Planning Commission to take states' views on Rajan report

NEW DELHI: Planning Commission will hold wider consultation with stakeholders, including states, before firming up its views on the controversial Rajan panel report that has suggested abolishing the special category status to states.

"We have to make up our mind about taking it to the National Development Council (NDC). We have to consult with the states in advance," a top Planning Commission official said.

The committee was formed by the Finance Ministry earlier this year under the then Chief Economic Advisor Raghuram Rajan, who is presently the governor of the RBI, as there were demand from various states seeking a special category status for grant of additional assistance from the central pool.

The Rajan Committee, which submitted its report last month, has instead suggested a new formula for providing assistance to the states on the basis of a Multi-Dimensional Index (MDI) which has evoked divergent reactions from states such as Tamil Nadu.

As of now, Planning Commission allocates plan assistance among states under a set of criteria called Gadgil-Mukherjee Formula.

"About our own Gadgil-Mukherjee formula, there is no way that we can change this formula. That is the formula approved by the NDC. We are contemplating what to do. But we have not discussed this with the Prime Minister," the official said.

There were reports that some officials from the Planning Commission were against the Rajan panel's suggestion to replace Gadgil-Mukherjee formula with Rajan Committee's Multi Dimensional Index (MDI) for allocation funds to states.

"We have not taken a view (on the report). There has been a misleading commentary in some newspapers that some officials in the Planning Commission have commented on it," Panel's Deputy Chairman Montek Singh Ahluwalia said last week.

As per the Gadgil-Mukherjee formula, 30 per cent of the total funds to states is earmarked for special category states.

As against the composition of central assistance of 30 per cent grant and 70 per cent loan for major states, special category states receive 90 per cent plan assistance as grant and just 10 per cent as loan.

Special category states also receive favoured treatment from the Finance Commission in respect of devolution of central tax revenues.