15th Finance Commission marks 42 per cent of divisible tax pool for states

Excluding the union territories of Ladakh and J&K, the tax devolution share suggested by the Finance Commission is 41 per cent of the total divisible pool.

Published: 02nd February 2021 05:36 AM  |   Last Updated: 02nd February 2021 07:46 AM   |  A+A-


For representational purposes

By Express News Service

NEW DELHI: The 15th Finance Commission has recommended that states, along with Ladakh and J&K, be given 42 per cent share in the divisible tax pool of the centre during the period 2021-22 to 2025-26, keeping its stand unchanged from the previous report.

The report which was tabled in the parliament today, has also kept criteria of horizontal devolution unchanged with 15 per cent weight to population and 12.5 per cent weight for demographic performance.

Excluding the union territories of Ladakh and J&K, the tax devolution share suggested by the Finance Commission is 41 per cent of the total divisible pool, which is arrived at after deducting cesses and surcharges and cost of collection from total tax collection.

The Commission has recommended post-devolution revenue deficit grants amounting to about Rs 3 lakh crore over the five year period.

The FFC has recommended higher grants to states at Rs 1.3 lakh crore in eight sectors, including health, school education, higher education, agriculture, maintenance of Pradhan Mantri Gram Sadak Yojana roads, aspirational districts and blocks, judiciary, statistics.

The finance ministry is yet to accept the recommendation and said it will consider the recommendation.

As per the glide path, the report said that fiscal deficit should be 6 per cent in 2021-22, 5.5  per cent in 2022-23, 5 per cent in 2023-24, 4.5 per cent in 2024-25, and 4 per cent in 2025-26, lowe than what the finance minister projected in her budget proposal this year.

Apart from tax devolution, the commission, headed by former bureaucrat and MP NK Singh was asked to recommend performance incentives for states in many areas like power sector, adoption of DBT and solid waste management as well as funding mechanism for defence and internal security. 

While recommending additional borrowing room to states based on performance in power sector reforms, the FFC also recommended a Rs 2.38 lakh crore non-lapsable fund for modernisation for the defence sector in the 2021-26 period. 

“The unutilised amount from the normal budgetary allocations to the MoD and MHA for capital expenditure shall not be part of the Fund and should be governed as per the principles of the annual budget process,” the report said.

The report recommended Rs 1.5 lakh crore be transferred to the MFDIS from the Consolidated Fund of India over the award period of the Commission.

The rest of the corpus will come from disinvestment proceeds of defence public sector enterprises; proceeds from monetisation of surplus defence land and proceeds of receipts from defence land.

In-Principle nod to Non-Lapsable Defence fund

The Central government has accepted in-principle the creation of non-lapsable fund for Defence in the Public Account of India. Sources of funding and modalities will be examined in due course of time, highly-placed sources in the Ministry of Finance said


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