Prime Minister Narendra Modi tried to play down fears of the southern States that the 15th Finance Commission would not do justice to them, but the Terms of Reference of the commission and policies pursued by the Centre in the division of taxes belie his assurances.
The population figures of the 1971 census had been fixed for Finance Commissions to arrive at the formula for devolution of funds from the Centre to the States until 2026 just as the number of Lok Sabha seats was fixed on the basis of 1971 census until 2026.
The Terms of Reference for the 15th Finance Commission changed it to 2011 census figures. Between 1971 and 2011 there have been vast divergences in the decadal population growth rate of states. By actively pursuing family planning and promoting female literacy, the southern States have brought down the population growth rate considerably.
Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh registered a much higher growth rate. By following arbitrary guidelines, the 15th Finance Commission would not be able to fulfill its responsibility spelt out in Article 280 of the Constitution.
Dismissing the concerns of the southern States, Union Finance Minister Arun Jaitley said, “Needless controversy is being sought to be created that the Terms of Reference of the 15th Finance Commission are loaded against any particular region of the country. Nothing could be farther from truth.”
The Prime Minister, however, said the Union government had advised the Finance Commission to consider incentivising States that had worked on population control.
“Thus, a State like Tamil Nadu, which has devoted a lot of effort, energy and resources towards population control would certainly benefit,” he said. By changing the population data from 1971 to 2011, Tamil Nadu stands to lose about Rs. 10,000 crore. If the incentive offered is five to 10 per cent, the state is still a loser.
Although Tamil Nadu did not join the conclave of finance ministers of southern States convened by the Kerala Chief Minister Pinarayi Vijayan to fight for their rights, it is very much on the same side as far as the 15th Finance Commission is concerned.
Telangana did not participate because it did not exist in 1971, the cut-off year. Demonetisation and implementation of GST had left states with very little fiscal elbow room.
Now the Centre has not only arbitrarily changed the Terms of Reference of the Finance Commission but also wants it to review the recommendations of the previous Commission, something never done before. While giving weightage to 2011 census figures may be advantageous to BIMARU States, it has weakened the federal principle India is committed to.
A second conclave of State finance ministers which will include Delhi, Punjab, Odisha and West Bengal, is to be held in Visakhapatnam to finalise a memorandum to be submitted to President Ramnath Kovind seeking to restore status quo ante before the 15th Finance Commission finalises its recommendations. But the first bricks of this wall of division have been laid.