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Monday, July 23, 2018

15th Finance Commission: Southern states’ fears unfounded, concerns already factored in, says Subhash Chandra Garg

Garg said that for the 15th FC to identify the rightful needs for the states for allocating resources, the population base of 2011 is a fair one.

Written by Sunny Verma | Updated: April 16, 2018 1:59:15 am
business news, arun jaitley, jaitley terms of reference, jaitley central taxes, finance commission, jaitley 15th finance commission, indian express Economic Affairs Secretary Subhash Chandra Garg.

The southern states’ fears that the 15th Finance Commission (FC) award will be biased against the states that have pursued population control are “unfounded”, as the Commission will take into account all aspects of relative population, relative poverty and progress made on reaching the replacement level on population growth, Department of Economic Affairs Secretary Subhash Chandra Garg said. He said the Centre has no plan to amend the Terms of Reference (ToR) of the 15th FC because “what is being asked for by the states is already there” in the mandate of the FC. In an interview with Sunny Verma, Garg said that for the 15th FC to identify the rightful needs for the states for allocating resources, the population base of 2011 is a fair one. Excerpts:

Last Tuesday, three non-BJP ruled southern states — Kerala, Karnataka, Andhra Pradesh — and Union territory Puducherry argued that the ToR would lead to states with higher population bagging a larger share of tax resources and a loss for states that have pursued population control. This will happen as the 15th FC will take 2011 Census into account, unlike the 14th FC that was tasked to consider 1971 Census. In determining states’ share of taxes, the 14th FC had given 17.5 per cent weight to 1971 population and 10 per cent weight to 2011 population. A 50 per cent weight was given to income distance, which measures the distance of state’s income from the state having the highest income. Since the ToR for the 15th FC doesn’t mandate it take into account 1971 Census, some states feel their efforts on population control front would not yield benefits.

There has been a debate, if not a controversy, over the 15th FC exclusively using the 2011 Census to arrive at allocation of resources. What is your response on the states’ concerns?

Finance Minister (Arun Jaitley) has explained and I have been speaking about it that the ToR of the Finance Commission are very balanced. The job of the Commission is to identify states’ needs, which need to be met from the transfer of resources from the Centre. For identifying needs, population is a very good criteria and it has to be the current one The current population is rightly identified by the last Census (2011). Therefore, for the FC to identify the rightful needs for the states, the population base of 2011 is a fair basis to act upon. But the ToR also recognise the things being done towards moving the replacement level of population control.

Read | Three non-BJP southern states meet, accuse Centre of bias; needless controversy, says Jaitley

So you (the FC) can recognise the efforts and progress made towards population control by giving certain weights to it or by coming out with a performance-based incentive scheme. So I think the controversy, as the FM said, is needless. The last FC also did the same (by assigning weights to 1971 and 2011 Census) without being told or asked. The 14th FC was headed by Dr YV Reddy (former RBI Governor). So if they arrive at the conclusion that the population of 2011 needed to be factored in, I think that is a very legitimate (point).

But the 14th FC took into account 1971 Census as well, which does not find reference in the ToR for the 15th FC.

Last (14th) FC had a specific mandate for using 1971, so they did it. But they also used 2011 Census. The 15th FC can also use the progress made from 1971 to 2011 by giving weight to those states who have controlled population more. So, that is the way the 1971 population can actually be recognised.

Kerala FM Thomas Isaac has highlighted the potential loss the southern states may have to bear due to change of population base years. Are these unfounded fears?

These are completely unfounded fears because the second part of the ToR is that from 1971 to 2011, the progress made actually recognises the 1971 population. So if someone had made progress they get greater weights. How does the FC work? The FC assigns weights to various factors in arriving at allocation of resources. They will assign weights to relative population as well as the progress made towards population control. So a state with higher population may get higher weight and higher allocation. But on the other hand, the state which has made better progress on population control may also get higher weight and higher allocation of resources. Those that have made lesser progress will get lesser resources. Those who have moved on the reverse side, that is their population growth has been higher than the replacement level of growth, then they may not get anything on that criteria. So this is the way the FC allocates resources. So, if that is done, I see no reasons for the fear.

Is the Centre planning any meeting with the states?

We don’t see any necessity because what is being asked for is already there (in the ToR for the 15th FC). It is not that it requires to be built in.

Do you plan amending ToR of the Commission?

No plans, absolutely.

Other states, like Punjab and West Bengal, may join the southern states to voice concerns against the mandate given to the FC. Don’t you think it poses a threat to the constitutional mandate given to the FC?

I don’t see any threat. There is absolutely no such fear. Any state or some states in combination can always get together and make their views collectively or separately known. So, if this gathering on this front comes up with a good case to argue and suggest how the FC should reward those states who have done better on population control, on relative reduction in population, I think it’s a very legitimate way of presenting their case.

Will the Centre intervene and impress upon the FC to assign specific weights or a separate performance-based scheme?

The ToR, they are very much clear themselves. The Central government doesn’t need to say anything on this.

But the Terms of Reference are not elaborate?

The ToR are the reference but the FC deliberates, assesses, examines, meets a lot of people, every concerned stakeholders. They get into studies, papers, hold conferences, seminars and then it comes up with a very reasoned, argued report containing recommendations. So the FC will deliberate on these issues very well.

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