New Delhi: Finance minister Arun Jaitley on Tuesday rubbished allegations that terms of reference of 15th Finance Commission will penalise Southern states by cutting down their share from Central revenue. In a Facebook post, the finance minister said that 15th Finance Commission (FC) balances "both the 'needs' represented by latest population and 'progress towards population control' very well." "There is no inherent bias or mandate in the ToRs (Terms of Reference) of the 15th FC which can be construed as discriminatory against the states which made good progress in population control," wrote Mr Jaitley. States like Kerala, Karnataka and Andhra Pradesh as well as the Congress-ruled union territory of Puducherry are concerned that the ToR mandates the Commission to use 2011 population for tax sharing and devolution of resources instead of earlier practice to use 1971 population.
Between 1971 and 2011 population shares of four southern states in total declined from 22.01 per cent to 18.16 per cent. Some states allege that use of 2011 population for sharing resources may mean a decline in the flow of resources to these states. However, Mr Jaitley said that there is specific inclusion in the terms of references of the 15th FC which is "efforts and progress made in moving towards replacement rate of population growth." He said that this ToR recognises the efforts of all the states which have done well in population control.
"This specific ToR would allow the 15th FC to propose a specific incentive scheme to reward the states which have achieved replacement level of population growth, and also, if the 15th FC wishes to do so, to assign appropriate weight to the progress made in population control while allocating resources," said Mr Jaitley.
Finance minister pointed out that share in Central taxes is allocated to the states based on recommendations made by the Finance Commissions (FCs) to help states to meet fiscal deficiency in providing a minimum standard of services to their people. "This calls for assessing states' 'needs' on rationale and equitable basis. FCs use appropriate criteria to assess true needs of states," said the finance minister. He said that population proxies very well for the needs of the people in quantitative sense. "Another criterion, the income distance, which captures very well relative poverty of people in the states, is used to assess qualitative needs," said Mr Jaitley.
He said that these two parameters allocate more resources to the populous and poorer states, which need additional funds for providing education, health and other services to the people, which own resources of these poorer States may otherwise not allow. Finance minister pointed out that 14th FC had no specific mandate for using 2011 census. "Yet, 14th FC rightly used the 2011 census population data to capture the demographic changes since 1971 to make realistic assessment of the needs of the States. It allocated 10 per cent weight to 2011 population," said Mr Jaitley. "The ToRs of 15th FC rightly balance both the 'needs' represented by latest population and "progress towards population control" very well," he added.
