KCR said the centre was violating principles of cooperative federalism.
Telangana Chief Minister K Chandrashekar Rao was scathing in his critique of the centre's economic stimulus plan in response to the COVID-19 crisis on Monday, accusing it of "blackmailing" state governments and "holding a knife to our neck".
"This is not federalism. The cooperative federalism mentioned by the Prime Minister is bogus, a farce," KCR said at a news conference.
"We are also running a government... We are not subordinates to the centre. State governments have more responsibilities and duties than the centre, it is a fact," he said.
Mocking the conditions imposed by the centre for increasing the states' borrowing limits, he said the state had already carried out many reforms like "One Nation, One Ration Card" being advertised as part of the coronavirus relief package.
"They are holding a knife to our neck and saying 'if you do this, then I will give you Rs 2,000 crore as alms'. They want us to increase municipal taxes. We don't want those Rs 2,000 crore," KCR said.
"I am not against reforms. We have done more reforms than the conditions they imposed but the methods adopted by them totally wrong," he said.
Union Finance Minister Nirmala Sitharaman had said on Sunday that the centre is increasing the borrowing limit under the Fiscal Responsibility and Budget Management (FRBM) Act from 3 per cent to 5 per cent but linked it to a number of conditions.
The conditions would include universalisation of ration cards, ease of doing business, power distribution and urban local body revenues, Ms Sitharaman said.
West Bengal Chief Minister Mamata Banerjee also criticised the centre's move saying it is against the basic tenets of the federal structure and an "eyewash to befool people".
Ms Banerjee, who is also the Trinamool Congress chief, termed the entire economic package a "big zero".
Terming the conditions put forth in the fifth and final tranche of the economic stimulus package of the centre an "assault on the federal structure", Ms Banerjee said for the 1.5 per cent of the 2 per cent increase, "states have to do away with the federal structure".