15th Finance Commission: Needless row over terms of reference, says Jaitley

Union Finance Minister Arun Jaitley at an event in New Delhi on March 27, 2018.

The controversy surrounding the terms of reference of the 15th Finance Commission is “needless” and cannot be “further from the truth”, Union Finance Minister Arun Jaitley said on Tuesday, as several southern States have voiced concern about their future finances.

“A needless controversy is sought to be created that the terms of reference of the 15th Finance Commission are loaded against any particular region of the country,” Mr Jaitley wrote in a Facebook post. “Nothing could be further from truth.”

The southern States of the country have criticised the terms of reference of the commission, saying they would erode the finances of these States because of their better performance in population control.

 

‘Appropriate criteria’

The Finance Commissions use “appropriate criteria” to assess the States’ needs, Mr. Jaitley wrote. Population figures serve as a good proxy for the needs of the people in a quantitative sense, while income distance captures the relative poverty, to provide a qualitative analysis.

“These two parameters allocate more resources to the populous and poorer States, which need additional funds for providing education, health and other services to the people, which own resources of these poorer States may not allow,” the Minister said.

“There is a specific inclusion of another reference, i.e. ‘efforts and progress made in moving towards replacement rate of population growth’ in the terms of reference of the 15th Finance Commission,” Mr. Jaitley said.

Recognises progress

“This ToR recognises the efforts of all the States which have done well in population control...[it] would allow the 15th Finance Commission to propose a specific incentive scheme to reward the States which have achieved replacement level and also, if the 15th FC wishes to do so, to assign appropriate weight to the progress made in population control while allocating resources,” he said.

Mr. Jaitley said that while the 14th Finance Commission had no specific mandate to use the 2011 census, it “rightly used” that census data to capture the demographic changes since 1971 to make a realistic assessment of the States’ needs. “It allocated 10% weight to the 2011 population,” he said.