Initial phase
The Tamil Nadu government came out with a series of responses between January 19 and February 1. These included: (i) readying Rapid Response Teams (RRTs) at state and district levels, (ii) setting up of a 24/7 control room, (iii) thermal scanning of air travellers from China, (iv) creating isolation wards in the General Hospitals of four major cities, and (v) running appropriate awareness campaigns.
Some of the other early measures are summarised below:
Health measures
-
On March 13, the Governor declared COVID-19 to be a notified disease in the state of Tamil Nadu, under the Tamil Nadu Public Health Act, 1939. Notifying a disease allows for incidences of the disease to be mandatorily reported to the government and in turn, helps authorities to respond with appropriate measures to prevent the spread of the disease.
-
On March 15, the government prescribed the Tamil Nadu COVID-19 Regulations, 2020. These regulations detail the responsibilities of hospitals and individuals, and the powers of officials in relation to the diagnosis, treatment, and containment of COVID-19. These include (i) creation of isolation wards in hospitals, (ii) containment measures in an area once positive cases are detected, and (iii) mandatory 14-day home isolation for asymptomatic air travellers from COVID-19 affected countries.
-
On March 15, the government also mandated a 14-day institutional isolation for all air travellers to prevent import of infections from other states. The state also initiated setting up of testing camps and conducting disinfectation drives in the border districts.
Travel and Movement
-
On March 15, the government notified a series of instructions that restricted the movement of people in the state. These include (i) shutting down of establishments, such as, educational institutions (up to Class 5), theatres, malls etc, and (ii) banning of inter-state travel for 15 days.
-
On March 16, the government announced additional restrictions till Mar 31, such as, closure of: (i) anganwadis and making alternate provision of dry ration for children at their homes, (ii) swimming pools, amusement parks, gyms, zoos, museums, bars, clubs etc, and (iii) all educational institutions, except the conduct of practical exams for class 10 and 12, and various entrance exams.
-
State borders were sealed off for road traffic, except for movement of essential commodities, from March 20 to March 31. Public transportation services, such as metro rail and inter-state private buses, were also suspended till March 31.
-
The Prime Minister asked the country to observe a Janta Curfew from 7 am to 9 pm on March 22,. The state government further extended this curfew to 5 am on March 23. Following this, the government immediately announced a state-wide lockdown from March 24 up to April 1.
-
On April 5, the government issued an advisory for the quarantine of migrant workers and the conduct of health camps for them.
Welfare Measures
-
On March 15, the government announced financial assistance of a total of Rs 60 crore to various departments, such as, health, transport etc, to take precautionary measures to combat COVID-19.
-
On March 24, the government announced the distribution of cash support of Rs 1,000 to all entitled family cardholders. Further, they were also eligible for free supply of essential commodities such as rice, dal, sugar, etc, during the month of April, through the Public Distribution System (PDS).
During the lockdown
A state-wide lockdown was announced from March 24 to April 1, followed by a nation-wide lockdown between March 25 and April 14. On April 13, the state-wide lockdown was extended up to April 30. This was followed by the extension of the nation-wide lockdown from April 15 to May 3. Under this, certain activities could be resumed after April 20.
Some of the key measures undertaken during the lockdown period are:
Travel and movement
-
Amidst the lockdown, on March 25, the government notified that establishments providing essential goods and services, which were allowed to operate. These included establishments such as (i) police forces, (ii) treasury, (iii) public utilities, (iv) banks, (v) media, (vi) telecommunications, and (vii) shops dealing with food, groceries etc. Further, on March 28, the government permitted a few agriculture-related establishments to operate, such as, Mandis, fertiliser shops, and agencies involved in procurement of agriculture products.
-
An Expert Committee formed by the state government to formulate guidelines for phased exit from lockdown after April 20, recommended the extension of the lockdown till May 3. Certain select activities were, however, permitted to resume operations from April 20 onwards. These include (i) MNREGA works related to irrigation and water conservation, (ii) rural construction projects on irrigation, dam safety, hospital buildings, roads and bridges, and (iii) state and central government offices at one-third capacity.
-
In view of rising number of cases, on April 24, stringent curfew orders were passed in the districts of (i) Chengalpattu, (ii) Kancheepuram, and (iii) Thiruvallur. The curfew will be imposed between April 26 and April 29, from 6 am to 9 pm, and with more stringent restrictions than under the ongoing nation-wide lockdown, such as, (i) petrol bunks to operate only between 8 am and 12 noon, and (ii) supermarkets and shops to remain shut.
-
Curfew orders were passed in 5 more districts. In Chennai, Coimbatore and Madurai, curfew is imposed between 6 am and 9 pm from April 26 to April 29. In Salem and Tiruppur, curfew was imposed from April 26 to April 28.
Welfare Measures
-
On March 30, the government announced a cash assistance of Rs 1,500 per month to be credited into the bank accounts of differently-abled persons. It also announced that transgenders without ration cards, were eligible to receive 12kg of rice, 1kg of dal, and 1 litre of cooking oil, from fair price shops (FPS).
-
Further, a cash assistance of Rs 1,000 was announced for (i) all ration card holders through FPS, (ii) registered auto drivers and construction workers, (iii) members of TN Cine Welfare Board, and (iv) match factory workers.
-
On April 2, the government announced a concession package to manufacturers of COVID-19 related medical equipment, who will commence production before July 31, 2020. The package applied to both MSMEs and large manufacturers of equipment, such as, ventilators, Personal Protection Equipment (PPE) kits and medicines. Some of the concessions include: (i) 30% capital subsidy, upto Rs 20 crore, (ii) 100% stamp duty waiver, (iii) 6% interest subvention for capital loans for two quarters, (iv) commencement of manufacturing without prior approval, and (v) provision of necessary land on priority basis for short-term/long-term leases, etc.
-
Rs 50 lakh grant was announced to the families of frontline workers in the event of their unfortunate demise. If infected by COVID-19, they are eligible for Rs 2 lakh assistance towards treatment costs. In certain cases, if eligible, their kin would also receive a government job offer.
-
On April 7, the government announced that MLALAD funds could be utilised for COVID-19 prevention and containment activities. A total of Rs 1.25 crore can be utilised towards prevention, containment, treatment, and purchase of medical equipment, PPEs etc.
Health Measures
-
On April 2, the government released a list of designated COVID-19 hospitals in the state. Instructions were issued to refer all COVID-19 positive cases exclusively to these designated hospitals. However, willing citizens were also permitted to approach private hospitals, at their own cost. Private hospitals were further instructed to establish dedicated fever clinics to cope with the increasing load of flu and fever cases.
-
Amidst a rise in the number of cases, on April 4, the government issued instructions to: (i) avoid all kinds of religious gatherings, (ii) hospitals to not show religious bias in treating patients, and (iii) doctors to coordinate with the government and check in on the mental health of quarantined patients via video conferencing facilities such as Skype.
-
On April 5, the government issued cluster containment measures to stop the transmission, morbidity, and mortality associated with the further spread of COVID-19. This was in response to the large number of imported infections from the attendees of the Nizamuddin conference in Delhi.
-
Various guidelines were issued towards (i) treatment protocol of COVID-19 positive patients, (ii) appropriate management of suspect cases of COVID-19, (iii) dead body management, (iv) criteria for classification of hotspots, and (v) protocol for use of Rapid Antibody Tests in hotspot areas.
-
The government also instructed District Authorities to ensure the protection of doctors and other hospital staff who are being forcefully evicted from their houses by landlords. As a measure to develop immunity against COVID-19, the government, on April 25, also recommended providing Zinc and Vitamin tablets, and herbal powder to all personnel on frontline duty in containment areas.
Other Measures
-
Administrative: Eleven committees have been formed to coordinate implementation of various welfare programmes. In all districts, Crisis Management Committees have been formed under the district collector.
-
Education: The conduct of semester examinations in universities and colleges is postponed to the beginning of the next academic year, as and when the institutions reopen. Private colleges and schools were also instructed to not compel students/parents to pay pending dues for 2019-20 or advance fees for 2020-21.
-
Industry: On April 22, the government released a list of industries classified as continuous process industries. These are companies where the production lines are functioning 24/7. The list includes (i) refineries, (ii) large steel plants, (iii) large cement plants, (iv) sugar mills, (v) large paper mills, (vi) tyre manufacturers etc.
-
Technology: The government launched a Whatsapp Chat Bot for providing latest information and guidance related to COVID-19 in both Tamil & English.
For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.
Between the last time Parliament met in March 2020 and the ongoing Monsoon session (a period of nearly six months), the government issued 941 notifications across sectors in response to the COVID-19 pandemic. It also announced a Rs 20 lakh crore economic package to improve the state of the economy and provide relief to those affected by the nationwide lockdown. In addition, the government also proposed long-term policy changes during this period in sectors such as agriculture, economy, and education.
One of the key roles of a Member of Parliament (MP) is to hold the government accountable for its policies and actions. Parliamentary questions are one of the key instruments MPs use to exercise this role. Questions help MPs seek information from the government on matters of public importance and on the status of implementation of its policies and programmes.
However, in view of the prevailing extraordinary situation due to COVID-19, both Lok Sabha and Rajya Sabha have suspended their Question Hour, which would have allowed MPs to seek oral responses from Ministers and ask follow-up questions. However, unstarred questions are admitted, for which written answers are provided.
This post provides an overview of the government’s response to some of the key questions raised by MPs during the first five days (September 14, 2020, to September 18, 2020) of the session.
Unstarred questions in the Monsoon session
A total of 1,950 unstarred questions have been asked in the first five days of the Monsoon session of the Parliament (1,150 questions in Lok Sabha and 800 questions in Rajya Sabha). The Ministries in focus for the questions were: Health (154 questions), Agriculture (127 questions), Education (104 questions), Finance (96 questions), and Railways (80 questions).
Questions ranged from the impact of the lockdown to strategy for vaccine procurement, to the status of the programmes announced to alleviate COVID related issues. Besides COVID-19, there were questions around India-China trade, locust attacks, and custodial deaths.
On COVID-19 testing and vaccine strategy
Testing data and Health infrastructure: In response to a question, the government informed that India is conducting nearly 10-11 lakh tests every day and so far, a total of 6.05 crore samples have been tested for COVID-19. Nearly 40% of the confirmed cases are persons between the age of 26-44.
To improve health capacity, as of Sep 15, a total of 15,360 COVID treatment facilities have been created with:
- 13,20,881 dedicated isolation bed (without oxygen support)
- 2,32,516 oxygen supported isolation beds
- 63,194 ICU beds (including 32,409 ventilator beds)
Vaccine development: The Central Drugs Standard Control Organisation has granted permission for conduct of clinical trials in the country to the following: (i) Bharat Biotech International Ltd. and Cadila Healthcare (these are in phase 1 and phase 2 of trials), and (ii) Serum Institute of India Pvt. Ltd (for vaccine developed by University of Oxford/AstraZeneca - this is in Phase 3, or advanced phase, of the trials).
The government is also exploring the possibility of cooperation with Russia for advancing the COVID-19 vaccine in India.
Health insurance: The Ministry noted that data on the number of healthcare workers who are infected by COVID-19 or who have lost lives during COVID duty is not maintained at the central level. As per data from the Pradhan Mantri Garib Kalyan Insurance Package, a total of 155 medical staff, including 64 doctors, have died due to COVID-19. The scheme provides an insurance cover of Rs 50 lakh (including loss of life) to healthcare providers, including community health workers, who may have come in direct contact of COVID-19 patients and who may be at risk of being impacted by this.
Under the Ayushman Bharat Scheme, a total of 4.03 lakh hospitalisations have been registered (and authorised) towards the treatment of COVID-19. Under Ayushman Bharat, the government provides health cover of five lakh rupees per family per year, for secondary and tertiary care to around 10.7 crore vulnerable families.
Impact on other health services: In light of COVID-19, that there has been a 19.4% drop in Hepatitis-B birth doses administered and a 31% drop in vaccination sessions held in health facilities and outreach sessions from April-June 2020 as compared to the same period last year. Similarly, there has been a drop of 23.9% in institutional delivery in the April-June 2020 quarter as compared to the same period last year.
Impact of COVID-19 on Indian economy
Trade: Responding to a question on the impact of COVID on exports, the government provided the following data:
- Overall exports declined by 25.4% during April-June 2020 (compared to the same period in 2019). However, data for August 2020 shows a recovery in exports with the decline reducing to 12.7% (compared to August 2019).
- The export of goods from Special Economic Zones (SEZs) was Rs 81,481 crore in the April-June 2020, 37% lower than the corresponding period in 2019 (Rs 1,30,129 crore).
India-China trade: Members also raised questions on the impact of COVID and the border issue with Ladakh on Indo-China trade. The government held that it has taken steps to balance the trade with China by increasing exports and reducing import dependence. The trade deficit with China during April-June 2020 was USD 5.5 billion as compared to USD 13.1 billion during the same period last year.
Table 1: Trade deficit with China (in billion dollars)
|
Year |
2016-17 |
2017-18 |
2018-19 |
2019-20 |
April - June 2019 |
April - June 2020 |
|
Export |
10.17 |
13.33 |
16.75 |
16.61 |
4.16 |
5.53 |
|
Import |
61.28 |
76.38 |
70.31 |
65.26 |
17.26 |
11.01 |
|
Total Trade |
71.45 |
89.71 |
87.07 |
81.87 |
21.42 |
16.55 |
|
Trade Deficit |
-51.11 |
-63.04 |
-53.56 |
-48.64 |
-13.1 |
-5.48 |
Sources: Unstarred Question No. 647, Lok Sabha, answered on September 16, 2020; PRS.
With regard to the import of Active Pharmaceutical Ingredients (bulk drugs), bulk drugs account for nearly 63% of total pharmaceutical imports in India as per government data. Of these, 68% of the bulk drugs imported by India in 2019-20 were from China.
Civil aviation: The government informed that the revenue of Indian carriers was down by nearly 86% during April-June 2020, as compared to the same period last year.
Table 2: Impact of COVID-19 on the civil aviation sector
|
Indicator |
Previously |
Now |
% Change |
|
Revenue related |
April-June 2019 |
April-June 2020 |
|
|
Revenue of Indian carriers |
Rs 25,517 crore |
Rs 3,651 crore |
-85.7% |
|
Revenue of Air India |
Rs 7,066 crore |
Rs 1,531 crore |
-78.3% |
|
Revenue of Airport Operators |
Rs 5,745 crore |
Rs 894 crore |
-84.4% |
|
Employment related |
March 31, 2020 |
July 31, 2020 |
|
|
Employment at airlines |
74,887 |
69,589 |
-7.1% |
|
Employment at airports |
67,760 |
64,514 |
-4.8% |
|
Employment at ground handling agencies |
37,720 |
29,254 |
-22.4% |
|
Employment at Cargo operators |
9,555 |
8,538 |
-10.6% |
|
Traffic related |
March-July 2019 |
March-July 2020 |
|
|
Total domestic traffic |
5,85,30,038 |
1,20,84,952 |
-79.4% |
|
Total international traffic |
93,45,469 |
11,55,590 |
-87.6% |
Sources: Unstarred Question No. 872, Lok Sabha, answered on September 17, 2020; PRS.
Vande Bharat Mission: The Vande Bharat Mission was launched on May 7, 2020 to facilitate the return of Indian nationals stranded in various countries. As of September 10, 2020, a total of 13,74,237 Indians have returned to India and the total cost incurred for this effort was Rs 22.5 crore. Of these, about 3 lakh people were working outside India. The government stated that SWADES (Skilled Workers Arrival Database for Employment Support) initiative has been launched to conduct a skill mapping exercise of the returning citizens under the Vande Bharat Mission.
Metro rail: Due to the lockdown, metro services in different cities came to a halt. This has led to a loss of Rs 1,609 crore for the Delhi Metro. The loss incurred due to the halting of the other metros was: Rs 170 crore for Bengaluru Metro, Rs 90 crore for Lucknow Metro, Rs 80 crore for Chennai Metro, and Rs 34 crore for Kochi Metro.
On Shramik special trains and Vande Bharat Mission
Railways revenue: As of August 2020, the total revenue of Railways was Rs 41,844 crore, which is a decline of 42% over the corresponding period last year. Of this, Rs 39,648 crore (95%) was freight revenue. During April to August 2020, the passenger traffic was 1.3% of the traffic in the corresponding period last year, and the freight traffic was 86.7% of the traffic seen in the corresponding period last year. The total amount of refund made to passengers due to cancellation of trains booked till April 14, 2020 (for the journey period between March 22, 2020 and August 12, 2020) was Rs 3,371 crore.
Special trains: Several members asked questions about the Shramik special trains, the number of migrant labourers who returned to their home states, and the loss of revenue to railways due to restrictions on travel and movement. The government responded that 4,621 shramik special trains were run from May 1 to August 31, 2020, which transported 63 lakh passengers across the country. Based on the data provided by states, 97 persons passed away while travelling on Shramik special trains (as of September 9, 2020). A total fare of Rs 433 crore was collected from the state governments for running these special trains.
The government also started other special trains (15 pairs of Rajdhani Express and special trains for examinations such as JEE and NEET). The average occupancy in these trains (from May 12 to August 31, 2020) was around 82%.
On Migrant labourers, relief measures and MGNREGS
A total of 1.05 crore migrant workers have returned to their home state till now (maximum to Uttar Pradesh, followed by Bihar, West Bengal, and Rajasthan). State-wise details are listed in the table below.
Table 3: Number of migrant workers who have returned to home-state (as of September 14, 2020)
|
State |
Workers who have returned to the state |
|
Uttar Pradesh |
32,49,638 |
|
Bihar |
15,00,612 |
|
West Bengal |
13,84,693 |
|
Rajasthan |
13,08,130 |
|
Madhya Pradesh |
7,53,581 |
|
Jharkhand |
5,30,047 |
|
Punjab |
5,15,642 |
|
Assam |
4,26,441 |
|
Kerala |
3,11,124 |
|
Maharashtra |
1,82,990 |
|
Tamil Nadu |
72,145 |
Sources: Unstarred Question No. 197, Lok Sabha, answered on September 14, 2020; PRS.
Responding to a question on whether free grains under the Aatma Nirbhar Scheme had reached the migrant workers, the government stated that no data on the number of migrants/stranded migrant persons across the country was available with the Department of Food Distribution and that the responsibility of identification of beneficiaries under this scheme was entrusted with states. The government informed that states have indicated about 2.8 crore migrant worker beneficiaries. As of August 31, 2020, food grains have been distributed to 2.67 crore of the identified beneficiaries for the months of June and July 2020.
MGNREGS: On whether the migrant labourers have been provided jobs under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), the government said that there is no provision to register a job cardholder categorized as a migrant labourer in the card in the scheme. It stated that a total of 86.82 lakh new job cards have been issued this year so far, against a total of 64.96 lakh cards issued during the same period last year. The employment provided under the scheme was nearly 100% higher for the months of June and July 2020, as compared to the corresponding months in 2019. The total demand (from April 2020 to September 12, 2020) for employment under the scheme was 22.5 crore persons, a 39% increase from 16.2 crore persons for 2019-20 (during the same period).
EPF withdrawal: In March 2020, as part of the relief package, the government increased the withdrawal limit from the Employee’s Provident Fund (EPF) accounts. In areas declared to be affected by an epidemic or pandemic, members are permitted to withdraw three months’ salary or 75% of the amount lying in the member’s PF account, whichever is lesser. The government stated that a total of Rs 39,403 crore has been withdrawn from EPF from March 25, 2020 to August 31, 2020. The withdrawal was highest in the states of Maharashtra (Rs 7,838 crore), Karnataka (Rs 5,744 crore), and Tamil Nadu (Rs 4,985 crore).
Other questions
Locust attack: Several members sought to know whether the locust attacks caused damage to crops and whether the government has provided any compensation to the affected farmers. The Ministry of Agriculture responded that the locust incursions were reported in the 10 states of Bihar, Chhattisgarh, Gujarat, Haryana, Madhya Pradesh, Maharashtra, Punjab, Rajasthan, Uttarakhand, and Uttar Pradesh. The Rajasthan government has reported crop damage of 33% or more in nearly 3,400-hectare area. Haryana has reported below 33% crop damage in 6,166-hectare area. No damage was reported in Gujarat, Chhattisgarh, Punjab, and Bihar. On compensation, the government stated that pest attack has been notified as a natural disaster and states could provide relief under the State Disaster Response Fund. However, no state government has reported any data yet on the distribution of relief to affected farmers.
Functioning of virtual courts: The Ministry of Law and Justice informed that 11,93,046 hearings were done by video conferencing between March 24, 2020 and July 15, 2020 by district and subordinate courts across India. Further, it stated that to handle challenges related to COVID-19, the government has allocated nearly Rs 30 crore for providing video conferencing equipment and facilitating help desk counters for e-filing in various court complexes
Custodial deaths: The government informed that a total of 1,697 persons died under police/ judicial custody, and a total of 112 cases were registered as encounter deaths (from April 2019 to March 2020). State-wise details are noted below in Table 4 for select states (they comprise 75% of the total custodial and encounter deaths in 2019-20). On whether the government is considering a legislation to prevent the torture of individuals by police and public officials, the Ministry of Home Affairs informed that police and public order are state subjects and there is no proposal to bring a legislation in this regard.
Table 4: Custodial deaths and Encounter deaths across select states (April 2019-March 2020)
|
State |
Custodial deaths |
Encounter deaths |
|
Uttar Pradesh |
403 |
26 |
|
Madhya Pradesh |
157 |
3 |
|
West Bengal |
122 |
1 |
|
Bihar |
110 |
5 |
|
Punjab |
99 |
1 |
|
Maharashtra |
94 |
3 |
|
Rajasthan |
84 |
2 |
|
Haryana |
77 |
1 |
|
Tamil Nadu |
69 |
3 |
|
Chhattisgarh |
59 |
39 |
Sources: Unstarred Question No. 292, Lok Sabha, answered on September 15, 2020; PRS
For this purpose, the GST (Compensation to States) Act was enacted in 2017 on the recommendation of the GST Council. The Act guarantees all states an annual growth rate of 14% in their GST revenue during the period July 2017-June 2022. If a state’s GST revenue grows slower than 14%, such ‘loss of revenue’ will be taken care of by the Centre by providing GST compensation grants to the state. To provide these grants, the Centre levies a GST compensation cess on certain luxury and sin goods such as cigarettes and tobacco products, pan masala, caffeinated beverages, coal, and certain passenger vehicles. The Act requires the Centre to credit this cess revenue into a separate Compensation Fund and all compensation grants to states are required to be paid out of the money available in this Fund.
How much compensation is provided to states?
For 2018-19, Centre gave Rs 81,141 crore to states as GST compensation. However, for the year 2019-20, the compensation requirement of states nearly doubled to Rs 1.65 lakh crore. A huge increase in requirement implies that states’ GST revenue grew at a slower rate during 2019-20. This can be attributed to the economic slowdown seen last year, which resulted in a nominal GDP growth of 7.2%. This was significantly lower than the 12% GDP growth forecast in the 2019-20 union budget (Figure 1).
Figure 1: GDP growth rate (2017-21)
Sources: Union Budget Documents; MOSPI; PRS.
In 2019-20, the gross GST revenue (Centre+states) increased by just 4% over the previous year. Despite this, due to the compensation guarantee, all states could achieve the growth rate of 14% in their GST revenue – much higher than the overall growth in GST revenue. However, there was a delay in payment of compensation from Centre. More than Rs 64,000 crore of the compensation requirement of states for 2019-20 was met in the financial year 2020-21.
What led to a delay in payment of compensation to states?
In 2019-20, the delay in payment was observed due to insufficient funds with Centre for providing compensation to states. These funds are raised by levying a compensation cess on the sale of certain goods, some of which were affected by the economic slowdown. For instance, in 2019-20, sales of passenger vehicles declined by almost 18% and coal offtake from domestic coal companies reduced by nearly 5%, over the previous year. As a result, cess collections registered a growth of just 0.4% in 2019-20 (Figure 2), against the 104% increase seen in the compensation requirement of states. This resulted in a shortfall of funds of nearly Rs 70,000 crore.
Figure 2: Cess collections insufficient for providing compensation
Note: In 2017-18, GST was implemented for only nine months. Compensation amount shown may not match with the amount released in that financial year because of delay in releases.
Sources: Union Budget Documents; Ministry of Finance; GST Council; Lok Sabha Questions; PRS.
How can compensation be paid to states if cess collections are insufficient?
The shortfall in collections for 2019-20 was met through: (i) surplus cess collections from previous years, (ii) partial cess collections of 2020-21, and (iii) a transfer of Rs 33,412 crore of unsettled GST funds from the Centre to the Compensation Fund. These unsettled funds are GST collections, generated in 2017-18 from inter-state and foreign trade, that have not yet been settled between centre and states.
In the 2020-21 budget, the Centre has estimated a 10% growth in nominal GDP. However, due to the impact of COVID-19 and the lockdown, the actual growth in 2020-21 is likely to be much lower. In such a scenario, states’ GST revenue would also be much lower than expected, thus leading to a higher compensation requirement. However, the ability of Centre to pay compensation depends on the cess collections, which are also getting impacted this year. For instance, cess collections during the period Apr-Jun 2020 have been 41% lower in comparison to the same period last year. Moreover, of the Rs 14,482 crore collections made during this period, Rs 8,680 crore has been likely used up for paying compensation for 2019-20.
Note that under the GST (Compensation to States) Act, 2017, Centre can provide compensation to states only through the money available in the Compensation Fund. The Union Finance Minister, in her budget speech in February 2020, clarified that transfers to the Fund would be limited only to collections of the GST compensation cess. Despite a shortfall of money in the Compensation Fund, the Centre is constitutionally obligated to meet states’ compensation requirement for a period of five years.
Various measures have been suggested to address the issue of shortfall in the Fund, either by reducing the compensation payable to states (which would require Parliament to amend the Act following GST Council’s recommendation) or by supplementing the funds available with Centre for providing compensation to states. The Act allows the GST Council to recommend other funding mechanisms/ amounts for credit into the Compensation Fund. For example, one of the measures proposed for meeting the shortfall involves Centre using market borrowings to pay compensation to states, with the idea that these borrowings will be repaid with the help of future cess collections. To enable this, the GST Council may recommend to Centre that the compensation cess be levied for a period beyond five years, i.e. post June 2022.
Impact on states post 2022
In 2019-20, except for a few north-eastern states, most states saw their compensation requirements increase multifold by 2-3 times, over the previous year’s figures. Table 1 shows the compensation requirement of states for the years 2018-19 and 2019-20. Six states (Delhi, Gujarat, Karnataka, Maharashtra, Punjab, and Tamil Nadu) accounted for 52% of the total requirement of compensation for 2019-20. Further, in some states such as Punjab and Delhi, compensation grants form a significant share of the overall revenue receipts (20% and 16% resepctively).
Note that states have been guaranteed compensation only for a period of five years. After June 2022, states dependent on compensation will observe a revenue gap due to a cut in these grants coming from Centre. States have roughly two years to bridge this gap with other tax and non-tax sources to avoid a potential loss of revenue, and a consequent fall in the size of their state budget, which could adversely affect the economy. To what extent will such concerns be alleviated remains to be seen based on the course of action decided by the GST Council.
Table 1: GST compensation requirement of states for 2018-19 and 2019-20 (in Rs crore)
|
State |
2018-19 |
2019-20 |
% increase in compensation requirement |
||
|
Amount |
As a % of revenue |
Amount |
As a % of revenue* |
||
|
Andhra Pradesh |
0 |
- |
3,028 |
3% |
- |
|
Assam |
455 |
1% |
1,284 |
1% |
182% |
|
Bihar |
2,798 |
2% |
5,464 |
4% |
95% |
|
Chhattisgarh |
2,592 |
4% |
4,521 |
7% |
74% |
|
Delhi |
5,185 |
12% |
8,424 |
16% |
62% |
|
Goa |
502 |
5% |
1,093 |
9% |
118% |
|
Gujarat |
7,227 |
5% |
14,801 |
10% |
105% |
|
Haryana |
3,916 |
6% |
6,617 |
10% |
69% |
|
Himachal Pradesh |
1,935 |
6% |
2,477 |
8% |
28% |
|
Jammu and Kashmir |
1,667 |
3% |
3,281 |
5% |
97% |
|
Jharkhand |
1,098 |
2% |
2,219 |
4% |
102% |
|
Karnataka |
12,465 |
8% |
18,628 |
11% |
49% |
|
Kerala |
3,532 |
4% |
8,111 |
9% |
130% |
|
Madhya Pradesh |
3,302 |
3% |
6,538 |
4% |
98% |
|
Maharashtra |
9,363 |
3% |
19,233 |
7% |
105% |
|
Meghalaya |
66 |
1% |
157 |
2% |
138% |
|
Odisha |
3,785 |
4% |
5,122 |
5% |
35% |
|
Punjab |
8,239 |
13% |
12,187 |
20% |
48% |
|
Rajasthan |
2,280 |
2% |
6,710 |
5% |
194% |
|
Tamil Nadu |
4,824 |
3% |
12,305 |
7% |
155% |
|
Telangana |
0 |
- |
3,054 |
3% |
- |
|
Tripura |
172 |
1% |
293 |
3% |
70% |
|
Uttar Pradesh |
0 |
- |
9,123 |
3% |
- |
|
Uttarakhand |
2,442 |
8% |
3,375 |
11% |
38% |
|
West Bengal |
2,615 |
2% |
6,200 |
4% |
137% |
Note: Arunachal Pradesh, Manipur, Mizoram, Nagaland, and Sikkim did not require any compensation in 2018-19 and 2019-20.
*Revenue for the year 2019-20 does not takes into account those GST compensation grants which were payable to states in 2019-20 but were released by Centre in the year 2020-21. The percentage figures would be slightly lower if such grants are included in 2019-20 revenue.
Sources: State Budget Documents; Ministry of Finance; Lok Sabha Questions; CAG; PRS.