Parties from Andhra Pradesh have staged a virtual
political revolt against the Bharatiya Janata Party (BJP)-led NDA
government, seeking a special status category for the southern state.
Amid the ongoing political
upheaval, here’s a primer on how the Centre-state financial relations have
changed with the 14th Finance Commission
and extending special favours is no longer a sound arrangement.
What is SCS?
The Constitution does not include any provision for categorisation of any
State in India as a Special Category Status (SCS) State. But, recognising
that some regions in the country were historically
disadvantaged in contrast to others, Central plan assistance to SCS States
has been granted in the past by the erstwhile Planning Commission body, National Development Council (NDC). The
NDC granted this status based on a number of features of the States which
included: hilly and difficult terrain,
low population density or the presence of sizeable tribal population, strategic
location along international borders, economic and infrastructural backwardness
and non-viable nature of State finances.
What kind of assistance do SCS States receive?
The SCS States used to receive
block grants based on the Gadgil-Mukherjee
formula, which effectively allowed for nearly 30 per cent of the Total Central Assistance to be transferred to
SCS States as late as 2009-10.
What are Finance Commissions
and why are they important to India’s federal scheme?
Sharing of financial resources
between the Centre and states is important for any successful federation-based
democracy. Any country that has more than one level of government meets the essential
condition of being a federation. Some Indian states are richer than others.
The Constitution, through Article 280 to 281, provides for a
unique mechanism in Finance Commissions
for division of taxes and revenues vertically — between the Centre and states,
and horizontally— among all states, based on their levels of development,
prosperity and regional needs.
How has the 14th Finance
Commission made the demands of special status redundant?
Finance minister Arun Jaitley has
said that the demand for special status by some states is no longer tenable
after the 14th Finance Commission, which was a watershed, as it recommended
that the states’ share in net proceeds
of Union tax revenues should increase from 32% to 42%.
It also suggested that sharing of
taxes should be the primary route for transfer of resources to states. With
this, it virtually made concessions such as additional funds through ‘special status’ administratively redundant.
What else makes special
concessions on ground of backwardness superfluous?
Besides granting states a much
larger share of the financial pie, the 14th Finance Commission set aside the
distinction between plan and non-plan expenditure. It instead stressed higher
devolution from the ‘divisible pool’, which is where all government income is
first collected before being divided.
In other words, the 14th Finance
Commission devised a new mechanism for the flow of resources between the Centre
and the states and also across states without
any scope for political mediation or bargaining. The era of favouring one
state over another is deemed to have ended with the dismantling of the Planning Commission, which used to allocate
funds to states.
No comments:
Post a Comment