Govt asks FFC to review some suggestions
SPECIAL GRANTS AND NUTRITION GRANTS TO STATES ARE SOME RECOMMENDATIONS THE GOVT HAS ASKED THE 15TH FINANCE PANEL TO REVIEW
NEWDELHI:The Union finance ministry has asked the 15th Finance Commission (FFC) to review its recommendations on special grants and nutrition grants to the states.
The commission, whose first report was tabled in Parliament by finance minister Nirmala Sitharaman on Saturday along with the Budget, had recommended that the provision of special grants aggregating to ₹6,764 crore in 2020-21 to ensure that during the fiscal year no state receives less than what it received in FY20 on account of tax devolution and revenue deficit grants.
However, the finance ministry has requested the FFC to reconsider the recommendation, holdOther ing that “it introduces a new principle”. The FFC has also recommended additional grants of ₹7,735 crore to states for nutrition in FY21, advising that it should not be substituted for either state share or Union share as it is an “additionality”. However, the finance ministry observed that the FFC should review this recommendation as a part of its overall proposal of measurable performance-based incentives for states in the main report.
recommendations of the FFC, such as reduction in the share of states in the divisible pool of taxes from 42% to 41%, revenue deficit grants to states of ₹74,340 crore, local bodies grants of ₹90,000 crore, disaster-related grants of ₹28,983 crore and sectoral grants, have been accepted by the finance ministry.
The commission’s recommendation for performance-based incentives has also been accepted “in principle” by the finance ministry, which said that it will “examine” the other recommendations of the FFC related to revenue and expenditure reforms, accounting and budgeting reforms, and additional disclosures to be made by all tiers of the government “in due course”.
The term of the NK Singhheaded FFC was extended by a year in November and the panel is expected to present its final report covering financial years 2021-22 to 2025-26 by October 30.
The FFC has brought back the concept of grant-in aids after the 14th Finance Commission disbanded it. The commission has also tweaked the criteria and weights under which funds are allocated to states. It assigned 15% weight to the population of a state, down from the 17.5% allocated by the 14th Finance Commission, but raised the weight under demographic performance from 10% to 12.5%.
The FFC report has introduced a new criteria, the “tax effect”, for states, with 2.5% weightage, while significantly reducing the weight for income distance, or the distance of the gross state domestic product (GSDP) of a particular state from the state with the highest GSDP, from 50% to 45%.