‘No bias in terms of reference to states’

New Delhi: Finance minister Arun Jaitley on Tuesday rubbished allegations that terms of reference of 15th Finance Commission will penalise Southern states which have worked in population control by cutting down their share from Central revenue.

Finance minister in a Facebook post said that 15th Finance Commission (FC) balances “both the ‘needs’ represented by latest population and ‘progress towards population control’ very well”.

“There is no inherent bias or mandate in the ToRs (Terms of Reference) of the 15th FC which can be construed as discriminatory against the states which made good progress in population control,” wrote Mr Jaitley.

States like Kerala, Karnataka and Andhra Pradesh as well as the Congress-ruled union territory of Puducherry are concerned that the ToR mandates the Commission to use 2011 population for tax sharing and devolution of resources instead of earlier practice to use 1971 population.

Between 1971 and 2011 population shares of four southern states in total declined from 22.01 per cent to 18.16 per cent. Some states allege that use of 2011 population for sharing resources may mean a decline in the flow of resources to these states. In a first-of-its-kind initiative, the finance ministers of south Indian states at a conclave at Thiruvananthapuram said that ToR was against the principles of federalism enshrined in the Constitution and also would result in revenue loss to the performing states.

However, Mr Jaitley said that there is specific inclusion in the terms of references of the 15th FC which is “efforts and progress made in moving towards replacement rate of population growth.” He said that this ToR recognises the efforts of all the states which have done well in population control. “This specific ToR would allow the 15th FC to propose a specific incentive scheme to reward the states which have achieved replacement level of population growth, and also, if the 15th FC wishes to do so, to assign appropriate weight to the progress made in population control while allocating resources,” said Mr Jaitley.

Mr Jaitley said that a needless controversy is sought to be created that the terms of Reference (ToR) of the 15th Finance Commission are loaded against any particular region of the country. “Nothing could be further from truth,” he said.

Finance minister pointed out that share in Central taxes is allocated to the states based on recommendations made by the Finance Commissions (FCs) to help states to meet fiscal deficiency in providing a minimum standard of services to their people.