14th Finance Commission was unfair to Tamil Nadu: Paneerselvam

State set to loose Rs 35,485 cr in next 5 years due to new devolution pattern

The Tamil Nadu government has said that due to tax buoyancy of the Centre, the state will lose heavily in real terms when new devolution pattern, based on the 14th Finance commission recommendations, is adopted.

The State administration estimated that Tamil Nadu will lose about Rs 35,485 crore in the next five years.

In his budget speech, Tamil Nadu Chief Minsiter O Pannerselvam, who also holds finance portfolio said that two major sources of revenue receipts are devolution of central taxes and grants-in-aid by the Centre. 

Major changes in the pattern of tax devolution have been brought in by the Centre, based on the recommendations of the Fourteenth Finance Commission.

Though the States’ share in vertical sharing between the Centre and the States has been increased from 32 to 42%, there is no additional flow of resources to the States on account of these changes, as the amount already available to the States in the form of Grants-in-aid is now diverted as tax devolution. 

Tamil Nadu has been further hit very badly because of the drastic reduction in the horizontal sharing percentage. 

As a result of these changes, even after the shifting of substantial Grants-in-aid to tax devolution, devolution and grants-in-aid together will be reduced to Rs 37,526 crore during 2015-2016, as compared to Rs 39,057 crores received during 2014-2015. 

“If we take into account the projected tax buoyancy of the Central Government, the State will lose heavily in real terms when this new devolution pattern is adopted. It is roughly estimated that Tamil Nadu will lose about Rs 35,485 crore in the next five years due to these changes,” said Panneselvam.

He said, the State Government will be burdened with a heavy responsibility of providing additional share in the Centrally Sponsored Schemes from its own resources without getting adequate increased resource flow from the Central government.

The State appealed he Centre that States like Tamil Nadu which have lost heavily in the present backwardness based devolution formula should be compensated to some extent from out of the allocation of Rs 20,000 crore earmarked for the NITI Aayog.