded in raising the issue at the national level and definitely the finance commission will have to consider it, he said.
He said this is a legitimate issue and there are plans to hold dialogues at a larger level.
The Union government has begun a "fire-fighting" exercise as it feels what it had done was a "mistake", Issac said.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)