Chief minister Nitish Kumar on Thursday said Bihar had been let down by the horizontal distribution of funds under the divisible pool of resources as per the 14th Finance Commission recommendations.
In a letter to Union finance minister Arun Jaitley, he expressed his concern over devolution to Bihar over the next five years, saying that the state government’s worry over the proposed devolution as per the 14th Finance Commission recommendations had not been addressed.
“I thank you for expressing an ‘unwavering commitment’ towards overall development of Bihar and betterment of its people. However, a lot is desired in deeds, which, it seems, does not appear to be forthcoming,” he said.
“Statistically, it appears that the allocation recommended by the 14th Finance Commission out of the divisible pool is 136% more than what was allocated by the 13th Finance Commission, but both the allocation figures are not comparable at all,” he said.
Kumar said the commission itself had noted that since there was little scope to increase the share of aggregate transfers from the Centre to the states, all that it had done was to suggest compositional shift in the total transfers.
He said as regards vertical distribution under the 13th Finance Commission, the size of the divisible pool of resources was 32% of the net tax revenue receipts of the Union government, but there were other transfers through grants-in-aid to the states.
Kumar said under the 14th Finance Commission, the divisible pool of resources had undoubtedly become larger at 42% of the net tax revenue receipts of the Centre, but all other transfers to the states would be less, which the commission itself had noted. The component-wise comparison of different transfer figures was bound to be misleading, he said.
“We ought to compare only total transfers to the state. The impact of changes in vertical transfer patterns is similar in all states. But whether the recommendations are fair to Bihar can be judged only by analysing the horizontal distribution pattern,” he said.
“A decrease in the share of divisible pool of taxes for Bihar from 10.92% to 9.67% is not insignificant, but a sizeable reduction of 1.25 percentage point. The reasons for the decrease in allocation are surprising and untenable,” he said.
The CM said Bihar would receive less allocation because the criterion of ‘income distance’ was given less weightage and ‘area’ was given higher weightage penalising a densely populated state like Bihar. In addition, assigning some weight to ‘forest area’ is a disadvantage to Bihar as it is very low in the Gangetic plains.
Kumar said Bihar had also been penalised for financial prudence that was maintained by constraining the non-plan expenditure while the states with revenue deficits had been rewarded. “It is startling that the 14th Finance Commission has in fact penalised states which have observed financial discipline as per standards set by previous Finance Commissions,” he said.
He also regretted that the state government’s endeavour to increase the green cover had not been recognised by the Commission as well as loss of lives and property in Bihar due to annual occurrence of floods from rivers originating in Nepal which accrued additional financial burden on the state.
Kumar said Bihar’s backwardness on physical and social infrastructure parameters and the lowest per capita income of the people had been ignored and said the allocation pattern under the 14th Finance Commission recommendation “is not only unfair but also defies equalisation principle”.
“I will again like to reiterate that the total central pool available for all states is Rs 39.48 lakh crore, out of which Bihar will be getting Rs 3.83 lakh crore at 9.6% of total resources over the next five years (2015-20), which is a substantial decrease both in percentage terms (10.8%) and percentage points (1.2) in comparison to Rs 1.58 lakh crore that our state had got from a total financial kitty of Rs 14.55 lakh crore under the 13th Finance Commission recommendations,” he said.