AP pitches for rewarding states with better finance management

The Andhra Pradesh government today put forth a number of suggestions before the 14th Finance Commission for "rewarding" states based on fiscal management and enhancing devolution of Central taxes by according weight to different parameters.
It also wanted amendments in the Fiscal Responsibility and Budgetary Management Act to ensure "quality of fiscal consolidation" by states.
Expressing serious concern over the declining state share in devolution of Central taxes, Chief Minister N Kiran Kumar Reddy urged the 14th Finance Commission to ensure that at least 40 per cent of the divisible pool of Central taxes were devolved to the states.
Delivering the keynote address at a meeting of the 14th Finance Commission members here today, the Chief Minister also suggested that grants equivalent to at least four per cent of the Central taxes be recommended for the local bodies while the Central share in disaster relief fund be enhanced to 90 per cent from the present 75 per cent.

"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 Tenth Commission, it came down to 6.94 per cent in the 13th Commission. We are distressed that instead of being rewarded, we are being penalised for significantly improving our per capita income level," the Chief Minister said.

Noting that area and population of a state represented the fiscal needs better than other indicators, Reddy suggested that area and 1971 population may be assigned weights of 30 and 20 per cent respectively.

"We accept the proposition that vertical imbalances are common in most federations, being a necessary consequence of the system of assignment based on comparative advantage.
"Our major concern is that there has been an accentuation of vertical imbalances far beyond those envisaged in the Constitution," the Chief Minister said.
He proposed that "instead of speaking in terms of re-distribution of resources between the Centre and the states, there is an imperative to re-align resources in favour of the states.