Union Cabinet extended the tenure of 15th Finance Commission 28/11/2019 – Posted in: Daily News

15th Finance Commission

 

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  • About 15th Finance Commission

 

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The Union Cabinet has approved the extension of the term of the 15th Finance Commission, which is to decide on the division of tax and other resources between the centre and the states, by one-year to October 30, 2020. The term of the commission was originally set to end in October 2019.

 

The cabinet “approved the 15th Finance Commission to submit the first report for the first fiscal year viz. 2020-21 and to extend the tenure of 15th Finance Commission to provide for the presentation of the final report covering FYs 2021-22 to 2025-26 by October 30, 2020.

 

The cabinet decision means the Commission will recommend its award to six fiscal years, instead of the usual five.

This means that while the Commission can give recommendations for six years through two reports (2020-21 to 2025-26) when the Sixteenth Finance Commission is set up, it will consider devolution for 2025-26 to 2029-30, and not from 2026-27.

The restrictions imposed by the model code of conduct had delayed the working of the commission, as it was able to complete its visit to states only recently. This, as a result, impacted its detailed assessments on the requirements of different states.

 

The proposed increase in coverage of the period for which the commission’s recommendations are applicable will help medium-term resource planning for the state governments and the central government.

 

Making a five-year coverage available for the commission beyond 1st April 2021, will help both state and central governments design schemes with medium- to long-term financial perspective and provide adequate time for mid-course evaluation and correction.

Union territories usually get their resources from the central government’s share of the divisible pool, but the Jammu and Kashmir Reorganization Act mandates the commission to treat the two union territories as a state. Ladakh, on the other hand, is expected to get funds out of the centre’s share, like any other union territory.

 

15th Finance Commission

The Union Government set up the 15th Finance Commission under the chairmanship of NK Singh in November 27, 2017, to give recommendations for devolution of taxes and other fiscal matters for five fiscal years, commencing 1 April 2020.

 

The main objective behind setting up of the commission was to protect fiscal stability, improve the quality of public spending and strengthen cooperative federalism.

 

Members of 15th FC

Members of 15th FC

 

Criticism

Many ministers, chief ministers and finance ministers; retired civil servants; judges; and economists from South Indian states opposed the commission’s terms of reference, as, it used the data of 2011 census, instead of the data of 1971 census.

Politicians from the south believed that this would dilute the share of South India in the pool of union’s tax revenue, because of its shrinking population vis-à-vis the north since 1971.

 

Important Information

Article 280 of the Constitution states that the President shall constitute a Finance Commission at the expiration of every fifth year or at such earlier time as the President considers necessary.

 

Source: Indian Express

 

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