New Delhi: The Narendra Modi government is unlikely to accept all the recommendations of the 15th Finance Commission — be it on defence funding or more transfers to states to meet health and education requirements in full, sources in the Ministry of Finance told ThePrint.
The 15th Finance Commission, headed by N.K. Singh, had made a host of recommendations in its report that covers the years 2021-22 to 2025-26. The report submitted at the end November was made public Monday.
The finance ministry is of the view that some of the recommendations of the panel cannot be implemented given the fiscal constraints.
In case of the panel’s suggestions for a non-lapsable modernisation fund for defence and internal security of Rs 2.38 lakh crore for a five-year period, the government has given an in-principle nod to the setting up of the fund but is unlikely to act on the suggestion of fundraising for the same.
“The finance commission has recommended the constitution of a separate non-lapsable defence fund. But it has not allocated any funds for the same. Instead, it has suggested to the government ways to raise funds to finance the fund,” said a senior finance ministry official who didn’t wish to be identified.
“So while the government has accepted the recommendation of setting up a fund, the modalities of it will be different than what was suggested by the panel,” he said.
The panel has suggested the fund can have four sources of financing — transfers from the Consolidated Fund of India, disinvestment proceeds of defence public sector enterprises, proceeds from the monetisation of surplus defence land, and funds from sale of defence land likely to be transferred to state governments and public projects in future.
The proceeds of the fund are envisaged for modernisation of defence services and state police forces.
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‘Fiscal constraints’
The finance ministry is also unlikely to agree to the recommendations of the 15th Finance Commission to provide grants to states for health, school and higher education, agriculture, judiciary, maintenance of Pradhan Mantri Gram Sadak Yojana, among others, amounting to nearly Rs 1.3 lakh crore over the next five years.
“There are fiscal constraints. The commission has awarded states a 41 per cent share in the total tax revenues, the same as the previous commission. But in addition, it has recommended various sectoral grants. Where is the fiscal space?” said the official quoted above.
“The Centre is borrowing from the markets and is running a 9.5 per cent (of gross domestic product) fiscal deficit,” he said.
He pointed out how even the 14th Finance Commission had recognised that the amount of funds available with the Union government were limited.
The 15th Finance Commission has recommended that states be given health grants for strengthening urban and rural health centres and that too without any conditions, given their importance in fighting the pandemic.
In addition, it has recommended states be given funds for incentivising improvement in educational outcomes and higher education, and for strengthening the judiciary, among others.
“What the government has decided is that the sectoral priorities that were singled out by the finance commission will be taken into account while restructuring the centrally sponsored schemes rather than giving it in the form of sectoral grants to states,” said the official.
The government is in the process of reducing the number of centrally sponsored schemes by a third. At present, there are around 131 such schemes.
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