PM blocks Finance Commission appointments

FinMin meeting today to finalise terms of reference for 14th panel

A finance ministry proposal for clearance of appointments to the 14th Finance Commission ahead of former finance minister Pranab Mukherjee’s resignation didn’t get the approval of Prime Minister Manmohan Singh.

Mukherjee, incidentally, took oath as the new President of the country today and would be giving the final clearance for constituting the next Finance Commission when the government finalises the names of members and chairman and also the terms of reference.

A senior government official in the know of the developments said the finance ministry had proposed the name of a former RBI governor as chairman of the 14th Finance Commission, and economic affairs secretary R Gopalan and a former advisor to the finance minister as members.

PANEL PROPOSAL

• PM had asked FinMin to first appoint a special officer for finalising the terms of reference, before seeking approval for the appointment of members and chairman of the 14th Finance Commission
• FinMin had proposed the name of a former RBI governor Y V Reddy as chairman of the 14th Finance Commission
• Names of economic affairs secretary R Gopalan and a former advisor to the finance minister were proposed for members

The official added that the prime minister had asked the ministry to first appoint a special officer for finalising the terms of reference, before seeking approval for the appointment of members and chairman.

Gopalan is set to retire in a week after a three-month extension. It is expected he might get another extension and join the Finance Commission when it is constituted, if his name is cleared by the prime minister’s office to take up the job.

Finance and Revenue Secretary R S Gujral is holding a meeting tomorrow to concretise the terms of reference for the Finance Commission, which is likely to be set up between September and November.

The ministry has already started preparing the groundwork for the Commission. The panel requires at least two years to finalise its report, which needs extensive research and deliberations with central ministries and state governments.

The 14th Finance Commission’s recommendations will stand for the five-year period of 2015-2020.

An amount of Rs 30 lakh has been earmarked in Budget 2012-13 for setting up an advance cell for the Commission.

The Finance Commission is a Constitutional body set up every five years to make recommendations relating to the distribution of the net proceeds of taxes between the Centre and the states, the principles which should govern the devolution to the states out of the Consolidated Fund of India, and the measures needed to augment the consolidated fund of a state.

Any other matter may be referred to the Commission by the President in the interests of sound finance.

The 13th Finance Commission was constituted in November 2007, under the chairmanship of former finance secretary Vijay L Kelkar, and the commission gave its report in December 2009.

B K Chaturvedi, member, Planning Commission; Indira Rajaraman, professor emeritus, National Institute of Public Finance and Policy; Abusaleh Shariff, chief economist, National Council of Applied Economic Research; and Atul Sarma, former vice-chancellor, Rajiv Gandhi University (formerly Arunachal University), were the full time members of the commission.

The present expenditure secretary, Sumit Bose, was secretary to the panel.