22/08/2018 10:23 AM IST | Updated 24/08/2018 2:18 PM IST

Kerala Floods: Why The Modi Government May Not Accept UAE's Rs 700 Cr Relief

The MEA has not announced a formal decision yet.

MANJUNATH KIRAN via Getty Images
People carry food and water aid distributed to those stranded by floods in Pandanad in Alappuzha District in Kerala on August 21, 2018.

While the United Arab Emirates (UAE) has offered Rs 700 crore to Kerala towards its relief funds, the Narendra Modi-led Bharatiya Janata Party (BJP) government is unlikely to accept the offer over tax issues and a policy put in the place by the Congress Party-led United Progressive Alliance (UPA) in 2004.

NDTV quoted a senior Ministry of External Affairs (MEA) official as saying, "If foreign aid is coming to non-profits or NGOs which are registered under the Foreign Contribution (regulation) Act (FCRA) then they will not be taxed. But if donations are received by NGOs which are not registered, then it is counted as the income of the NGO and that will be taxed."

The report said that while the MEA has welcomed donations from Indians abroad, since it is tax free, Kerala Finance Minister Thomas Issac told NDTV that there was no provision of UAE's donation to be taxed if it was to be a direct cash transfer.

Reports say that the centre has decided to depend only on domestic funds to finance Kerala's flood relief. The MEA, however, has not made any official announcement over the donation.

The Hindu reported that if the offer is accepted, it will reverse a 15-year-old convention put in place by the government in 2004 where it decided not to take foreign aid. This was in the aftermath of the tsunami that had hit the southern coastal states of the country.

Hindustan Times reported that Sheikh Mohammed Bin Zayed Al Nahyan, the crown prince of Abu Dhabi, called Prime Minister Narendra Modi on Tuesday to inform him of the intention to contribute to rehabilitation efforts in Kerala.

Kerala Chief Minister Pinarayi Vijayan took to Twitter to thanks the UAE and express gratitude for the offer.

Over 2 million migrants from India work in the UAE and most of them are from Kerala.

A report in Outlook said that India was also unlikely to take assistance from the United Nations that has also come forward to offer financial help.Meanwhile, Vijayan has told the Centre that the state government needs a Rs 2,600 crore 'special package' for relief work.

The Indian Express reported Vijayan as saying, "The government is planning to build a new Kerala, not just rebuild what existed before the floods."

The report said Vijayan has also asked the Centre to raise its borrowing ceiling from 3% to 4.5% of its GDP.

Over 300 people have died in the worst floods that Kerala saw in a decade. More than a million people have been displaced and thousands of homes have been razed to the ground. As the rain has abated and the flood water has receded, the state is looking at a herculean task of rebuilding infrastructure and rehabilitating displaced citizens.

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