Fiscal politics take centrestage in Tamil Nadu as DMK accuses centre of under-funding the state

The ruling party in Tamil Nadu has also left no stone unturned in reminding its electorate that while Tamil Nadu is yet to receive support, the Centre did not hesitate in parting with flood relief with Cyclone Tauktae ravaged Gujarat in 2021.

"The next day, the Prime Minister, in Gujarat, announces ₹1,000 crore," said DMK spokesperson A Saravanan, Why is there step-motherly treatment for Tamil Nadu? That is the question we are asking."

It isn't just flood relief — the DMK has also targeted the Centre and BJP for not honouring the commitment to fund one of Chennai's key infrastructure projects, Phase two of the Chennai Metro Rail. Failing to hear from the Centre on this front, the state's finance minister Thangam Thennarasu announced on February, while tabling the state budget, that Tamil Nadu would bear the entire project cost of ₹12,000 crore, in order to complete construction by 2026.

However, the BJP claims the DMK is distorting facts, to make a political statement. The party also blames the DMK government of breaching procedures to fast-track the project.

"The Metro Phase 2 has not been approved by the cabinet," said Narayanan Thirupathy, Vice President, Tamil Nadu BJP, "Without approval, how do you expect the Centre to release funds? First of all, the cabinet has to approve. Before approving, you have started work. And now, you're asking for money without approval."

The DMK, in turn, is accusing the Centre of being obstructionist in facilitating external funding for the project. "They (Centre) only have to push the file to the Asian Development Bank with the recommendation 'yes, give the money, we have all the resources'," said Saravanan, "The Union Government is not doing that."

Infrastructure funding aside, Tamil Nadu has also been arguing that it gets far less than it contributes to the national tax kitty. The present-day tax devolution formula has the state receiving around ₹29 for every ₹100 given to the Centre, even as a state like Uttar Pradesh receives ₹273 for every ₹100 contributed.

Despite Tamil Nadu expecting ₹44,760 crore in Central GST devolution for FY25 — up 6% from initial estimates — it wants changes to the method this tax devolution is calculated.

"Our concerns are different," said T Udhayachandran, Tamil Nadu's finance secretary in a chat with CNBC-TV18 on February 19, the day of the state budget, "It's the formula being adopted by the finance commissions that we are addressing. Probably, the new finance commission will address our concerns and will be kind enough to developed states like TN."

Interestingly, the AIADMK, which is the principal opposition in the state, is not buying any of these claims. While it agrees that the Centre must fund relief and infrastructure, it claims the DMK government is being reckless with its own borrowing and expenditure.

"If the DMK had not borrowed ₹3.5 lakh crore in 3.5 years; if they had borrowed the same average that the AIADMK borrowed and delivered results, this would have been a burning issue today," said AIADMK spokesperson, Kovai Sathyan.

He added: "Having borrowed much more than the average is and still claiming that they aren't getting money from the Centre, will not go down as a good narrative." With just under a month to go for phase one of polling in Tamil Nadu, the Centre-State fiscal face-off is likely to dominate discourse at poll rallies and roadshows.