Mamata Banerjee on Wednesday wrote to Prime Minister Narendra Modi, alleging that his government’s act of adding attorney-general K.K. Venugopal’s opinion to the discourse over the GST compensation impasse was apparently “an act of subterfuge” to undermine the faith of states in cooperative federalism.

With her four-page missive to Modi, the Bengal chief minister made it clear she thought the Centre’s proposal that the state governments could borrow to meet the compensation deficit was a “betrayal of trust” and “violated the very premise of federalism”.

In the letter, she expressed her objection to Venugopal being brought in, contrary to the spirit of dialogue.

“… there was no legalistic approach taken by bringing in the AG, since it was a matter of trust with full cooperation between the states and the Centre,” she wrote, referring to the Centre referring to Venugopal’s view — brought up by the Centre last week — that the Union government was not legally bound to compensate from its coffers a shortfall in GST revenues of states.

Her counterparts in Kerala, Tamil Nadu, Telangana, Chhattisgarh and Delhi raised similar concerns.

“… AG has been brought in, who seemed to opine that it is not the responsibility of the government of India to compensate the states for GST shortfall in the pandemic situation. This appears to be an act of subterfuge to undermine the trust reposed by the states in the spirit of cooperative federalism,” added the Trinamul Congress chief, who in a meeting of several non-BJP chief ministers convened by Congress chief Sonia Gandhi on August 26 fiercely defended the states’ right to the compensation.

Sources close to Mamata said that she mentioned the AG’s opinion as she thought that his opinion was part of a plan to deny the states their legitimate dues.

According to the Centre’s estimates, the compensation requirement of states in the current fiscal would be Rs 3 lakh crore, of which Rs 65,000 crore would come from levy of cess. Of the Rs 2.35 lakh crore shortfall, Rs 97,000 crore is for GST implementation and the remaining amount is to cover Covid-19-related expenses and losses.

The Centre gave the states two options: borrow Rs 2.35 lakh crore or borrow Rs 97,000 crore through an RBI-provided window.

The Mamata government has already rejected the twin formula, with state finance minister Amit Mitra claiming it neither has any headroom to borrow nor the ability to pay interest.

Initial estimates suggest Bengal alone will face a shortfall of Rs 15,000 crore in GST collection this year as the economy faces headwinds from the Covid-19 pandemic. If the state plans to recoup the loss, which translates into 1.5 per cent of state GDP, entirely by market borrowing, it would hit the debt ceiling limit under the FRBM Act.

“Why should we accept this deprivation from the Centre? In my letter, I spoke on behalf of all (including BJP-ruled) states,” Mamata said on Wednesday.

“Why will you budge from a commitment? Commitments must always be honoured. There cannot be such a breach of trust. At this time, we think, it will only weaken federalism. There will be conflict between the states and the Centre. That is not correct,” she added.

Expressing “deep anguish” by the GST impasse, which she called a “betrayal” of the trust and moral responsibility of the Centre towards the states, Mamata wrote: “This is a travesty and an abrogation of the fundamental basis on which the states gave up 70 per cent of their taxing powers, including the entire VAT regime, to usher in the GST regime.”

Reminding Modi of his stand on the GST while he was the chief minister of Gujarat and the view of his party while in the national Opposition, placed on record by deceased leader Arun Jaitley in 2013, she asked the Prime Minister not to “belie the trust” between the states and the Centre.

“I further urge you not to allow an insufferable blow to the federalist policy of our nation,” she added.

Trinamul protests

Mamata’s party has planned extensive protest programmes on September 8, 14 and 20 across Bengal against the alleged deprivation of the state by the Centre.

Announcing the decision, Trinamul secretary-general Partha Chatterjee said it was not only about the GST impasse but also Rs 53,000 crore in dues from the Centre, besides Cyclone Amphan relief.