It is a “petty thought” for states to demand Union funds as per their tax contribution, stated Union Minister for Commerce Piyush Goyal on Saturday, February 8. He was speaking at the Rashtriya Ekatmata Yatra 2025 held in Mumbai by the Akhil Bharatiya Vidyarthi Parishad (ABVP) and the Students Experience in Inter-State Living (SEIL).
The Minister said, "There are some states like Karnataka, Tamil Nadu, and Telangana that ask as much tax devolutions as their tax contributions. There can't be any petty thinking (choti soch) worse than this, and there can’t be any misfortune worse than this.”
"It is unfortunate that some states … leaders of the earlier government in [Maharashtra] … used to calculate the tax paid by Mumbai and Maharashtra and [demand] to be given back that much amount [of central funds]," he reportedly said. Piyush Goyal was elected to Parliament from the Mumbai North constituency.
He further said that the Modi government's "laser focus" has been on the Northeast and eastern states in the last 11 years. “Prime Minister Narendra Modi believes that for the country to prosper, Northeastern states, and eastern Indian states like Bihar, West Bengal, Odisha, and Jharkhand must develop.”
The Minister’s comments were an attack at southern and Opposition-ruled states in the country that have been demanding their fair share of the central tax devolutions. TNM had calculated the return per rupee of tax paid for some key states after the 2024-25 interim Union Budget. For every rupee that Karnataka paid as tax to the Union government in 2022-23, the state received just 11 paise from the central divisible pool. Bihar, on the other hand, received Rs 5.9 per rupee, and Uttar Pradesh Rs 1.72, we had found.
The 15th Finance Commission gave 40% weightage to a state’s needs on the basis of its population and other factors and 45% for its per capita income difference, its performance was awarded only 15% weightage, thus putting the southern states at a disadvantage. The south Indian states argue that this puts well-performing states at a disadvantage, while underperformers are disincentivised to do better. Contrary to the Union government’s claims, it cannot absolve itself of any role in the decision regarding state’s shares in the divisible pool, because the terms of reference for finance commissions are passed by the Union cabinet.