AP seeks 40% share in central taxes

Wants Finance Commission to follow 1971 population census for devolution of central resources to states

The Andhra Pradesh government on Thursday asked the 14th Finance Commission to stick to the 1971 population census as the criteria for devolution of central resources while maintaining that the income inequalities in states needs to be addressed through targeted schemes rather than the finance commission transfers.

The state government also requested the visiting delegation of the commission, headed by its chairman Y V Reddy, to recommend the states' share in the divisible pool of central taxes at 40 per cent as compared with the present 32 per cent. It argued that higher devolution was necessary to meet the increased compliance costs on account of the entitlement-based legislations such as the National Food Security Bill brought out by the Government of India.

"It is a matter of grave concern to Andhra Pradesh that its share in tax devolution has been coming down with each Finance Commission. From 7.91 per cent in the 10th Commission, it came down to 6.94 per cent in the 13th Commission," chief minister N Kiran Kumar Reddy said at a meeting with the commission.

Going by this trend the state expects to lose at least Rs 20,000 crore between 2015 and 2020 during which period the transfers will be made on the basis of a formula that will be decided by the commission some time during next year.

This, he said, was nothing but penalising those states that have significantly improved the per capita income levels of its people. He also admitted AP performed well above the national average in per capita incomes only on account of four districts while the remaining 19 districts continued to fare below the national average. "The high income in four districts should not lead to lower transfers to the majority of population in the remaining districts," he said.

The chief minister conveyed his government's fears to the commission that the adoption of the 2011 population census as the criteria would further narrow the scope of fund flows to the states outside the general category, besides bringing in undesirable volatility in central devolutions to states. He also said a weightage 20 per cent to the tax effort and 10 per cent to the fiscal discipline should be given in determining the devolution of resources to states in addition to human development indicators, area and population.

The chief minister also opposed the idea of insulating the pricing of public utilities from policy fluctuations and any interference on matters related to state level subsidies.