Tamil Nadu Finance Minister Levels Serious Allegations Against Union Government
Tamil Nadu Finance Minister Thangam Thennarasu presented a stark picture of the state's financial situation during the interim budget presentation for 2026-27 on Tuesday. In a detailed address, he accused the Union government of deliberately creating what he termed an "artificial fiscal crisis" in Tamil Nadu through systematic actions that have severely strained state finances.
Unprecedented Challenges and Specific Allegations
Thennarasu outlined what he described as unprecedented challenges facing the DMK government, pointing to multiple areas where he claims the Centre has actively worked against Tamil Nadu's interests. "In every field, be it denial of sanction of major infrastructure projects for 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, Union government appears to leave no stone unturned to artificially precipitate a fiscal crisis in Tamil Nadu," the minister stated emphatically.
Detailed Breakdown of Financial Impacts
The finance minister provided specific figures to substantiate his claims:
- GST Compensation Termination: Resulted in an estimated revenue shortfall of Rs 9,600 crore for the current fiscal year
- IGST Settlement Deduction: Centre deducted Rs 1,709 crore from the state's RBI account without prior intimation or consultation
- Reduced Tax Share: Tamil Nadu's share in central taxes was reduced in Union budget 2025-26 revised estimates, causing an unanticipated shortfall of Rs 1,202 crore
- Article 293 Mandates: The sudden imposition of requirements under Article 293(3) of the Constitution led to unbudgeted expenditure of Rs 3,087 crore for maintaining Guarantee Redemption Fund levels
Additional Financial Burdens and Withheld Funds
Thennarasu detailed further financial pressures:
- The Union government mandated Tamil Nadu to pay Rs 16,290 crore as Loss Funding to TNPDCL, despite actual losses being only Rs 413 crore, resulting in an additional expense of Rs 15,877 crore
- Substantial funds were withheld by the Centre: Rs 3,548 crore under Samagra Shiksha Scheme, Rs 3,112 crore under Jal Jeevan Mission, and Rs 2,246 crore of Finance Commission grants
- Even approved projects like Chennai Metro Rail Phase II, agreed upon with 50:50 sharing, saw the state government incurring Rs 9,500 crore as payment towards the Union government's share, which continues to reflect as part of state debt
Broader Implications for State Finances
The cumulative impact of these actions has been severe, according to the finance minister. "These actions adversely affected state's debt-GSDP ratio. They also reduced state's ability to borrow within its permissible limits, thereby impacting its liquidity," Thennarasu explained. Despite repeated reminders from the state government, he claimed the Union government has failed to address these concerns.
"These are but a few challenges faced by state government in the current fiscal, where severe fiscal stress was caused by the actions of Union government, which had a destabilising impact on state finances," the minister concluded, painting a picture of a state government struggling against what it perceives as deliberate financial constraints imposed from the Centre.
