Published On: Tue, Apr 10th, 2018

15th FC’s terms of reference not loaded against any state: Jaitley

New Delhi: Describing as “needless” the ongoing controversy around the terms of reference of the 15th Finance Commission, Finance Minister Arun Jaitley on Tuesday said these are not biased “against any particular region of the country.”

These two parameters allocate more resources to the populous and poorer States

Following a daylong meeting in Thiruvananthapuram on Tuesday of ministers from Kerala, Karanataka, Andhra Pradesh and Puducherry, it was decided to prepare a joint memorandum to be submitted to the President and others for reframing of the 15th Finance Commission’s terms of reference, Kerala Finance Minister Thomas Issac told reporters.

According to the southern states, under the 15th Finance Commission’s terms of reference, they stand to receive relatively less share from the central taxes because their population has fallen, which is an achievenment that deserves to be praised and not penalised.

As per its terms of reference, the commission is required to use population data from the 2011 Census and not the 1971 Census that was used earlier.

“Needless controversy is being sought to be created that the Terms of Reference (ToR) of the 15th Finance Commission are loaded against any particular region of the country. Nothing could be further from truth,” Jaitley said in a Facebook post.

“The share in Central taxes is allocated to the States based on recommendations made by the Finance Commissions to help states to meet fiscal deficiency in providing a minimum standard of services to their people.”

Two criteria are applied by FCs in recommending allocation of the state share of central taxes.

“This calls for assessing states’ ‘needs’ on rationale and equitable basis. Population proxies very well for the needs of the people in quantitative sense. Another criterion, the Income Distance, which captures very well relative poverty of people in the states, is used to assess qualitative needs,” Jaitley said.

“These two parameters allocate more resources to the populous and poorer States, which need additional funds for providing education, health and other services to the people, which own resources of these poorer States may otherwise not allow,” he added.

Noting that although the 14th Finance Commission had no specific mandate for using the 2011, Jaitley said it, nevertheless, “rightly used the 2011 census population data to capture the demographic changes since 1971 to make realistic assessment of the needs of the states”.

The 14th finance panel allocated 10 per cent weight to the 2011 Census, and allocated a 42 per cent share in the Central Taxes to the states, more than ever before, he added.

The 15th Finance Commission has the specific inclusion of another reference – “efforts and progress made in moving towards replacement rate of population growth”.

“This ToR recognises the efforts of all the states which have done well in population control. This specific ToR would allow the 15th FC to propose a specific incentive Scheme to reward the states which have achieved replacement level of population growth.

“There is no inherent bias or mandate in the ToRs of the 15th FC which can be construed as discriminatory against the states which made good progress in population control,” said Jaitley.

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