Finance Commission to meet advisory council on May 17

The 15th Finance Commission (FFC) will hold a meeting on next Thursday and it will be attended by members of the newly constituted advisory council on the contentious terms of reference (ToRs).

Under pressure from states not ruled by the BJP to withdraw or amend some vexed ToRs, the FFC on Wednesday announced the setting up of the council.

Its members include Arvind Virmani, former chief economic advisor; Surjit Bhalla, part-time member of the Economic Advisory Council to the Prime Minister; J P Morgan Chief India Economist Sajjid Chinoy; and Credit Suisse India Economist Neelkanth Mishra.

Sources said the council might be asked to do research and study on ToRs. This is probably the first time that a Finance Commission has set up a council on ToRs.

Meanwhile, former finance minister P Chidambaram tweeted that the council could not amend "flawed" ToRs. "Any advice it (the Council) gives will be like an attempt to straighten the dog's tail," he tweeted.

He said the chief ministers and finance ministers of states must insist on amending ToRs.

There are precedents on changing the ToRs of Finance Commissions.

The most contentious issue is the use of the 2011 population census with southern Indian states, among a few others, fearing that they will be discriminated against. The states also want to go back to using the 1971 census.

Finance Minister Arun Jaitley had responded last month to the issue and had said that the “controversy” around the ToRs was a “needless” one and there was nothing that could be construed as discriminatory against states that had made good progress in population control.

States that met in Andhra Pradesh’s new capital Amaravati, on Monday, demanded that they not be judged on the basis of the Narendra Modi government’s “New India 2022” development goals or on implementing central schemes, or on to what extent they had deepened the goods and services tax net. The FFC has been mandated with considering measurable performancebased incentives for states. The parameters on which they could be measured include how well they implemented the flagship schemes of the central government, and control or lack of it in incurring expenditure on populist measures.

They also said that Union Territories with legislatures, like Delhi and Puducherry, be considered by the FFC.