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’15th Finance Commission Holds A Threat to Economic Independence of States’

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The Terms of Reference (ToR) of the 15th Finance Commission posed a threat to the economic independence of states, a conclave of Chief Ministers, finance ministers and secretaries of various states opined.

They made a strong pitch for assured devolution (of funds) rather than discretionary devolution.

The conclave strongly opposed the ToR, saying they reflected the Centre’s ‘discriminatory attitude’ towards the states.

A draft memorandum approved at the conclave, which would be submitted to the President, said the ToR violates the federal principle as enshrined in the Constitution, erodes the autonomy of all states and brings significant financial hardship.

“The ToR of the FFC raises serious concerns. They are qualitatively different from the ToR of the previous Finance Commissions. Some of the changes infringe on the provisions of the Constitution. Some others are disruptive of well-settled federal fiscal arrangements in India,” it said.

The conclave feared that these changes would restrict the states from fulfilling their constitutional obligations as listed in the Seventh Schedule.

“They will also prevent states from working effectively towards independent and distinct goals and aspirations within the overall constitutional framework. They will, thus, further weaken cooperative federalism in India,” it said.

While suggesting at least 13 amendments to the ToR, the conclave also wanted Union Territories with legislature (NCT of Delhi and Puducherry) included along with states for consideration by the FFC.

The main amendment sought was to Para 4 (ii) to restore the words “which are in need of assistance”, mentioned in Article 275 of the Constitution, in the appropriate place.

It also wanted the last sentence in Para 5 relating to revenue deficit grants deleted.

In Para 6, the conclave sought deletion of the words ‘likely to be reached by 2024-25’ and insertion of ‘current’ after the words ‘on the basis of’.

Terms referring to flagship schemes of the Union Government and Direct Benefits Transfer should also be deleted, it said.

It wanted Para 8 amended to read ‘The Commission, while making its recommendations, is directed to use the population data of 1971 in all cases where population is a factor for determination of the devolution of taxes, duties and grants-in-aid”.

The reference to providing incentives to states reaching replacement rate of population growth, in Para 7 (ii), should be deleted, it added.

Earlier in the day, Andhra Pradesh Chief Minister N Chandrababu Naidu, who inaugurated the day-long conclave, said progressive states would lose heavily if the 2011 census was taken as the basis for devolution of central funds.

He also demanded that the Centre respect the cooperative federal system.

Puducherry Chief Minister V Narayanasami, Delhi Deputy Chief Minister Manish Sisodia, Finance Ministers Thomas Isaac (Kerala), Amit Mitra (West Bengal) and Manpreet Singh Badal (Punjab) spoke at the conclave.

Others who participated were Andhra Pradesh Chief Secretary Dinesh Kumar, 14th Finance Commission member M Govinda Rao, former Special Chief Secretary (Finance) Venkataramani Bhaskar, finance expert V B Athreya, Kerala State Planning Board Vice-Chairman V K Ramachandran, Kerala Principal Secretary (Finance) Ekroop Caur and Andhra Pradesh Finance Secretary Muddada Ravi Chandra.

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