New Delhi, Sep 20 (PTI) The Congress on Saturday accused the government of indulging in "coercive" federalism by eroding independence of states and reducing them to municipalities while citing a CAG report that claimed debt on states has risen to nearly Rs 60 lakh crore in 10 years.

Congress general secretary Randeep Surjewala claimed that India's federalism is under "unprecedented strain".

In a post on X, he said states already carrying debt levels that have "tripled in a decade" and are now being stripped of their "fiscal independence" through the government's handling of GST compensation cess and "arbitrary" central levies.

"The result is 'double jeopardy': mounting debt and shrinking revenues.

"'Cooperative federalism' is at stake, 'decentralisation of power' is at stake, and what we are witnessing is a deliberate attempt to 'finish the States', hollow out their 'functionality', and 'unionise power' in the hands of the Centre," he said in his post.

Surjewala said a CAG's report on state debt makes the crisis even more alarming. He said public debt of states has "tripled" in 10 years, from Rs 17.57 lakh crore in 2013-14 to Rs 59.60 lakh crore in 2022-23, equal to 22.96 percent of their combined GSDP.

Eight states already have debt levels above 30 per cent of their GSDP, he claimed citing the report.

"Modi government's centralisation is 'strangling States', eroding their 'independence', 'finishing their functionality', and reducing them to 'powerless municipalities'.

"This is not cooperative federalism. It is 'coercive federalism' that undermines democracy itself by 'unionising power' in the Centre and leaving States to collapse under debt and dependency," the Congress general secretary said.

He said as "Coercive federalism" converts states into "glorified municipal committees", there are 12 issues to ponder over.

Claiming that Rs 1,70,000 crore is collected every year from "cesses and surcharges", he aid the Centre keeps it and states get nothing.

"If merged with GST, States would get their share. Today, they are denied." Surjewala also said "Compensation Cess" was created to pay states for GST losses and that period ended in June 2022.

"Now the same cess is only used to repay central loans." Beyond October 2025 there is "no constitutional mandate" to continue it, yet the Centre wants to hold it exclusively, he claimed.

The Congress leader also alleged that as GST collections are projected to shrink further, the states will lose half or more of this and neither GST nor cess will flow to them.

In October 2024, he claimed the government promised that cess would be converted into an additional levy and shared equally between Centre and states.

"Now they refuse to share. A complete 'somersault' targeting States," he said.

"If the Centre collects Cess on its own, it will not enter the Consolidated Fund. This means States will lose the '41 percent devolution' guaranteed by the Finance Commission.

"Proposition is simple. Keep Cess but use it only to compensate States for the next decade. The Modi government dismisses this as "hogwash" and repeats the same false promise of "economic buoyancy". Reality is Karnataka - State alone loses Rs 25,000 crore every year compared to the pre-GST regime," he said.

With states losing revenue, he claimed that this is a "death-knell" for financial independence of states.

"They will be reduced to "glorified municipalities", stripped of power and made dependent on crumbs from Delhi," Surjewala claimed.

He also claimed that "Cooperative federalism" is being hollowed out and "Decentralisation of power" is being reversed.

States are drowning in "debt", denied their rightful "revenues", and attacked through "cess politics", the Congress leader alleged. PTI SKC ZMN

Fiscal federalism at risk as central retention of GST cess is said to erode state revenue and autonomy. Claims that central retention and redeployment of the GST compensation cess and other cesses has constrained state revenue, increased state indebtedness, and undermined Finance Commission devolution, thereby reducing state fiscal autonomy; calls for restricting cess use to compensate states and restoring transparent revenue-sharing to protect cooperative federalism.