Finance panel report not good for State’s economy, Deshmukh tells PM

Deshmukh said the State’s share in Central taxes has been cut down to 4.632 per cent from earlier 6.126 per cent while the backward states who have failed to maintain financial discipline have been rewarded with more funds.

Finance Minister Jayant Patil wrote an identical letter to his counterparts of all the states.

Meanwhile, economist P R Brahmananda has observed that though the report was revolutionary, it has miserably failed to reconside the principles of equity with efficiency. “It penalises the more efficient states and therefore has the potential of stalling the second generation tax reforms,” he said.

Brahmananda pointed out that as per the recommendations of the Commission, poorer states will now get a bigger share of Central taxes, while richer states with better infrastructure, administrative and fiscal apparatus will get less than what they used to receive under the Tenth Finance Commission formula.

Maharashtra Economic Development Council president V S Palekar said the most significant recommendation of the Commission was the transfer of 37.5 per cent of the gross revenue receipts of the Centre to the states, but the fact that Maharashtra will get only 4.63 per cent of the Central share was shocking.

“On the basis of the recommendations of the first finance commission, we were given 17.5 per cent, while after the Eleventh Finance Commission, we will get a meagre assistance of 4.6 per cent. We will lose atleast Rs 750 crore per year following the revised formula,” he added.