New Delhi: The Ministry of Finance has been “reasonable and fair” while considering the 15th Finance Commission’s recommendations, especially given the fiscal pressures the government is facing, panel chairman N.K. Singh said in an interview.
The commission’s report, which was submitted last year and made public earlier this month, recommended 41 per cent of the total taxes collected by the central government should be shared with the states for the period 2021-22 to 2025-26.
It also called for a host of grants to the states over and above the 41 per cent of the taxes. These include revenue deficit grants, state-specific grants and sectoral grants.
While the Narendra Modi government has accepted the 41 per cent devolution, it has not accepted the calls for sectoral grants as well as state-specific grants citing revenue constraints, ThePrint reported last week.
The commission had recommended that the states be given sector-specific grants amounting to Rs 1.29 lakh crore and state-specific grants of over Rs 49,000 crore.
“On the state-specific recommendations, they have said that they would give this due consideration. On the sector-specific grant, they have said that this will be considered in the context of the rationalisation of the centrally-sponsored schemes,” Singh said.
The Modi government has been “reasonable and fair” in response to their recommendations, said the panel chief. “If I were in the Ministry of Finance, I wouldn’t have spoken a different language,” he added.
He pointed out that the ministry has accepted the recommendation of a revenue deficit grant of Rs 2.95 lakh crore to 17 states over a five-year period.
“That’s a grant. It’s not a right,” he said, adding that the Centre has also accepted the recommendations on national disaster management.
Acceptance of non-lapsable defence fund a ‘quantum’ change
The panel had also recommended 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 this, but not accepted it in entirety.
Singh said the fact that the government has accepted the recommendation for setting up such a fund is the “main thing”.
“The acceptance of a non-lapsable fund, in my view, is a quantum change in thinking of the Ministry of Finance, in managing capital expenditure for defence,” Singh said.
The commission has not allocated any definite amount for the defence fund but has only recommended ways the Centre can raise funds for the same.
The panel had 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.
According to finance ministry sources, the central government is unlikely to follow the recommendations of the panel when it comes to modes of fundraising.