The 15th Finance Commission on Wednesday formed an advisory panel to assist it on matters related to the commission’s terms of reference. The panel will also help the commission, headed by former bureaucrat NK Singh, understand the best national and international practices on devolution of taxes.
The Finance Commission decides the distribution of money collected in taxes by the Centre among the states. The government’s terms of reference for the 15th Finance Commission say that it should use the 2011 Census, and not the 1971 Census as has been the norm, as the base year to determine how tax revenue is divided.
The southern states, as well as West Bengal, Punjab and Delhi, have opposed this. A state’s population is a significant factor in determining how revenue is distributed, and the southern states, which have controlled their population growth over the decades, fear that the new base year will harm their interests.
“The use of population from census 2011 by 15th Finance Commission with a greater weight for determining the allocation of funds to the states would cause great injustice to the states,” BloombergQuint quoted Andhra Pradesh Finance Minister Yanamala Ramakrishnudu as saying in Amravati on Monday. He was speaking at a meeting attended by the finance ministers of Puducherry, West Bengal, Kerala, Delhi and Punjab. “This approach would penalise states which have shown declining fertility rates and lower population growth over the past four decades,” he added.