Centre's tax devolution to states doubled to Rs 95K cr in November: FM

Move to help capex, perk up growth, says FM Nirmala Sitharaman

Union Finance Minister Nirmala Sitharaman on Monday said the Centre would release double the monthly amount of tax devolution -- a total of Rs 95,082 crore -- in November to enable the states to step up their capex and spur economic growth close to double digits this fiscal year.

The states were to be given Rs 47,541 crore in November in line with the 15th Finance Commission’s formula of devolving 41 per cent of central taxes to the states, Sitharaman told reporters after a meeting with chief ministers and finance ministers of states, and lieutenant governors of Union Territories.

“The chief ministers requested that if part of tax devolution be front-loaded, it would be helpful. I have directed the finance secretary to do this immediately. This is an exceptional year. States should not be short of money when we are requesting them to push up capital expenditure,” she said.

Union Finance Secretary T V Somanathan said devolution was done in 14 instalments.

Sitharaman also said two states -- Madhya Pradesh and Sikkim -- asked for further relaxation in the Fiscal Responsibility and Budget Management (FRBM) Act. States are allowed to borrow from the markets to the extent that it does not increase their fiscal deficit beyond 3 per cent of their gross state domestic product (GSDP). They can borrow 2 per cent more this fiscal year, 1 per cent with riders and 1 per cent is unconditional.

She said the entire GST compensation to the states had been given in November itself.

Somanathan said states had high cash balances at Rs 2.66 trillion as on October 30, but four states had negative cash balances.

He said 20 states’ capex was 79 per cent higher during the first six months of FY22 year-on-year due to a low base effect. However, this was also higher by 23 per cent against the corresponding period of 2019-20, a pre-pandemic year.

The finance minister said states asked for a better dispute resolution mechanism after the approval of projects, improving road connectivity, etc.