Seven states, UTs write to President on finance panel terms of references

The governments of seven states and Union Territories have jointly written to President Ram Nath Kovind seeking amendments to some of the contentious terms of references of the 15th Finance Commission.

A memorandum, signed by the chief ministers or finance ministers of Andhra Pradesh, Puducherry, Karnataka, Delhi, West Bengal, Kerala and Punjab, said the terms were disruptive and a cause for concern.

Apart from the issue of the use of the 2011 census, the memorandum also asked that states not be judged on the basis of the National Democratic Alliance government’s ‘New India 2022’ development goals or on implementing central schemes, or to what extent they had widened the goods and service tax (GST) net. The states also want to go back to using the 1971 census and have asked that Union Territories with legislatures, like Delhi and Puducherry, be considered by the 15th Finance Commission.

“We the chief ministers and finance ministers of the undersigned states and Union Territories wish to bring to your attention the fact that the terms of reference of the 15th Finance Commission violate the federal principle as enshrined in the Constitution, erode autonomy of all states, and bring significant financial hardship to all states,” the draft memorandum stated. It was released after a meeting of the representatives of the states in Andhra Pradesh’s new capital Amaravati.

The meeting was attended by Andhra Pradesh Chief Minister Chandrababu Naidu, Andhra Pradesh Finance Minister Yanamala Ramakrishnudu, West Bengal Finance Minister Amit Mitra, Punjab Finance Minister Manpreet Singh Badal, Puducherry Chief Minister V Narayanasamy and Delhi Deputy Chief Minister Manish Sisodia. Poll-bound Karnataka is also part of this grouping. However, no one from the state could attend the meeting due to the ongoing election campaign.

Addressing the meeting, Naidu said the 2011 population criteria would adversely affect the flow of funds to performing states. "There is no reason why some of the large north Indian states should lag behind their counterparts in the south in economic development as they are endowed with abundant water resources,” he said, and added the 15th Finance Commission should focus on encouraging competition among states instead of penalising states that had performed well.

The meeting also wanted a review of the overall funds' flow to states during the 14th Finance Commission period as the states feel they got a raw deal due to a cut in assistance to centrally sponsored schemes despite the increase in their share of taxes to 42 per cent.

The issue of use of census and population control has been simmering for a while now. A grouping of four southern finance ministers first met in Thiruvananthapuram last month. The Andhra Pradesh government had hoped for participation from as many as 11 states for Monday’s meeting, including Telangana, Tamil Nadu and Odisha.

Among the terms of reference for the 15th Finance Commission, it has been mandated with considering measurable performance-based incentives for states. The parameters on which they could be measured include include how well they implement flagship schemes of the central government, and control expenditure on populist measures.

The 15th Finance Commission could also come up with a definition of ‘populist schemes’. A number of experts, including members of the commission, feel that in the run-up to the 2019 general elections, the terms of reference and the workings of the panel will become increasingly politicised. Government officials maintain that in spite of criticism by some of the states, the terms of reference will not be amended.

Finance Minister Arun Jaitley had responded last month to the issue and had said that the ‘controversy’ around the terms of reference was a ‘needless’ one and that there was no inherent bias or mandate in the terms which could be construed as discriminating against states that had made good progress in population control.