Tax devolution to be raised to 50 per cent, demands Naveen

December 09, 2013 05:50 pm | Updated 05:51 pm IST - Bhubaneswar

A file picture of Odisha Chief Minister Naveen Patnaik. Photo: Rajeev Bhatt.

A file picture of Odisha Chief Minister Naveen Patnaik. Photo: Rajeev Bhatt.

Odisha Chief Minister Naveen Patnaik on Monday demanded rise in the existing level of tax devolution to the states from the existing 32 per cent of tax receipts of the Centre to 50 per cent.

Stating that tax devolution was the major part of transfer of resources to the states, Mr. Patnaik pointed out, though bulk of the expenditure responsibility lies with the states, the buoyant sources of revenue were with the Centre.

Addressing a meeting of the 14th Finance Commission headed by Y V Reddy here, the Chief Minister said “It is seen the share of Odisha in the aggregate transfer of resources recommended by successive Finance Commissions, shared tax and grants taken together, is going down. It is, therefore, imperative to design a suitable fiscal transfer formula, so that the states receive their due share.”

A proper distribution largely determines the state’s share in central taxes, the Chief Minister said.

“Hence we would submit before the Commission to design a formula or principle for determination of share of central taxes primarily on the principles of equity,” he said.

On the grants-in-aid front, Mr. Patnaik informed the FC that acute gap in delivery of services due to resource constraints was important and should be taken into account while recommending the conditions attached to the grants.

Stating that Odisha was vulnerable to disasters, Mr. Patnaik said while floods and droughts were recurring phenomena in the state, severe cyclones caused widespread damage and devastation.

“The Commission may review the current arrangements for provision of grants for disaster relief,” he said.

Noting that the Odisha government welcomed the Goods and Services Tax (GST) system, the Chief Minister said “We are in favour of implementation of GST, but at the same time we have been arguing for safeguarding the state’s fiscal autonomy and standing constitutional arrangement for compensating the state for loss on account of implementation of GST.”

Odisha has been consistently growing above the national average over the past nearly ten years, he pointed out, adding due to its abundant mineral wealth, the state has become an attractive destination for investment in power, metal and metal product sectors.

“However, it suffers from deficiencies in critical infrastructure. The socio-economic indicators, though improving over the years, remain below the national average,” he said, while stressing that large investments were required to develop the state.

“We also intend to make massive investments to bridge the gap in availability of physical infrastructure,” Mr. Patnaik said, adding capital investment to the extent of Rs 38,925 crore has been proposed including Rs 5,000 crore in PPP projects.

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