The 15th Finance Commission proposes to review all the centrally sponsored schemes (CSS) in the wake of growing concern of States that these schemes were eating into their resources, said Chairman of the Commission N. K. Singh.
Speaking at an interactive session with economists on ‘Fiscal Federalism in multi-party democracy — Macro Economy Vulnerabilities” at the International School of Business here on Wednesday, he referred to the challenges facing the 15th Finance Commission and sought their views.
Mr. Singh said this was the first Finance Commission that would be submitting its recommendations after the abolition of Planning Commission and thus a need to fill that void. This was also the time when the Finance Commission was facing the full rigours of the Goods and Services Tax which still did not reach its resting point with frequent changes in the tax rates and categories. As GST was the most important source of revenue, the Commission would have to think about its dialogue with the GST Council with regard to fund allocation to the States.
Mr. Singh said that they were more than half way through the consultative process and visited 19 States so far. The States were seeking more flexibility to design the schemes to serve their people better. There was also proliferation of CSS and the two recent big schemes were Ayushman Bharat and Kisan Samman Nidhi. Both the schemes would need enormous resources eventually, than what was budgeted.
This was heading towards achieving the concept of universal basic income, prevalent in some countries but in those countries subsidies were not of the range as in India, he said.
De-risking economy
Chairman 14th Finance Commission and former RBI Governor Y. V. Reddy said in an increasingly uncertain global world, when one needed to de-risk the economy, it would be better to avoid centralisation. It was also not possible to have uniform provisions for enabling a service when there was wide divergence in the economy of States, he said.
Former finance secretary of united Andhra Pradesh V. Bhaskar said there were many anomalies in implementation of GST Act to the disadvantage of States and they should be rectified as the States were not getting their share in a seamless fashion and it was being manipulated. He also argued that Finance Commission should insist that every State should make budgetary allocation for disaster mitigation and National Disaster Management Authority be empowered to release relief and reconstruction funds to the States as required. It should not be at the political discretion of the Centre.
Finance Advisor to the State G. R. Reddy said resource base of Centre increased significantly and it should share each resource with States. Non-tax revenue was not being shared now.
Former chief secretary of AP P.K. Mohanty argued for greater share of funds to local bodies, both urban and rural bodies, and the loss of their revenue on account of GST be compensated.
‘Populist schemes’
The Terms of Reference of the Commission such as need to curtail expenditure on populist schemes of States should be debated, said retired IAS officer Premchand. Though populist was a relative term, such schemes could lead to fiscal indiscipline and cut into expenditure on important services like education, health and maintenance expenditure. The Commission should also look into the populist schemes of the Centre, he said.
Sustainable borrowings
The Commission should look into borrowings and liabilities of the States and their sustainability and need to place a limit on interest payable by States in tune with their revenue receipts. It should also take a call whether to continue revenue deficit grant and the formula of devolution should be such no State should have revenue deficit, he said.
