Finance panel may be asked to recommend on farm crises

The 15th Finance Commission (FFC) may be asked to suggest ways of providing more fiscal space and resources for states to deal with agricultural crises. The terms of reference and composition of the FFC are being decided and could be finalised by October.

Business Standard has learnt the FFC could be told to study the impact of drought and price crashes due to oversupply on farmers and agricultural income. And, suggest how states could deal with such issues without breaking their fiscal limits.

There have been large-scale protests by farmers around the country. Five states have announced farm loan waivers (Uttar Pradesh, Punjab, Karnataka, Telangana and Maharashtra), totalling around ~2 lakh crore. This has prompted concerns about their fiscal health, already stretched due to issuance of bonds under the scheme to restructure power distribution companies, termed Ujwal Discom Assurance Yojana (UDAY).

Finance Minister Arun Jaitley has maintained that the central government will not participate in any loan relief by states. And, that the latter are expected to pay banks and cooperatives from own allocations and revenues. The Centre will stick to its fiscal deficit target for the year of 3.2 per cent of gross domestic product (GDP), he has said.

An official said the FFC’s stated terms might not explicitly stem from the current agri issues but look for suggestions for the coming years. The FFC’s recommendations will be for the years 2020-2025.

Among the issues it could be told to study would be if states should be given a fiscal expansion on the lines of the one given for UDAY bonds. The states’ combined deficit limits as laid down by the existing Fiscal Responsibility and Budget Management rules was increased to 3.25 per cent of GDP, from 3 per cent.

As reported by Business Standard, former parliamentarian, revenue and expenditure secretary N K Singh is being considered for position of chairman of the FFC.