‘Centre’s actions impose Rs 50,000 crore burden on TN’, says Thangam Thennarasu

Tamil Nadu govt is facing a cumulative fiscal burden of nearly ₹50,000 crore in the current financial year due to actions by Centre that have had a destabilising impact on the state’s finances, finance minister Thangam Thennarasu said.

“In every field — be it denial of sanction for major infrastructure projects for Tamil Nadu, withholding the release of funds for centrally sponsored schemes, curtailment of tax revenues without due consultation, or the unfair imposition of conditional expenditure mandates — Centre appears to leave no stone unturned to artificially precipitate a fiscal crisis in Tamil Nadu,” he said.


Highlighting the fiscal pressures, Thennarasu said the GST rate rationalisation approved by the GST council without accommodating states’ concerns has resulted in a revenue shortfall of about ₹9,600 crore for Tamil Nadu in FY26. This has compounded financial stress following the end of the GST compensation regime.

In addition, Centre deducted ₹1,709 crore from state’s account with Reserve Bank of India in April 2025 towards IGST settlement without prior consultation. The revised allocation of central taxes in the Union Budget has also led to an unexpected shortfall of ₹1,202 crore.

The state has also been forced to incur unbudgeted expenditure of ₹3,087 crore after Centre mandated maintaining 5% of outstanding guarantees in Guarantee Redemption Fund under Article 293(3).

A major component of the fiscal burden, he said, stems from a directive requiring the state to provide ₹16,290 crore as loss funding to Tamil Nadu Power Distribution Corporation Ltd. Since the utility’s actual loss was only ₹413 crore, this translated into an additional expenditure of ₹15,877 crore for state.

Further, Centre has withheld or not released ₹8,906 crore under Centrally Sponsored Schemes and grants, including ₹3,548 crore under Samagra Shiksha, ₹3,112 crore under the Jal Jeevan Mission, and ₹2,246 crore in Finance Commission grants.

The state has incurred expenditure of about ₹9,500 crore towards Centre’s share of the Chennai Metro Rail Phase II project, which continues to be reflected in the state’s debt, affecting its debt-GSDP ratio and borrowing capacity.

Thennarasu also recalled back-to-back disasters over the past five years, including cyclones such as Michaung, Fengal and Ditwah.

The Union govt released a “meagre sum” of ₹1,151 crore as relief assistance despite requests for ₹50,922 crore, he charged.

He criticised the 16th Finance Commission for granting Tamil Nadu only a marginal 0.44% increase in devolution, far lower than Kerala’s 23.74% and Karnataka’s 13.27%. The state, he said, was not seeking generosity but fair and equitable treatment, and stated that the commission had failed to ensure this.