As a direct result of the Narendra Modi government’s decision to turn Jammu and Kashmir and Ladakh into two separate union territories, the Fifteenth Finance Commission (FFC) is likely to allocate sums from the divisible tax pool to 28 states, instead of 29. The allocations for the two union territories of Jammu and Kashmir and Ladakh are expected to come out of the Centre’s liabilities, Business Standard has learnt.
“It now becomes 28 states instead of 29, and according to the standard practice and the Terms of Reference, the requirements of union territories have to be counted as part of liabilities of the Centre. The devolution of the tax pool will have to be recalculated from 29 states to 28,” said an official aware of the working of the FFC.
The official added that it isn’t immediately clear if the FFC will be given additional terms of reference or more time to adjust for the conversion of the state of Jammu and Kashmir to two separate union territories. All this is of course subject to the Jammu and Kashmir Reorganization Bill being passed in Rajya Sabha (will change once passed) and it withstanding any challenge in the Supreme Court.
As reported earlier, FFC Chairman N K Singh has ruled out including UTs with legislative bodies, like Delhi and Puducherry, in the divisible tax-pool in-line with other states, even after getting representations to do so. “We are not formally considering the memorandum of Puducherry and Delhi because under the Constitution, we are not enjoined to do so, and we have to strictly act in accordance with the Constitution,” Singh had told Business Standard in an interaction earlier this month.
Just like Delhi and Puducherry, Jammu and Kashmir is expected to become a Union Territory with legislatures and elected parties in power, just short of a full statehood status. Ladakh will be a Union Territory without a separate legislative body, like Chandigarh, Daman and Diu, Andaman and Nicobar, and others.