Fifteenth Finance Commission recommends a 41% cut of central tax revenue go to states
The recommendation is just a percentage point short of the 42% level suggested by the 14th Finance Commission. The snip reflects the change in the status of Jammu and Kashmir from state to union territory.
NEW DELHI: Amid the tug of war between the central and state governments for more resources, the Fifteenth Finance Commission (FFC) chaired by NK Singh is learnt to have recommended that states get 41% of central tax revenues, the same level that it proposed in its interim report for 2020-21 a year ago.
Among other parameters, it has considered a new 12.5% weightage for "demographic performance" while fixing the devolution formula.
The recommendation is just a percentage point short of the 42% level suggested by the 14th Finance Commission. The snip reflects the change in the status of Jammu and Kashmir from state to union territory. While the total share of central tax revenues for states remains more or less at the same level, several states, especially the southern ones, would likely see their share of the pie shrinking. The commission would submit its report to the government on Monday.
ET has learnt that the FFC has also recommended setting up of a non-lapsable Modernisation of Defence and Internal Security Fund (MDISF), to be called Rashtriya Suraksha Naivedyam Kosh. During 2021-26, the fund is estimated to add up to around Rs 2.4 lakh crore, Rs 1.5 lakh crore of which would be directly transferred from the Consolidated Fund of India (CFI) and the rest raised through sale of defence land and defence public-sector enterprises. The fund would, however, have an annual cap of Rs 50,000 crore. It means if such sales bring more resources than the threshold in any year, it would go to the CFI.
The MDISF should be specifically used for capital investment for defence, paramilitary and state police forces. Defence would have exclusive rights over the fund which would be operated by a panel headed by the cabinet secretary with the secretaries of defence, home, expenditure and the chief of defence staff as members.
The FFC is learnt to have recommended that state governments keep aside at least 8% of their 2021-22 budget for building healthcare capacities.
