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State FMs see serious flaws in Terms of Reference of 15th Finance Commission

By TIOL News Service

NEW DELHI, MAY 08, 2018: AT the conclave of State Finance Ministers who assembled to debate on the impact of the ToR of the 15th Finance Commission on fiscal federalism at Amaravati, the AP Finance Minister, Mr Yanamala Ramakrishnudu, said that the use of population from census 2011 by 15th FC with a greater weight for determining the allocation of funds to the States would cause great injustice to the States. This approach would penalise States which have shown declining fertility rates and lower population growth over the past four decades, he added.

He further underlined, "Secondly, we are all aware about the division of the powers of taxation and borrowings between the Centre and the States. The States can rarely match their resources with the development needs. States are required to put in place the necessary enabling conditions such as the provision of adequate infrastructure to attract private investments. This involves incurring capital expenditure. The use of 2011 census population figure would result in reduction of the share of majority of the States. If devolution gets reduces, it is bound to increase fiscal and revenue deficits of States.”

He spoke about other key concerns of the ToR, and was followed by Chief Minister of Puducherry, Shri V. Narayanaswamy, who raised the point that the ToR should contain a paragraph to include provisions for union territories also. “The present ToR indicate a move towards central discretion in the release of funds to States. What the States want is the opposite. We want a financial regime in which there is a decisive move away from discretionary to assured devolutions”, he said.

Mr Manish Sisodia, the Deputy Chief Minister of Delhi, said that the 15th Finance Commission will only lead to a centralised path to development. He expressed his support and agreement with the cause of the conclave, and said he looks forward to participate in drafting the memorandum.

Mr Amit Mitra, Finance Minister of West Bengal said that resistance to this Finance Commission is vital, as the ToR are in violation of fundamental constitutional values. “States are facing massive revenue deficits”, he said. “I also want to highlight the non-payment of fund release by the Centre. West Bengal has not received ₹9,958 crores. We are forced to borrow from the market to keep our basic government initiatives running. We need to resist this forced ceiling placed on states’ ability to borrow.”

“These terms of reference are a part of undermining the federal structure. And to my knowledge, other Chief Ministers too have written to Prime Minister Narendra Modi regarding their concerns about the 15th Finance Commission”, said Mr. Mitra.

Finance Minister of Punjab, Mr Manpreet Singh Badal spoke about the impact of GST-related changes, and explained that Punjab is a consequence of many industries migrating away during the partition. “We need to take care of power subsidies, food security and facilities that we assure our people. The ToR acts as an impediment, and is violative of at least Articles 270 and 285.”

The Chief Minister of Andhra Pradesh, Mr N.Chandrababu Naidu, then addressed the conclave and appreciate the remarks made by all the Ministers. He welcomed the economic experts, secretaries and advisors, and said, “I hope that the common Memorandum that we will work on today acts as a starting point for fresh thinking in regard to devolution in recognition of the growing reality of States being more than equal partners in development of the country.”

“The Terms of Reference of the 15th Finance Commission almost penalises states for being progressive and well-performing. States that are good at population control will be in debt.”

“South Indian states, in particular, who have been reportedly good at population control, will be affected. The few seats that South Indian MPs have in the parliament will soon not be ours. The little voice we have, will soon go away”, he said.

 


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