BHUBANESWAR: Chief Minister Mohan Charan Majhi on Thursday made a strong pitch for increasing the share of states in the vertical devolution of funds from the divisible pool of central taxes from the current 41 per cent to 50 per cent.
The chief minister made the demand during a meeting with members of the 16th Finance Commission headed by Arvind Panagariya here. The central panel was on a four-day visit to assess the financial needs of the state before making its recommendations on tax devolution to the Centre.
The chief minister sought an award of Rs 12,59,148 crore for the five years from 2026 to 2031 “We have demanded Rs 9,88,422 crore to make up for pre-devolution revenue deficit, Rs 1,10,434 crore for state-specific need, Rs 1,00,036 crore as grants to local bodies, Rs 31,004 crore for disaster response and Rs 29,252 crore for disaster mitigation,” Majhi told mediapersons in a briefing after the meeting.
Justifying the need for higher tax devolution to the state, Majhi said cess and surcharges levied by the Union government was noticeably higher compared to the rise in gross tax revenues.
“Ignoring the Covid year (2019-20), the average share of cess and surcharges in the post-Covid years is close to 15 pc of gross tax revenue of the Union government while this average throughout 2010-15 is 6.21 pc. The increase in states’ share in Union taxes to 42 pc seemed larger than it really was because it overlooked the fact that the higher devolutions subsumed the just-discontinued plan grants,” said the memorandum submitted by Majhi to the Commission.
Moreover, the reworked financing pattern of the centrally-sponsored schemes effectively shifted a substantial part of the financing burden to the states, the memorandum added.
“We pressed upon the 16th Finance Commission that there is merit in the argument for raising the tax share of states to 50 pc, especially if the issue of cess and surcharges is not quickly resolved. Even in the event of some definite measure relating to cess and surcharges, the case for 50 pc devolution would remain because of the need for untied resources,” the CM said.
He said the central government’s tax revenue is allocated to states based on a predetermined formula. Currently, Odisha’s share is 4.528 pc of this allocation. The state has placed a demand to increase its share to 4.964 pc.
The state has also submitted a proposal asking for a combined grant of 2 pc of the projected gross revenue receipts of the Centre for all rural and urban local bodies to bolster local governance and development initiatives, he added.
The chief minister further said that the other major demand before the commission was to recommend the Centre to take care of the entire annual corpus need of the State Disaster Response Fund (SDRF) in which the state’s contribution is 25 pc.
Apart from the above, the Commission was requested to recommend grants for specific purpose transfer for health, water supply, sanitation and old-age security, Majhi said.