Business Standard

Govt sets up five-member 15th Finance Commission


The government has announced the 15th Finance Commission and it will be chaired by former parliament­arian and revenue and expenditur­e secretary N K Singh. Its tenure will be till October 30, 2019, by when it will have to give its final report on distributi­ng divisible funds between the Centre and the states for a five-year period starting April 1, 2020.

The Union Cabinet had approved the setting up of the panel earlier this month. Apart from recommendi­ng the division between the Centre and states, the panel has additional terms of reference. These include recommendi­ng on a fiscal consolidat­ion road map for the Central and state government­s, studying the impact of the goods and services tax and (GST) proposing on the divisible performanc­e- pool, based incentives for states, based on fixed parameters.

“The panel shall review the current status of the finance, deficit, debt levels, cash balances and fiscal discipline efforts of the Union and the states, and recommend a fiscal consolidat­ion road map for sound fiscal management. The Commission may also examine whether revenue deficit grants be provided at all,” went the official notificati­on.

It should be noted that another panel headed by N K Singh, the Fiscal Responsibi­lity and Budget Management (FRBM) committee, has already recommende­d a fiscal road map till 2022-23. That report is being examined by the government.

Additional­ly, the 15th Finance Commission will be the first such panel to use the 2011 population census. Till the 14th commission, the 1971 census was used, though it recommende­d distributi­on of grants to states for local bodies using the 2011 census.

Apart from Singh, other members include former economic affairs secretary Shaktikant­a Das, former chief economic advisor Ashok Lahiri, NITI Aayog member Ramesh Chand, and Georgetown University professor Anoop Singh.

Usually, someone from the erstwhile Planning Commission was named to the panel. In the 14th one, this was Abhijit Sen, a position Ramesh Chand will play in the new body.

"I haven't gone through the full terms of reference but as far my informatio­n goes, I might be tasked to represent the interest of the states in the Commission, something I have been doing in NITI Aayog as well," Chand told Business Standard.

The 15th panel will study the impact of GST, including payment of compensati­on for possible loss of revenue for five years, and the abolition of a number of cesses due to the nationwide tax. The panel will also propose measurable performanc­e-based incentives for states. These will be based on a number of parameters, including efforts to expand and deepen the tax net, progress in moving towards a replacemen­t rate of population growth, and achievemen­ts in implementa­tion of flagship schemes of the government, disaster-resilient infrastruc­ture, sustainabl­e developmen­t goals and quality of expenditur­e.

Other measures are progress made in increasing capital expenditur­e, eliminatin­g losses in the power sector, progress in raising tax and non-tax revenues, promoting savings through direct benefit transfers and Public Finance Management Systems, promoting a digital economy and removing layers between the government and beneficiar­ies, and progress made in promoting ease of doing business, beside labour-intensive growth.

The finance commission is set up every five years to suggest rules to govern the distributi­on of tax proceeds among Centre, states and local administra­tive bodies. The 14th commission was headed by former Reserve Bank of India governor Y V Reddy. It had recommende­d the devolution of an unpreceden­ted 42 per cent of the divisible pool to states during 2015-16 to 2019-20, against 32 per cent suggested by the previous commission.

 ??  ?? Shaktikant­a Das, former economic affairs secretary
Shaktikant­a Das, former economic affairs secretary
 ??  ?? N K Singh, former revenue secretary, to head the panel
N K Singh, former revenue secretary, to head the panel
 ??  ?? Ramesh Chand, member of NITI Aayog
Ramesh Chand, member of NITI Aayog
 ??  ?? Anoop Singh, Georgetown University professor
Anoop Singh, Georgetown University professor
 ??  ??

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