Telangana on Friday pitched for 40% devolution of the central tax revenue to states, making a case for allocation of resources based on the 'functional responsibilities' of the Centre and the states under the Constitution.
Besides, the state government said that issues of income inequalities need to be addressed through specific schemes tailored to meet the requirements of backward states and special development packages and not through tax devolution.
It also sought an adequate 'compensatory mechanism'.
Making a presentation before the 14th finance commission, Telangana chief minister K Chandrasekhar Rao said: "With focus on inclusive growth, the commitments of states have increased considerably. As most of the sectors touching on the lives of the people fall within the purview of states, there is an imperative to align resources in favour of states."
He added: "I request the Finance Commission to be a trail blazer, ushering in an era of resource transfers based on constitutionally assigned responsibilities. There is another compelling reason for a paradigm shift in resource sharing in favour of states as there has been considerable increase in the non-tax revenues of the Centre from off-shore royalties, sale of spectrum and disinvestment proceeds."
Noting that there has been a reduction in the size of the divisible pool because of the levy of cesses and surcharges by the Centre, Rao said it has neutralised the increases in states' share in Central tax revenue recommended by successive finance commissions.
"This can easily be accommodated by a marginal reduction of 5% in the Centre's expenditure on state subjects," he said.
"We are of the firm view that population and area represent the needs of a state in terms of provision of public goods and services more than any other indicator. We propose that weights of 25 and 30% be assigned to population and area respectively," he added.