15th Finance Commission’s terms of reference is not good for federal policy, says Manmohan Singh

15th Finance Commission’s terms of reference is not good for federal policy, says Manmohan Singh

Former Prime Minister Manmohan Singh on Saturday said the Centre should have consulted state chief ministers before it changed the terms of reference of the 15th Finance Commission, PTI reported. He said unilateralism is not good for federal policy and cooperative federalism.

The Finance Commission decides how the taxes collected by the Centre should be distributed among the states.

In July, the terms of reference for the 15th Finance Commission were changed, and they were asked to use the 2011 Census, and not the 1971 Census – as has been the norm – as the base year to determine the devolution of taxes. A state’s population is a significant factor in determining how revenue is distributed, and the southern states, which have controlled their population growth over the decades, had voiced their concerns that the new base year will harm their interests. States such as West Bengal, Punjab and Delhi have opposed the commission’s terms of reference.

The senior Congress leader was speaking at an event in Delhi on the expansion of the mandate given to the Fifteenth Finance Commission to suggest if there was a need to set up a separate mechanism for funding defence and internal security. The commission has to submit the recommendations by the end of November.

Singh said that it was necessary for the Centre to carry states along, and it should not give a feeling that they were robbing them of the resources by the changes done to the panel’s terms of reference.

“The best course would have been for the Central government that if it wants to tailor the terms of reference, it should be backed by Chief Ministers’ Conference, which is now under the auspices of NITI Aayog, otherwise there would be strong feeling that the [Central] government is trying to rob the states of due resource allotment,” he said.

“I think that it is not good for the federal polity of our country and cooperative federalism we all swear by these days,” Singh added. “The commission’s report goes to the finance ministry and then it goes to the Cabinet and therefore government of the day can take a view that whatever the mandate of the Parliament, the government would abide by that rather than imposing its view unilaterally on the reluctant state commissions.”

He urged the government to go by the advice of the chief ministers of all the states. “I am told once upon a time, the 9th Finance Commission took the view that it will be guided by the Constitutional mandate and will do the fair distribution of taxes, though I don’’t know that whether this [15th] commission is going to adopt that line of thought,” Singh said. “But…internal security as well as defence are subjects which are of great national importance.”

Singh said all states have a legitimate interest in the allocations for health, education, environment protection, and other important subject matters. “What should be done by the government is to evolve a broad national consensus in dealing with all these issues, otherwise there would be bickering and dissatisfaction,” he stressed.

Singh, who is also an economist often credited with historic economic reforms as finance minister in 1991, said it was “odd” for the government to come up with additional terms of reference. “Most of the states have already gone to the commission with their requirement and now you impose another terms of reference on the commission, which would complicate its work,” he said. “That is certainly not good for the federal polity and cooperative federalism that we desire should flourish in the country.”

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Author: Lili