Finance Commission must keep federal structure in mind

Jatin Desai
Saturday, 28 April 2018

The terms of references (ToR) of 15th Finance Commission (FC) have become controversial. The developed states of South India feel the ToR are against them and are doing injustice to them. The ToR will help states of North India which are not well maintained and developed. It has led to tension between Centre and Southern states and has also raised a question about federalism.

The terms of references (ToR) of 15th Finance Commission (FC) have become controversial. The developed states of South India feel the ToR are against them and are doing injustice to them. The ToR will help states of North India which are not well maintained and developed. It has led to tension between Centre and Southern states and has also raised a question about federalism.

The CMs of southern states have already criticised the Central government for changing ToR. They already had a conclave of finance ministers of southern states in Thiruvananthapuram, Kerala on April 10 and now, they have called a meeting of finance ministers of various states in Vijayawada on May 7 to discuss the issue. They said that ToR was against the principles of federalism enshrined in the Constitution and also would result in revenue loss to the performing states. AIADMK-ruled Tamil Nadu and TRS-ruled Telangana did not participate in the conference.

Union Finance Minister Arun Jaitley defended the ToR by saying there is no inherent bias in the ToR of the 15th FC that could be construed as discriminatory against the states which have made good progress in the population control.  

Finance Commission is a constitutional body which divides the finances of the country between the Centre and the states. This time, there is a departure from the earlier practise. It used to rely on 1971 census data. The 15th FC’s ToR has stipulated that 2011 census data should be used. The FC is headed by NK Singh. The controversy primarily surrounds over 2011 census.

The southern states are opposing the use of 2011 census population figures instead of 1971 for the purpose of tax devolution. The apprehension among southern states is if 2011 census data is used as the criteria for revenue devolution, then they will suffer badly as they have implemented population control programme effectively than northern states. The commission will make recommendations for the five years commencing on April 1, 2020.

Tamil Nadu did not participate in the Kerala conclave of finance ministers of southern states. But, they agree with the spirit behind conclave. It has lodged its protest with the Central government against ToR. The population growth varied differently from state to state. The growth rate falls rapidly in case of southern states. In 1951, there were 12 Malayalis and Tamils for every 100 Indians, the share had dropped to 8 by 2011.

Southern states believe that their share will get reduced as they have managed to keep a check on the population growth. It is not the case with some of the states of North India. The terms are seriously flawed and it would affect the better performing states. It is a reality that most of the Southern states are better managed. The 14th FC had made a small change. It gave a weightage of 10 per cent for 2011 census data.

The practice was to use 1971 census data entirely prevailed till 13th FC. After 1971, campaign for family planning began in a big way. That was the reason that 1971 census data was considered all these years. The 1971 census data is also the basis for the distribution of Lok Sabha seats among states.

According to the TN government, the state has controlled population growth and therefore, the share of funds by the Central government based on 2011 census data will be less as compared to 1971 census figures.

According to a study done by Centre for Socioeconomic & Environmental Studies, Kerala stands to lose around Rs 7,800 crore if 2011 census is used to estimate the population and TN may lose Rs 10,537 crore.

Kerala CM Pinarayi Vijayan said, ”The 15th FC should not try to impose the ideological and economic agenda of the Centre on the state governments.” The CM of Karnataka, Siddaramaiah, said that the parameters of the FC discriminated against the southern states. Kerala’s finance minister Thomas Issac opined that the ToR were undemocratic and did not reflect the true spirit of Indian Constitution. CPM has called ToR as ‘anti-federal’ and ‘anti-democratic.’

On the other hand, states from north India which have not given much importance to the population control, are likely to gain sizeably from the flawed approach.  

The Central government needs to be more sensitive and federal structure must be respected. It is the responsibility of the Central government to see that no state government gets a feeling that they are discriminated. The state which performs better on population control, should be encouraged by providing special 
financial packages.

Unhappy with govt
 The CMs of southern states have already criticised the Central government for changing ToR.
 The apprehension among southern states is if 2011 census data is used as the criteria for revenue devolution, they will suffer badly as they have implemented population control programme effectively than northern states. 
 

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