There is no proposal or reason to change the ToRs, says Finance Ministry

The chairman and members of the 15th Finance Commission on Friday met Vice-President M Venkaiah Naidu and told him that the terms of reference (ToRs) given to the commission was “only a broad guidance” and could be amended.

However, the finance ministry said that there is no proposal or reason to change the ToRs.

The Vice-President, in his capacity as chairman of the Rajya Sabha, which is the Council of States, held an hour-long meeting with the chairman and members of the finance panel.

According to sources in the Vice-President’s office, the commission’s chairman NK Singh told Naidu that “The commission was free to finalise specific criteria and weightages for each of the parameters, after discussions with states.”

Singh also ruled out any injustice to any state in the allocation of divisible pool of central revenue. He said that the 14th Finance Commission was asked to go by the 1971 population census. However, it took into consideration the 2011 census, thereby rewarding those states that did well in population control.

According to sources, Singh said the terms of reference suggested a broad set of nine indicators, including “Efforts and progress made in moving towards replacement rate of population growth” to reward well-performing states.

Sources said that issues like the terms of reference, implications and broad approach likely to be followed by the commission were taken up at length during the hour-long meeting.

“As chairman of the Council of States, I thought it would be appropriate to talk to you about the principles followed by various commissions in the recent past and your thinking in the current context,” Naidu told the commission members.

The Vice-President referred to reports about reservations of some states on aspects of the terms of reference of the commission, including apprehensions that it would lead to a north-south divide. Singh, however, said the spectre of a “north-south divide” was unfounded. 

He added that ensuring macro-economic stability of the country, rewarding states for their past performance besides incentivising future performance, among others, would broadly guide the commission’s approach to determine revenue allocation between the Centre and states and among the states.

At a separate press conference in North Block, economic affairs secretary Subhash Garg said, “We have clarified a number of times that there is no reason or proposal to change the terms of reference.”

Vice-President Naidu told the commission’s officials to further the cause of economic unity and integration of the nation. He also called for the need to buoy performance, reforms, specific needs of states as well as the Centre and the problems of the farm sector.

Naidu stressed that the commission should do whatever is needed to make agriculture sustainable through appropriate recommendations. He called for setting aside resources for promotion of necessary infrastructure.

Commission members said successive finance panels have been guided by the need to address the issues and challenges of their times and it would be the same with 15th Finance Commission.

Members of the commission, including Shaktikanta Das, Ramesh Chandra and Arvind Mehta attended the meeting.

The commission is to submit its report on determining the transfer of revenues and allocation of grants-in-aid of revenues of the states by April 1, 2019. The recommendations of the commission will be applicable for the period 2021-22 as well as 2022-27.