NEW DELHI: The finance ministry has more than halved the post-devolution revenue deficit grant for states, recommended by the Fifteenth Finance Commission (FFC) from Rs 74,340 crore to Rs 30,000 crore for the year 2020-21.
While the total revenue collected by the Centre is directly transferred to states as their share in the divisible tax pool, the Finance Commission also provides a mechanism for compensation of any loss of revenue incurred by states.
These are called post-devolution revenue deficit grants. The 14th FC had recommended ‘post-devolution revenue deficit grants’ of a total of Rs 1,94,821 crore for 11 states during its award period (FY16-FY20). For the next five years, the FFC is yet to give its final report.
However, in the interim report handed to the government, it had recommended post-devolution revenue deficit grants of Rs 74,340 crore for 14 states in 2020-21.
Of the total revenue deficit grant, Rs 37,917 crore was assigned to Andhra Pradesh, Kerala, Punjab, Tamil Nadu and West Bengal, while Rs 36,423 crore was for Himachal Pradesh, Uttarakhand and seven North-East states.
However, the finance ministry has made the allocated of only Rs 30,000 crore in Budget 2020-21 to states, which is less than half of the recommended money.
Certainly, states, who were to receive this amount, are fuming over it.
“The 15th UFC, it is informally learnt, awarded Rs 74,000 crore as revenue deficit grants to states. In an unprecedented move, Centre has slashed it down to Rs 30,000 crore. It is a serious blow to those states who suffered a serious reduction in tax share because of population factor,” Kerala Finance Minister Thomas Isaac tweeted on Monday.
This will pose a problem for these states and cause stress to finance.