Former Reserve Bank Governor and Chairman of the Fourteenth Finance Commission Dr. Y.V. Reddy has not supported an expansion in its purview to include the erstwhile Planning Commission’s role of allocating funds to States.
The Modi government had informally sought Dr. Reddy’s views on the issue, said a government source. The Finance Commission is likely to submit its report to President Pranab Mukherjee before Monday (December 15).
Prime Minister Narendra Modi had invited Thirteenth Finance Commission Chairman Dr. Vijay Kelkar to a high-level consultation meeting on the Planning Commission on August 27, where he too expressed reservations on the issue.
According to a source who had attended the meeting, Dr. Kelkar said if the Finance Commission had to take on the Planning Commission’s role it would have to be made a permanent body through a Constitutional Amendment. Doing so, Dr. Kelkar cautioned, could dilute the biggest strength of the Finance Commission – its non-permanent nature. Since Finance Commissions are appointed anew after every five years they are able to look at the devolution of the Centre’s tax revenue to States with a fresh perspective each time, he said.
The Planning Commission’s allocations to States of Central funds meant for development expenditure were made on a yearly basis.
Dr. Kelkar also informed the meeting that all the Finance Commissions set up in Independent India had deliberated on whether the commission should be a permanent body. Each time the recommendation was to not make it permanent, so that it remains equidistant from the Centre and States. He also pointed out that while Finance Commission members tend to be revenue expenditure experts, the Planning Commission’s developmental objectives require capital spending-related skill sets.
In the wake of the scrapping of the Planning Commission, the Modi government is mulling assigning the role of allocating Plan funds across States to the Finance Commission. Some States, such as Gujarat, have supported the idea.
Gujarat Chief Minister Anandiben Patel has proposed that the Centre should give grants to State governments for implementing Central Government schemes as per allocations made in the Union Budget or the Finance Commission, according to a press statement.
“The back door favour to the States by the Planning Commission in the name of Special Central Assistance and Additional Central Assistance should be stopped,” Ms. Patel said.
