Finance Minister Arun Jaitley said on Monday the government had accepted key recommendations of the 14th Finance Commission (FFC).
These include raising the states’ share of the net Union tax proceeds to 42 per cent from 32 per cent, the highest such increase in devolution to states.
Read our full coverage on Union Budget
Other accepted recommendations are on grants to states for local bodies, greater power to states in spending for natural disasters and grants to states which will still have a revenue deficit after the new devolution ratio takes effect.
The Centre has also decided to delink and transfer eight centrally sponsored schemes (CSS) to states; the FFC had recommended transfer of 30 such schemes.
Jaitley said the 42 per cent increase in states' share is the “largest ever change in percentage of devolution. When Finance Commissions have recommended an increase, it has been one to two per cent.” He said compared to the devolutions in 2014-15, the total outgo to states in 2015-16 will see a rise of at least 45 per cent.
The FFC has recommended grants for local bodies of Rs 2.87 lakh crore over the next five financial years. Of these, about Rs 2 lakh crore will go to gram panchayats and Rs 87,144 crore to municipal bodies.
For the 11 states which will face a revenue deficit after the new tax-sharing regime comes into force (Andhra Pradesh, Assam, Himachal Pradesh, Jammu and Kashmir, Kerala, Manipur, Meghalaya, Mizoram, Nagaland, Tripura and West Bengal), the FFC has recommended an additional grant of Rs 1.95 lakh crore from 2015-16 to 2019-20.
Another accepted recommendation allows a state to use 10 per cent of the funds available to it under the State Disaster Response Fund for occurrences which it considers a disaster, but which are not on the list of the Union home ministry.
For centrally sponsored schemes, the FFC had recommended 30 of these be delinked from the Centre and transferred to states. The Centre only accepted eight, as mentioned earlier. Jaitley did not name the schemes and said all the major CSS would still be with the Centre.
“Many of these are national priorities and meant for the poor. So, a majority will continue to be with the Centre,” he said. Jaitley added recommendations not accepted would be taken up within the Centre and among states and other stakeholders.