Kiran seeks devolution of 40 p.c. of divisible pool of Central taxes to States

Chief Minister N. Kiran Kumar Reddy has made a strong pitch for taking human development parameters rather than per capita income of a State as the criterion for allocation of resources from the Centre’s divisible pool of resources to the States.

Speaking at the meeting with the 14th Finance Commission headed by Chairman Y.V. Reddy at the Jubilee Hall here on Thursday, Mr. Kiran Kumar Reddy sought devolution of at least 40 per cent of divisible pool of central taxes to the States from the present 32 per cent.

“State’s share coming down”

He expressed concern that the State’s share in tax devolution had been coming down with each Finance Commission from 7.91 per cent in 10th Commission to 6.94 per cent in the 13th Commission because of rise in per capita income. “Instead of being rewarded, we are being penalised for improving our average per capita income level. But if one removed the per capita incomes of four highest income districts, the average per capita income of remaining 19 districts would be below national average,” he said.

Human development index was a comprehensive index that measured the overall status of a State in terms of education, health and standard of living. The HDI would be a relevant criterion for distribution of funds among the States, he said.

He also argued for realignment of resources in favour of States. “Most of the sectors touching the lives of people fall in the domain of the States. We hope the 14th Finance Commission will rectify the imbalance in resource sharing between the Centre and the States,” he pleaded.

Mr. Kiran Kumar Reddy suggested that the Fiscal Responsibility and Budgetary Management Act needed amendment to provide focus on the quality of fiscal adjustment. He said there was a need to incentivise States which managed their finances better.

Noting that area and population of a State represented the fiscal needs better, he said the 1971 population should be taken as a bench mark for determining the States’ share. The Commission’s proposal to use 2011 Census could bring in volatility in Central devolution to States, he said.

The other suggestions included higher grants of at least 4 per cent of Central taxes for local bodies to improve local self-governance, additional resources to plug critical gaps in few sectors and increase in the State Disaster Relief Fund as the State with long coastline was prone to natural calamities.

Later in a memorandum submitted to the Finance Commission, State government sought grants to the tune of Rs.30,425 crore for various sectors like education, health, irrigation, public distribution system, forests, women and children, development of backward and scheduled areas to plug critical gaps.