BHUBANESWAR: Odisha’s share in central tax devolution is set to decline under the recommendations of the 16th Finance Commission for 2026-27.
The state is estimated to receive Rs 67,460.46 crore, amounting to 4.42 per cent of the divisible pool, lower than the 4.528 per cent horizontal devolution recommended by the 15th Finance Commission. Odisha had proposed that its share be raised to 4.964 per cent.
The report of the 16th Finance Commission was tabled by Union Finance minister Nirmala Sitharaman while presenting the Union Budget for 2026-27. The Commission has, however, kept the vertical devolution at 41 per cent, same as the 15th Finance Commission.
The transfer of funds to Odisha was estimated at Rs 63,073.7 crore for 2025-26 at the devolution rate of 4.528 per cent. In the previous financial year 2024-25, the transfer of funds to Odisha was Rs 57,692. 24 crore as per recommendations of the 15th Finance Commission.
According to the Finance Commission report, the horizontal devolution has been fixed by giving 17.5 per cent weight to population of 2011, 10 per cent to demographic preference, 10 per cent to area, 10 per cent to forest, 42.5 per cent to per capita GSDP distance and 10 per cent to contribution to GSDP by the state.
Official sources, however, said that the horizontal devolution fixed by the 16th Finance Commission is less than what was demanded by the state government. During discussion with members of the 16th Finance Commission headed by Arvind Panagariya here on February 7, 2025, Chief Minister Mohan Charan Majhi had 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.
He had sought an award of Rs 12,59,148 crore for 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,” he had said.
Justifying the need for higher tax devolution to the state, Majhi had said cess and surcharges levied by the Union government was noticeably higher compared to the rise in gross tax revenues.
Official sources, however, said the provisions for state-specific programmes and other demands made by the state government will be known soon. The state had asked for central support for road projects and national highways (NHs) with an investment of Rs 41,580 crore.