Finance Commission chairman on denial of interim relief

Chairman of the 16th Finance Commission Arvind Panagariya seemed to be unaware of Karnataka’s accusation that the Centre did not honour the interim relief of ₹5,495 crore recommended by the 15th Finance Commission for 2020-2021.

When his attention was drawn to the issue, he said: “I do not think the Centre has denied this. It has not been released yet.” However, member Ajay Narayan Jha intervened and said that the Centre did not take a positive view of the recommendation in the first report. “The second report or main report was on State and sector- specific grants for five years. The Centre said it will try and incorporate as part of the Centrally-sponsored scheme,” Mr. Jha said.

When his views were sought on the Centre not adhering to the commission’s recommendations, Mr. Panagariya said: “The Central government has always honoured the recommendation on devolution, local bodies, and disaster relief. In State-specific and sector-specific recommendations, the record is more mixed.”

What Karnataka has asked for

50% of Central divisible pool should be shared with States, which currently stands at 41%..

Cap on cesses and surcharges to 5% of the total tax income. Anything above 5% should be considered under divisible pool.

Set right anomaly of reduction in devolution between 14th and 15th Finance Commission by 1.66%.

Investment of ₹55,586 crore for Bengaluru over the next five years; ₹27,793 crore from the Centre.

Matching grant of ₹25,000 crore for development of Kalyana Karnataka region, while govt. has set aside same amount to overcome regional imbalance.

₹10,000 crore to manage natural disaster, relief, and rehabilitation in the sensitive Western Ghats.

What State could get

If the 16th Finance Commission accepts Karnataka’s recommendations to re-calibrate the criteria for devolution of funds, the State could get slightly above 1% increase in the total devolution that could translate to over ₹70,000 crore over five years. A senior Finance Department official said that though these calculations were not shared with the commission, the State could benefit substantially as it could get 4.8% in the horizontal devolution. Currently, Karnataka’s share in devolution stands around 3.647% as recommended by the 15th Finance Commission.