ISLAMABAD: In India, Bharatiya Janata Party (BJP)-ruled states such as Uttar Pradesh, Madhya Pradesh, and Rajasthan received a disproportionately high share of central tax devolution between 2020-21 and 2024-25, even though they contribute far less to the nation’s total tax collections, according to an Indian media report.
The data shared by the Ministry of Finance with the Rajya Sabha (Upper House) shows that Uttar Pradesh accounted for 4.6% of the total tax collected in the country between 2020-21 and 2024-25, but received 15.8% of the taxes shared by the center during this period.
Bihar’s share in devolution exceeded its contribution to total taxes by 8 percentage points, Madhya Pradesh’s by 5.5 pp, and Rajasthan's by 3.55 pp.
‘Fiscal discrimination’
Tamil Nadu, where the Dravida Munnetra Kazhagam party is in government, has in the past blamed the central government for discrimination.
In September, Tamil Nadu Finance Minister Thangam Thennarasu accused the center, or Union, government of practicing “fiscal discrimination against opposition-ruled states,” warning that such bias was undermining the spirit of cooperative federalism.
According to Indian media, he argued that partisan policies were depriving states such as Tamil Nadu of their legitimate financial allocations and turning cooperative federalism into coercive federalism.
Thennarasu alleged that the ruling BJP discriminated against states governed by opposition parties. “Just because we belong to the opposition, we are not treated on par with BJP-ruled states. When it comes to the matters of fiscal issues, there must be cooperative federalism, it must be in true spirit."
Six criteria
Meanwhile, the Indian Ministry of Finance has clarified that States’ contributions to central taxes are not a criterion considered by the 15th Finance Commission when it formulated its devolution formula for the period 2020-21 to 2025-26.
“Devolution to States during the last five financial years was based on the inter-se percentage worked out by the 15th Finance Commission on the basis of six criteria — population, area, income distance, demographic performance, forest & ecology and tax & fiscal efforts. Contribution to the Central Exchequer was not adopted by the 15th FC as a criterion,” Minister of State for Finance Panka Chaudhary said in his reply.
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