Business

Govt. extends 15th finance panel term

The extension will help the N.K. Singh-led panel to examine comparable estimates for financial projections.

The extension will help the N.K. Singh-led panel to examine comparable estimates for financial projections.   | Photo Credit: R. V. Moorthy

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Commission to submit two reports; recommendations will be applicable for six years

The Union Cabinet on Wednesday approved the extension of the term of the 15th Finance Commission, which will now submit two reports.

The term had been extended till October 30. The first report, for financial year 2020-21, will be submitted in the coming months before the Union Budget, and the second report for the period 2021-26 will be presented by October 30, 2020.

This will effectively mean the 15th Finance Commission’s recommendations will be applicable for six years and not the conventional five-year period.

“The extension of the term will enable the Commission to examine various comparable estimates for financial projections in view of reforms and the new realities to finalise its recommendations for the period 2020-2026,” the government said in a release.

“The Commission, on account of the restrictions imposed by the model code of conduct, completed its visit to States only recently,” the release added. “This has had a bearing on the detailed assessments of States’ requirements.”

According to a former chairman of a previous Finance Commission, it is not unprecedented for the term of a Commission to be extended when there is a restructuring of States, or if the terms of reference for the Commission have been significantly expanded.

“This Commission has seen its terms of reference expanded and the reorganisation of J&K, and so, an extension of the term is not unusual,” the former chairman said. “It happened before in the 14th Finance Commission when Andhra Pradesh and Telangana were split.”

In a situation where the number of States has changed, the former chairman explained, the Commission then has to alter its calculations for every State and this takes time.

“The report for the year 2020-21 will be submitted soon, before the presentation of the Budget,” the office of 15th Finance Commission Chairman N.K. Singh told The Hindu. “The formula for the first year (2020-21) will not be carried forward for the next five years in a mechanical way, but will be subject to any changes that the Finance Commission may consider appropriate based on the circumstances at that time.”

The 9th Finance Commission under the chairmanship of N.K.P. Salve also saw its recommendation period extended to six years from the conventional five.

“The proposed increase in coverage of the period for which the Commission’s recommendations are applicable will help medium-term resource planning for the State governments and the Central government,” the government release said.

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Printable version | Dec 13, 2019 7:05:50 AM | https://www.thehindu.com/business/govt-extends-15th-finance-panel-term/article30099490.ece

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