State to ask Centre for escape clauses to breach fiscal deficit

Special status: The government expects the Centre to offer it some concessions as it is a large industrial State.

Special status: The government expects the Centre to offer it some concessions as it is a large industrial State.   | Photo Credit: File Photo

Ajit Pawar to attend Finance Commission meeting on March 13

The State government will urge the Centre to introduce limited escape clauses to enable it to breach tough budgetary norms mandated under the Fiscal Responsibility and Budget Management (FRBM) Act.

Finance Minister Ajit Pawar will attend a consultation meeting with the Finance Commission on March 13 to discuss possibilities of achieving better synergy between State FRBMs and the Central FRBM legislation. He will also push for early release of the State government’s grant proposals pending with the Centre.

Senior officials of the Finance Department said the government will also demand from the Centre to relax FRBM clauses on account of being a large industrial State and its weakening financial health.

Push for hike in share

The State is likely to push for a hike in its devolution share currently at 5.26% of the Centre’s kitty, and demand introduction of escape clauses to breach fiscal deficit, currently restricted at 3% of the budget.

“We will push for easing of norms that currently link surplus revenue requirements with release of funds from the Centre. Being a large industrial State, we believe some concessions could be offered to us, especially in light of the burden from the rolling out of the Goods and Services Tax regime,” said a senior official of the Finance Department.

The 15th Finance Commission’s terms of reference were amended by the President in November 2019 and extended until October 2020. While extending the term, the commission was asked to submit two reports, one for the year 2020-21, and a second report for 2021-22 to 2025-26.

The Finance Commission’s report for the financial year 2020-21 was substantially accepted by the Union government and presented in the Lok Sabha along with the Union Budget for 2020-21. The commission is now working earnestly to complete the task of recommending fiscal transfers for the extended award period.

The consultation with the States on March 13 is to discuss issues related to the final report of the Finance Commission for 2021-26, which it is likely to submit in October this year.

‘Significant development’

Senior officials said the discussions on optimum utilisation of funds will also be part of the meeting. The issue of timely constitution of State Finance Commissions as well as the action taken after their recommendations are also likely to be discussed.

The commission will also discuss the projections of the State Domestic Product and the tax buoyancy projected by them for the period of the award of the commission. This is very significant development as it impacts the quantum of resource for the revenue deficit grants, officials said.

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Printable version | Jun 4, 2020 11:47:15 PM |

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