Centre appears to leave no stone unturned to artificially precipitate a fiscal crisis in Tamil Nadu: State FM Thangam Thennarasu

Chennai (Tamil Nadu) [India], February 17 (ANI): Tamil Nadu Finance Minister Thangam Thennarasu on Tuesday said the State is facing unprecedented fiscal challenges due to the actions of the Union Government, alleging denial of funds, a reduction in tax revenues, and the imposition of conditions that have strained Tamil Nadu's finances.
Speaking in the assembly while presenting the interim budget, Thennarasu said that in a federal polity, States have often been treated unfairly, but the scale of challenges Tamil Nadu faces in the current financial year is unprecedented.
He said the Union Government has denied sanctions for major infrastructure projects, withheld funds under Centrally Sponsored Schemes, curtailed tax revenues without consultation and imposed conditions mandating expenditure, thereby creating artificial fiscal stress for the State.
"In a federal polity, there have been several instances in the past where States have been unfairly treated by the Union Government. However, I firmly believe that the extent of challenges faced by this Government is unprecedented. In every field, be it denial of sanction of major infrastructure projects for the State of Tamil Nadu, withholding of release of funds for Centrally Sponsored Schemes, curtailment of tax revenues without due consultation, or unfair imposition of conditions to mandate expenditure, the Union Government appears to leave no stone unturned to artificially precipitate a fiscal crisis in Tamil Nadu," Thennarasu said.
He said that the GST Council's approval of GST rate rationalisation, without considering the objections of several States, has resulted in a revenue shortfall of around Rs 9,600 crore in the current financial year. The State Finance Minister asserted that in April 2025, the Union Government deducted Rs 1,709 crore towards IGST settlement from the State's Reserve Bank of India account without prior intimation or consultation.
"The GST rate rationalisation was approved by the GST Council without considering the apprehensions and opposition recorded by several States. Even as States are reeling under fiscal stress caused after the termination of GST compensation regime, this hurried exercise has resulted in another significant blow to the State finances. The revenue shortfall for the Government of Tamil Nadu is estimated to be around Rs.9,600 crore in the current financial year. In the month of April 2025, the Union Government has deducted a bulk amount of Rs.1,709 crore for IGST Settlement from the State's account in Reserve Bank of India without due intimation or consultation. This has added to the revenue shortfall under GST, severely constraining our finances during the current financial year," said Thennarasu.
Thennarasu also noted that the share of Central taxes allocated to Tamil Nadu in the Union Budget 2025-26 has been reduced in the Revised Estimates, resulting in an unanticipated shortfall of Rs 1,202 crore. Referring to conditions imposed on borrowings, he said the Union Government has mandated that five per cent of outstanding guarantees be maintained in the Guarantee Redemption Fund.
"The share in Central Taxes allocated to the State of Tamil Nadu in the Union Budget 2025-26 has been reduced in the Revised Estimates. This has resulted in an unanticipated shortfall of Rs.1,202 crore to the Government of Tamil Nadu in the current financial year," said Thennarasu.
Referring to the Chennai Metro Rail Phase-II project, he said that despite approval for a 50:50 cost-sharing pattern, the Union Government's share has not been credited, forcing the State to incur about Rs 9,500 crore, which continues to be reflected as part of its outstanding debt, adversely affecting the debt-GSDP ratio and borrowing capacity.
"Even after approval by the Union Government of the long pending demand to take up Chennai Metro Rail Phase-II project in a 50:50 sharing pattern, the entire benefits of this project have not been received by the State Government. This Government has incurred an expenditure of approximately Rs.9,500 crore as payment towards the Union Government's share, which continues to be reflected as part of the State's outstanding debt. This not only adversely affects the State's debt-GSDP ratio but has also reduced our ability to borrow within our permissible borrowing limits, thus affecting our liquidity. Despite repeated reminders, the Union Government has not acted upon our request so far," he said. (ANI)