Fund allocations to states: Maharashtra government suggests new criteria to Finance commission

The 16th Finance Commission is on a visit to Maharashtra as a part of its process in consulting states and other stakeholders before it submits its report to the President of India by October 31.

On Thursday morning, Maharashtra Chief Minister Devendra Fadnavis presented the Memorandum of the State Government to the Finance Commission.

The Memorandum contains various suggestions and submissions of the state pertaining to the Commission’s terms of reference. “The state has sought some changes in horizontal devolution as compared to those in the 15th Finance Commission,” Panagariya said. As per the state’s demand, it has sought to increase weightage on population criteria to 20 per cent than the earlier 15 per cent, and on income distance to 37.5 per cent from the previous 45 per cent. The state requested the Commission to recommend new criteria like “sustainable development and green energy” (2.5 per cent) and “incremental contribution by states to India’s GDP” (2.5 per cent).

The state has proposed to increase the vertical devolution of the divisible pool from 41 per cent to 50 per cent, to merge the cesses and surcharges with the principal taxes and to include the non-tax revenue of the Union government in the divisible pool.

under special grants, the state demanded around Rs 1.28 crore for mega projects like Implementing the Economic Master Plan for MMR, River linking projects and assistance for works such as a new Bombay High Court Complex, prison upgrade, PG hostels for medical students and eco-tourism. The state also requested the Commission to recommend Revenue Deficit Grants to the State.

The State has also proposed to modify the sharing ratio between the Centre and State from 75:25 to 90:10. Another submission was to increase the grant-in-aid for local bodies from 4.23 per cent to 5 per cent of the divisible pool.