New Delhi: Niti Aayog vice-chairman Rajiv Kumar on Sunday pitched for building “performance indicators” for the devolution of funds to states.

He also said that while fiscal irresponsibility is bad, “fiscal fetish” is also not desirable and a delicate balance has to be maintained.

“I think it is clear that this (devolution of funds) has to include some performance based criteria. Therefore, those states which have done better in certain performance should not be punished. I think it is a better to start the process of building some performance indicators for the devolution of funds now and then increase it in a phased manner,” the Niti Aayog vice-chairman said at an event organised by industry body CII.

The Niti Aayog vice-chairman’s observations comes against the backdrop of some states expressing disquiet about the terms of reference of the 15th Finance Commission to decide the sharing of tax resources between the Centre and states.

The Niti Aayog was in favour of recommending to the 15th Finance Commission to consider sustainable development goals (SDG) performance for allocating a small percentage of funds to different states.

Unfortunately, it was found that if the government uses SDG performance criteria for the devolution of funds to states, “then it is the more backward states or populated states that will lose some of their allocations.”

Karnataka agriculture minister Krishna Byre Gowda had recently alleged that the Centre was playing politics over the terms of reference (ToR) of the 15th Finance Commission. He said that while ToR would lead to progressive states getting lesser allocation for the 2020-25 period, states that were lagging in governance and responsibility to deliver socio-economic services would be rewarded by grants.

The 15th Finance Commission had decided on the percentage of financial devolution and grants-in-aid, taking the 2011 census as the basis for central assistance. The commission was constituted late last year under the chairmanship of former bureaucrat and ex-MP N.K. Singh.