Cabinet clears 14th Finance Commission

The Cabinet on Thursday approved the constitution of a 14th Finance Commission to recommend on division of taxes between the Centre and the states and related financial matters for the period 2015-2020.

As reported earlier, former Reserve Bank governor Y V Reddy is considered likely to be chosen as chairman of the Commission. The finance minister’s former advisor, Parthasarathi Shome, and former finance secretary Sushma Nath are reported as likely to become members.

An Officer on Special Duty has been appointed to help finalise the terms of reference and decide on a venue for the Commission’s secretariat, along with other administrative issues. The 13th Finance Commission was headed by former finance secretary Vijay Kelkar.

OTHER APPROVALS

• Increase in pension from Rs 200 a month to Rs 300 under the Indira Gandhi National Widow Pension Scheme and Indira Gandhi National Disability Pension Scheme
   
• A comprehensive multi-pronged strategy for the prevention and control of Japanese Encephalitis and Acute Encephalitis Syndrome. Cost in this regard is estimated at around Rs 4,308 crore and the funds will be spent on various programmes in 60 districts across Uttar Pradesh, West Bengal, Bihar, Assam and Tamil Nadu to control the diseases. The scheme is planned for five years starting this financial year
   
• Waiver of loans and interest of Rs 2.10 crore for 370 tsunami-affected fishermen

 

Railway pay & auto board
The Cabinet also approved setting up of a National Automotive Board (NAB), a body to be a facilitator between the government and the automobile industry, and to promote research and development activity. Beside helping develop the industry, the idea is that it would be a think tank for the government.

It is to have members from the department of heavy industry, the Planning Commission and from ministries whose ambit would impact the sector, apart from scientists and industry representatives.

Also approved was a proposal of the railways’ ministry for payment of productivity-linked bonus equivalent to 78 days' wages for the financial year 2011-2012, for non-gazetted employees. The financial outgo would be Rs 1,022 crore. About 1.24 million employees would benefit. The pay ceiling for eligibility is Rs 3,500 a month. This payment is made each year before the Dussehra/Puja holidays.

The commission might also look at the issue of giving a moratorium on repayment of loans of debt-ridden states. West Bengal has been asking for a moratorium on its interest and repayments of about Rs 22,000 crore for the next three years.

The Centre’s dilemma is that the 13th Finance Commission had identified West Bengal, Kerala and Punjab as revenue-deficit states in 2007 and a moratorium to one state would mean extending the same benefit to the others, too.

The commission might also look at the impact of the proposed Goods & Services Tax (GST). Though the 13th Finance Commission had also looked at the issue, the delay in the new indirect tax regime might call for a fresh look, especially in the light of issues raised by the states with regard to Central Sales Tax compensation and loss of autonomy in the GST regime.