15th Finance Commission report: UP hopes to make up for marginal lossesUpdated: Feb 03, 2020 20:20 IST
The Uttar Pradesh government hopes the marginal losses the state is set to incur following implementation of the 15th Finance Commission’s report for 2020-2021 may be made up in the panel’s report for 2021-2022 to 2025-2026 that will be submitted later in 2020.
For now, the state government has begun working on the information to be sent to the panel in coming months.
“Yes, we hope Uttar Pradesh may get more than the earmarked share of 17.931% (against 17.959% by 14th Finance Commission) in the 15th Finance Commission’s report for 2020-2021. The Union government has extended the commission’s term by one year and the panel is expected to submit its final report by October 30, 2020. We will send all the necessary information being sought by the commission and hope to get more in the panel’s final report,” said a senior officer.
Finance minister Suresh Khanna also said he would say anything only once the state government got formal information from the commission.
“We will make our point once we get all the information,” said Khanna.
The state government’s optimism lies in the commission’s report observing, “This report for the year 2020-2021 outlines the broad features of public finances as well as opportunities and challenges that India faces over the short term. In the context of recent developments and the additional terms of reference (ToR), we have restricted our analysis and recommendations to the broad essentials of fiscal federalism- vertical and horizontal shares, revenue deficit grants, grants for local bodies and disaster risk management. We have also highlighted some of the areas of intervention that we will consider in greater detail in our final report as well as our expectations on fiscal reforms from the union and state governments.”
The15th Finance Commission has introduced demographic performance of states in the six point criteria recommended for horizontal devolution. The commission has given 15% weight to population, 15% to area, 10% to forest and ecology, 45% to income distance, 12.5% to demographic performance and 2.5% for tax effort.
The 14th Finance Commission had given 17.5% weight to population of 1971 and 10% weight to a population of 2011. It gave 15% weight to the area, 7.5% to forest cover and 50% to income distance.
Many southern states, in their memorandum given to the 15th Finance Commission, had raised concerns over the use of population data of 2011 for the purpose of devolution. Hence, the commission, in its report for 2020-2021, observed: “Their concern is that the states, which have controlled their population would be at a disadvantage, if the latest population data is used instead of population data from the 1971 Census….Para 8 of this commission’s terms of reference (ToR) specifies that the commission will use population data of 2011 while making recommendations… Our immediate predecessor the 14th Finance Commission had expressed the view that though the use of dated population data is unfair, it is bound by its ToR. This commission is of the view that fiscal equalisation being recommended by it is for the present needs of the states and this is best represented by the latest census data. Given the specific ToR to use 2011 population data, there is no further choice for this commission.”
The commission further observed, “In determining the vertical share of taxes, we have noted the compositional shift in the overall transfers to the states, and have continued with the previous approach of treating tax devolution as a more objective form of transfer of resources than other forms of transfer which are more discretionary. In determining the horizontal share of states, we have taken into account the performance of individual states both in the national objective of demography management and also in the collection of taxes. We have provided grants-in-aid for local bodies, disaster relief and for states with post devolution revenue deficit. We have refrained from giving state specific grants, but have provided a roadmap for sector specific grants and performance based incentives that we expect to address in greater detail in the final report.”