*TOICTM260210/ /15/K/1**TOICTM260210/ /15/Y/1**TOICTM260210/ /15/M/1**TOICTM260210/ /15/C/1*
THE TIMES OF INDIA, MUMBAI*
FRIDAY, FEBRUARY 26, 2010
TIMES NATION | FISCAL PRESCRIPTION
15
Drop in child
death rate will
Formula skew: Poor
SSA gets 24k cr
windfall under
fetch rewards
Team TOI
states pay for success
Rt to Education
C
oncerned by the lack of substantial Team TOI tion of funds will help states
steps by states to control infant tide over that crisis.
deaths in the country, the 13th Fi-
nance Commission has recommended link-
Jharkhand, Bihar, Chhattisgarh & Orissa Lose Out For Witnessing Sharp
ing states’ performance in reducing infant H
RD ministry and states While being generous in
can be happy as 13th grant of funds, the Commis-
Finance Commission sion has made it clear that it
mortality rate to grants from the Centre.
Growth; UP, J&K, Maha And Himachal Are Among Biggest Gainers
has been the most generous for should not become a substi-
The commission has set aside Rs 5,000 crore elementary education, allo- tute for current expenditure
as incentive grant for the purpose. cating Rs 24,068 crore for Sar- of states. It has stipulated that
The Finance Commission held that “in- Team TOI Since one of the factors taken va Shiksha Abhiyan to all the the expenditure (excluding Rs
centivising states to improve their human
A BIGGER
into account in the sharing for- states for the next five years. It 24,068 crore) should grow by
development indicators is desirable”. Ac-
J
harkhand has emerged, some- mula is he per capita gross state has also fully accepted the de- at least 8%.
cording to the Registrar General of India, what surprisingly, as the
SLICE
domestic product of a state rela- mand for grants made by the The second highlight on ed-
the country had an IMR of 53 deaths per state that is likely to be tive to the average for states — to HRD ministry. ucation is contrary to the Plan-
1,000 live births in 2008, which is much high- the biggest loser from the rec- Gain loss due to ensure that more backward states Even though funding for ning Commission’s argument
er than most ommendations of the 13th changes in sharing get more support — this rapid Right to Education has not that states are flush with funds
developed Finance Commission. It could growth has actually worked been worked
Dying Young
formula (Rs Cr)
countries. In lose something in the region against these states. Bihar, which out, the Com-
fact, one of the of Rs 900 crore a year as a result of
Share of all taxes Share of
has also witnessed rapid growth mission recog-
MP
75
(excluding service tax) service tax
Total
major targets the changes in the tax-sharing of late, seems to have become a nizes that more
of the Nation- formula.
Jharkhand
-810 -109 -919 victim of its success, although in funds will be
70
al Rural The commission’s report sug- Gujarat
-765 -102 -868
its case the growth is because of needed to imple-
Health Mis- gests a share of 2.802% for the state mining. ment the his-
48
Andhra Pradesh
-607 -79 -686
sion (NRHM) in the pool of shareable Central tax-
Orissa
-554 -73 -626
On the flip side, the biggest gain- toric legislation.
Orissa
is to reduce es, excluding service tax, and of
Tamil Nadu
-487 -64 -551
er in absolute terms is Uttar It is clear that
69
IMR to 30 per 2.846% in the portion of service tax Pradesh, though in percentage SSA will be the
1,000 live collections shared with the states.
Kerala
-470 -63 -532
terms Himachal Pradesh will get main vehicle for
71
births by 2012. These are down from its shares of
Chhattisgarh
-267 -35 -302 about 50% more as its tax share implementing
49
All India 3.361% and 3.405% respectively un- Karnataka
-190 -24 -213
from the Centre than it would have the RTE Act. FUTURE’S BRIGHT
IMR for rural der the 12th Finance Commission. Bihar
-161 -16 -177
got under the earlier formula. Two things
UP areas is a A decline of about half a per-
Haryana
In general, the north-eastern about education in the report for SSA and even RTE, the
67
-39 -5 -44
whopping 58 centage point in its share may seem
Goa
10 2 12
states, Himachal and Jammu & stand out. One, unlike the 12th Commission recognizes that
70
while infant like too little to quibble about. But
Sikkim
Kashmir gain significantly because Finance Commission that al- implementation of RTE Act
mortality in it isn’t. Given the fact that the share
17 3 20
of the changed formula. While the located funds for only eight would require considerable in-
49
urban areas is of all states put together is hu-
Mizoram
43 6 50
earlier formula compared each states, this time the Rs 24,068 crease in the funding require-
Assam
a much lower mungous — in the current year, for
Meghalaya
54 8 61 state with the all-state average, the crore has been provided for all ments for elementary educa-
64
36. The gov- example, the figure would be rough- Arunachal Pradesh
58 8 66
new one creates two categories of the states. The fund to be dis- tion. The report points out the
ernment has ly Rs 165,000 crore — you can see states and recommends sharing ac- bursed over the next five years divergent view on RTE fund-
66
Nagaland
74 10 84
accepted the how even that teeny bit can make a
Tripura
120 17 137
cordingly — one for special cate- is part of the equalisation grant ing between HRD ministry and
39
recommenda- huge difference.
Manipur
129 18 147
gory states and another for the gen- to all states which will be equiv- Planning Commission. While
tion to provide Some among the other big losers eral category states. alent of 15% of the assessed re- HRD has projected a require-
an “incentive from the change are predictable —
Punjab
Rajasthan
130 18 149
Just as there are surprises quirement. It will take care of ment of Rs 1.73 lakh crore, the
grant” of Rs like Gujarat and the four southern
Uttarakhand
63
262 36 298 among the ‘‘losers’’ so are there the recurring expenditure that Plan panel brought it down to
5,000 crore for states. But poor states like Orissa, Maharashtra
293 42 335
some unexpected states among the SSA incurs in terms of salary, Rs 1.44 lakh crore.
69 reduction in Chhattisgarh and Bihar are also los-
West Bengal
300 44 345
‘‘gainers’’. These include Maha- training and similar other On the flip side, the states’
38
infant mortali- ers and that might come as a sur-
Jammu & Kashmir
368 0 368
rashtra, West Bengal and Punjab. heads. But capital expenditure demand for sharing of 2% ed-
ty, to be re- prise to many.
Rajasthan
Again, the main reason seems to has to be left out of it. ucation cess has not been ac-
IMR*
leased to states What’s common to the three poor
354 51 405
Rural Urban
be, at least in the case of Maha- Considering that 14 states cepted. Education cess on in-
starting 2012- states, excluding Bihar, is the fact
Himachal Pradesh
375 51 427
* Per thousand live births
rashtra and West Bengal, that their defaulted on their share of direct tax will be subsumed un-
Source: RGI, 2008
2013 depending that they have all witnessed sharp
Assam
570 79 649 growth has lagged behind the av- 40% for SSA last year, it is un- der the basic rate of central
on the reduc- growth in their gross state domes- Madhya Pradesh
593 84 677
erage, thereby making them rela- likely that they will be able to Goods and Services Tax. How-
tion in IMR achieved by states with refer- tic product in recent years, thanks
Uttar Pradesh 599 91 690
tively more ‘‘backward’’ than they increase it to 45% as is re- ever, education cess on direct
ence to baseline level of 2009-2010 data. largely to rapid expansion of min- were at the time of the 12th Fi- quired from the next fiscal. tax may continue. But states
Note: Calculations are indicative and based on the divisible pool of
Mobile Creche’s founder member Devika ing activities. Central taxes in the budget estimates for 2009-10 nance Commission. Nevertheless, more devolu- will still not get anything.
Singh said, “Incentivising grants for states
is good but for such sanctions to be success-
ful, systemic changes are a must. There are
a complex set of systemic interventions that
need to be put in place first.”
Rs 50,000 crore sweet pill for GST rollout
Rs 5,000 cr to
According to the commission, the grant
will be dispensed over a three year period be- Team TOI which is as high as 30%. and a tax base of around Rs finance ministry on a rate of each, or the states could have
tween 2012 to 2015, with Rs 1,500 crore for the Terming GST as a game- 31,00,000 crore. According to 16% for GST for both the Cen- a percentage point more de-
get wheels of
first two years and Rs 2,000 crore in 2015.
T
he Centre has put an in- changing tax reform, the com- the task force report, the rev- tre and states combined on an pending on final negotiations.
centive tag on the im- mission says it will signifi- enue-neutral rate of 12% would assumption that a uniform However, there is no scope for
plementation of the cantly contribute to the buoy- comprise 5% as Central GST turnover threshold of Rs 10 taking central threshold limit
justice moving
Govt agrees to rein
Goods and Services Tax (GST) ancy of tax revenues and ac- and 7% state GST. This is a sub- lakh could provide a revenue of annual turnover to Rs 1.5
by accepting the 13th Finance celerate growth as well as gen- crore as demanded by states. Team TOI
Commission recommendation erate positive externalities. The 13th Finance Commis-
in spendthrift ways
which says states will benefit The grant of Rs 50,000 crore
Fall In Line, Get Paid
sion assumes that despite low-
from a compensation package would be used for meeting the Schedule of GST grants to states er levels of taxes, the revenue
of Rs 50,000 crore on account compensation claims of states of the Centre and the states
Team TOI of revenue loss only if they im- between 2010-11 and 2014-15.
2010-11
Rs 5,000
cr
F
ailure of the justice delivery system
has been a favoured topic of discus-
sion for long with little effort by the
will be buoyant. ‘‘Subsumation government to deal with it comprehensively.
plement the indirect tax re- Unspent balances in this pool
2011-12
Rs 11,250
cr of all major indirect taxes will Recognising the need for speedier justice
T
he government has accepted the rec- forms by April 1, 2013. would be distributed among all result in removal of inefficient delivery, the 13th Finance Commission has
ommendation of the 13th Finance The compensation package the states, as per the devolu-
2012-13
Rs 11,250
cr
taxes. Our manufacturers will granted Rs 5,000 crore for improving func-
Commission to return to fiscal dis- will shrink to Rs 40,000 crore tion formula, on January 1,
2013-14
Rs 11,250
cr
become more competitive and tioning of Lok Adalats and legal aid panels,
cipline as stipulated by the Fiscal Respon- if there is any delay in its exe- 2015. consequently exports will alternate dispute resolution centres, heritage
sibility and Budget Management (FRBM) cution after this date. It will be GST was initially scheduled
2014-15
Rs 11,250
cr
grow,’’ the report said. court buildings, state judicial academy and
Act by agreeing to eliminate the revenue further reduced to Rs 30,000 to be implemented from April
FIGURING IT OUT
| Task force of 13th Finance Commission
‘‘Provision of seamless in- training of judicial
deficit by 2013-14 and bringing down fiscal crore if the tax reforms are not 1, 2010. However, lack of con- put tax credit across all trans-
deficit to below 3% of GDP. The finance min- launched by April 1, 2014. sensus between states and the
suggested common rate of
12%
(Centre 5%, states 7%)
officers and public Over the next
actions will avoid tax cas- prosecutors.
istry has also accepted the suggestion that The indirect tax reforms in Centre on a uniform tax struc-
Within finance ministry, consensus for a uniform rate of
five years, the
cading, eliminate double tax- Over the next
borrowing limits of the states should hence- the form of GST will stream- ture and their inability to car-
16%
(8% for Centre and states) ation and improve resource five years, the
grant will be
forth be fixed by the Centre in line with these line the movement of goods ry out necessary legislative allocation. It will foster a com- grant will be used
used for six
targets. The Commission’s recommenda- across India with a single tax amendments have led to its stantial decrease from the neutral tax base of 40-45 lakh mon market across the coun- for six initiatives
initiatives
tions for the states include bringing down structure by abolishing the cur- postponement by six months. present rate of 20.5% (8% for assesses. Sources said the fi- try, reorient supply chains identified by the
identified by
the fiscal deficit to 3% of the gross state do- rent multiple tax system hav- A task force set up by the CENVAT and 12.5% for VAT). nance ministry could project and remove the present bias department of jus-
mestic product by 2014-15 and eliminating ing central excise, state VAT commission had earlier sug- However, there is a wide- the rates for both the Centre towards backward integra- tice. It includes in-
the department
the revenue deficit completely by then. and service tax — the sum of gested a common rate of 12% ranging consensus within the and the states on GST at 8% tion,’’ the report said. creasing the work- of justice
Originally, the FRBM Act, enacted in 2003 ing hours of
and brought into force from July 5, 2004, man- courts by using the existing infrastructure
dated that the revenue deficit should be elim-
Green concerns take root, funds shoot up
to hold hearings in morning and evening
inated and fiscal deficit contained at 3% of shifts. It is expected that 14,825 such courts
GDP by March 2008. In 2004, the target was can dispose of 225 lakh pending as well as
shifted to March 2009 by an amendment to freshly filed cases of minor nature within
the Act. The annual deficit reduction targets Team TOI for heartburn in regions a year. In five years (2010-15), it will lead to
could not be adhered to in 2005-06 as the Cen-
A Push For Planet
where forests are controlled disposal of 1,125 lakh cases. An amount of
tre pressed the pause button to accommo-
G
reen federalism has by communities. Rs 2,500 crore will be provided for this alone.
date the higher transfers recommended by got embedded in the
FORESTRY
RENEWABLE ENERGY WATER
The finance commission The second is enhancing support to Lok
the 12th Finance Commission. fiscal character of the
Rs 5,000cr Rs 5,000cr
MANAGEMENT
has also provided an incentive Adalats to reduce the pressure on regular
The Commission recommended a revised country now. The government of Rs 5,000 crore to generate courts. A grant of Rs 20 crore per year will
roadmap of fiscal correction prescribing a has accepted the 13th Finance Criteria | Criteria |
Rs 5,000cr
grid-connected renewable pow- be provided as support to hold about 10
combined debt-GDP ratio of 68% for 2014-15. Commission’s recommenda- State’s area under Grid-connected Criteria | er. With climate change and en- mega Lok Adalats for each of the 1,500 court
With the target of debt-GDP ratio for the Cen- tion to disburse more than Rs forest cover and renewable energy Improved water ergy security gripping inter- locations per year.
tre set at 45% in 2014-15, the target envisaged 15,000 crore on environmen-
its quality capacity to be increased management and
national and domestic policy Additional funding will be given to state
for all the states by implication is 25%. tal considerations to states. circuits like never before, the legal services authorities to enable them to
Rs 5,000 crore each will be
Conditional upon | Conditional upon |
regulation
recommendation could go a enhance legal aid to the marginalised and
provided for promoting
Making working Access being given to Conditional upon
|
long way in increasing renew- empower them to access justice. Promoting
War chest to tackle
forestry, renewable energy and
plans for renewable developers Setting water tariffs
able energy capacity. alternative dispute resolution mechanism
water management to the conservation of to power markets at and recovering 50% The third component for and enhancing capacity of judicial officers
states. Also, a special provi- forest land competitive rates of the water costs water management could be and public prosecutors through training pro-
any calamity
sion of Rs 120 crore for restora- the toughest to sell to states grammes are also on the agenda. The grant
tion of the largest fresh water with the condition that the will also support creation of judicial acade-
lake in Asia — Wullar lake in the new tranche of grants maintaining green cover on grants for the first two years states fix minimum water tar- my in every state to facilitate training.
Team TOI J&K — has been made. conditional on states deliver- behalf of the country at the be untied but for the next iffs. The grant is meant to There is also a proposal to create the post
The commission respond- ing on green issues. cost of their own economic three years be linked to the push for reforms in the water of court managers in every judicial district
W
ith the 13th Finance Commission ed strongly by recommend- For years, states with high development. number of approved working sector, a critical political is- to assist judiciary in their administrative
laying special emphasis on fund- ing a massive financial fillip forest cover have been com- Recognising this, the fi- plans which the state forest sue that requires states to set functions. Also, courts housed in heritage
ing for disaster relief to handle to environmental concerns. plaining to the Centre that nance commission has rec- department prepares. This up a regulatory authority that buildings will be provided grant for main-
both man-made and natural disasters, states But the commission has made they carry the burden of ommended that forestry linkage could become a cause would push for cost recovery. taining them.
will get more funds from the Centre.
The commission has earmarked Rs
26,373 crore for capacity building and urged
states “to follow the required accounting
practices to properly account for relief ex-
Finance Commission decides Centre-state revenue share
penditure”. Besides, it also suggested
streamlining the entire procedure of dis- What does the Finance Commission Since when have Finance Commis- flowing from policy changes, are: Which added to the Finance Commission’s tasks its work?
bursing relief funds under unified struc- do? sions been doing this job? central tax revenues are to be shared: after the 73rd and 74th amendments to The commission gets two years to sub-
ture at both the Centre and state level. In India’s quasi-federal structure, the The provision for having a Finance Com- Initially, the Constitution provided for the Constitution in 1992, which estab- mit its report after consultations with
The existing system of financing relief central government collects most of the mission to sort out the revenue-sharing the sharing of only two central taxes with lished the third tier of governance. central and state bodies and a cross-sec-
expenditure mainly revolves around the important taxes. However, much of the arrangement between states and the Cen- states — income tax and excise duties. Some other changes evolved by the FCs tion of society.
Calamity Relief Funds (CRF) maintained expenditure needs to be done by the tre is part of the Constitution, under Ar- This changed after the 80th constitutional in response to changing needs are: How are the FC’s recommendations
at the state level and the National Calami- state. So, a certain proportion of the tax ticle 280. The first commission amendment in 2000, which pro- State’s share: Population used to be the implemented?
ty Contingency Fund (NCCF) at the central revenue is transferred to the states. was appointed in 1952. So far, vided for sharing of the proceeds main criterion for sharing the income Traditionally, the Centre accepts the rec-
level. In addition, the Disaster Management What proportion of tax revenue is to be thirteen Finance Commissions of all Union taxes and duties tax component — the first seven com- ommendations. There is only one signif-
Act of 2005 had created two different heads shared with the states is the Finance have been appointed at intervals with the states, except the cen- missions assigned 80-90% weightage to icant case — that of the third Finance
— National Disaster Relief Fund (NDRF) Commission’s key responsibility. of every five years. As per the tral sales tax, consignment tax- it. The eighth FC introduced measures Commission — when its recommenda-
at the Centre and State Disaster Response It also works out methods of equi- Constitution, the commission is es, surcharges on central taxes of equity for the first time, including per tions about how to share five-year Plan
Fund (SDRF) at state level — making relief table distribution among various states appointed by a presidential or- and earmarked cesses. This was capita state income and the gap between resources was not accepted by the gov-
disbursement quite complicated. based on population, how much is der, and consists of a chairman one of the recommendations of state and highest per capita state income, ernment. The crucial recommendations
Taking note of this, the commission has needed to pull up lagging states, and and four other members. the 10th Finance Commission. as factors. The 12th FC increased the pop- relating to sharing of revenues from tax-
recommended merger of NCCF with NDRF how much productive value each is How have Finance Commis- From the first to the ninth FC, ulation parameter to 25%, reducing the es, duties and grants-in-aid are imple-
and merger of CRFs with SDRFs with ef- adding. Apart from these three manda- sion recommendations the share of income tax proceeds backwardness criterion to 50%. mented by an order of the President.
fect from April 1. tory functions, the commission also changed over the years? going to the states jumped from Grants for states: The commission Is the commission unique to India?
Since the government has accepted the recommends ways of strengthening the Since the first Finance Commission, the 55% to 80%. The tenth FC lowered it to also prescribes how much of grants is No, similar institutional mechanisms
commission’s recommendation, the proce- economic health of the country by sug- nature of India’s economy and macro- 77.5%. At the time of the seventh com- to be given to states. They even cover exist in Canada and Australia, which
dure of relief fund disbursement will now be gesting ways to increase revenue, bridge economic policy has changed dramati- mission, 40% was given to states. the capital expenditure needs of states too are faced with issues of sharing rev-
smoothened by removing multiplicity of au- gaps in income and expenditure, and cally. Some of the major changes in fi- Funds for panchayats and munici- in these sectors. enues between provinces and the fed-
thorities at both the Centre and state levels. handle debt. nance commission recommendations, palities: This mandatory function was How does the commission go about eral government.
*TOICTM260210/ /15/K/1**TOICTM260210/ /15/Y/1**TOICTM260210/ /15/M/1**TOICTM260210/ /15/C/1*
TOICTM260210/1R1/15/M/1OICTM260210/1R1/15/C/1OICTM260210/1R1/15/K/1OICTM260210/1R1/15/Y/1
CMYK
Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48