The Centre on Wednesday extended the 15th Finance Commission’s term by a year. The Narendra Modi government also asked the commission to submit an interim report for the 2020-’21 financial year, and a full report for the 2021-’22 to 2025-’26 financial years.
“The extension of the term will enable the commission to examine various comparable estimates for financial projections, in view of reforms and the new realities to finalise its recommendations for the period 2020-2026,” the government said in a press statement.
The Centre said the extension would help it and state governments with medium-term resource planning. The decision does not run afoul of the Constitution, Business Standard quoted unidentified officials as saying. “The Constitution just mandates that every five years a Finance Commission has to be set up,” said an official. “Today’s Cabinet decision is not in contravention of that.”
The newspaper also reported that the term had been extended considering the creation of the Union Territories of Jammu and Kashmir, and Ladakh. The Centre revoked the undivided Jammu and Kashmir’s special constitutional status on August 5 and the two Union Territories came into existence on October 31.
Union Territories usually get their financial resources from the central government’s share, but the Jammu and Kashmir Reorganisation Act, 2019, prescribes that the commission should treat the two Union Territories as a state.
In July, the terms of reference for the 15th Finance Commission were changed, and the panel was asked to use the 2011 Census as the base year to determine the devolution of taxes to states. Using the 1971 Census had been the norm before. Former Prime Minister Manmohan Singh was among those who criticised this move.