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As mandated by the
Article 280 of the Constitution, the Government has constituted the Fourteenth
Finance Commission consisting of Dr. Y.V.Reddy, former Governor Reserve Bank
of India, as the Chairman and the following four other members, namely: -
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1.
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Prof
Abhijit Sen
Member,
Planning Commission
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Member
(Part
Time)
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2.
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Ms. Sushma
Nath
Former
Union Finance Secretary
|
Member
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3.
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Dr.
M.Govinda Rao
Director,
National Institute for Public Finance and Policy, New Delhi
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Member
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4.
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Dr.
Sudipto Mundle
Former
Acting Chairman,
National
Statistical Commission
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Member
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Shri
Ajay Narayan Jha shall be the Secretary to the Commission. The Commission shall
make its report available by the 31st October, 2014, covering a
period of five years commencing on the 1st April, 2015.
The
Commission shall make recommendations regarding the sharing of Union taxes,
principles governing Grants-in-aid to States and transfer of resources to local
bodies.
Terms of Reference and the matters
that shall be taken into consideration by the Fourteenth Finance Commission in
making the recommendations are as under :
1.
(i) the distribution
between the Union and the States of the net proceeds of taxes which are to be,
or may be, divided between them under Chapter I, Part XII of the Constitution
and the allocation between the States of the respective shares of such
proceeds;
(ii)
the principles which should govern the grants-in-aid of the revenues of the
States out of the Consolidated Fund of India and the sums to be paid to the
States which are in need of assistance by way of grants-in-aid of their
revenues under article 275 of the Constitution for purposes other than those
specified in the provisos to clause (1) of that article; and
(iii)
the measures needed to augment the Consolidated Fund of a State to supplement
the resources of the Panchayats and Municipalities in the State on the basis of
the recommendations made by the Finance Commission of the State.
2.
The Commission shall
review the state of the finances, deficit and debt levels of the Union and the
States, keeping in view, in particular, the fiscal consolidation roadmap recommended
by the Thirteenth Finance Commission, and suggest measures for maintaining a
stable and sustainable fiscal environment consistent with equitable growth
including suggestions to amend the Fiscal Responsibility Budget Management Acts
currently in force and while doing so, the Commission may consider the effect
of the receipts and expenditure in the form of grants for creation of capital
assets on the deficits; and the Commission shall also consider and recommend
incentives and disincentives for States for observing the obligations laid down
in the Fiscal Responsibility Budget Management Acts.
3.
In making its
recommendations, the Commission shall have regard, among other considerations,
to –
(i)
the resources of the
Central Government, for five years commencing on 1st April 2015, on the basis
of levels of taxation and non-tax revenues likely to be reached during 2014-15;
(ii)
the demands on the
resources of the Central Government, in particular, on account of the
expenditure on civil administration, defence, internal and border security,
debt-servicing and other committed expenditure and liabilities;
(iii)
the resources of the
State Governments and the demands on such resources under different heads,
including the impact of debt levels on resource availability in debt stressed
states, for the five years commencing on 1st April 2015, on the basis of levels
of taxation and non-tax revenues likely to be reached during 2014-15;
(iv)
the objective of not
only balancing the receipts and expenditure on revenue account of all the States
and the Union, but also generating surpluses for capital investment;
(v)
the taxation efforts
of the Central Government and each State Government and the potential for
additional resource mobilisation to improve the tax-Gross Domestic Product
ratio in the case of the Union and tax-Gross State Domestic Product ratio in
the case of the States;
(vi)
the level of subsidies
that are required, having regard to the need for sustainable and inclusive
growth, and equitable sharing of subsidies between the Central Government and
State Governments;
(vii)
the expenditure on the
non-salary component of maintenance and upkeep of capital assets and the
non-wage related maintenance expenditure on plan schemes to be completed by
31st March, 2015 and the norms on the basis of which specific amounts are
recommended for the maintenance of the capital assets and the manner of
monitoring such expenditure;
(viii) the
need for insulating the pricing of public utility services like drinking water,
irrigation, power and public transport from policy fluctuations through
statutory provisions;
(ix) the
need for making the public sector enterprises competitive and market oriented;
listing and disinvestment; and relinquishing of non-priority enterprises;
(x) the
need to balance management of ecology, environment and climate change
consistent with sustainable economic development; and
(xi) the
impact of the proposed Goods and Services Tax on the finances of Centre and
States and the mechanism for compensation in case of any revenue loss.
4.
In making its
recommendations on various matters, the Commission shall generally take the
base of population figures as of 1971 in all cases where population is a factor
for determination of devolution of taxes and duties and grants-in-aid; however,
the Commission may also take into account the demographic changes that have
taken place subsequent to 1971.
5.
The Commission may review the present Public
Expenditure Management systems in place including the budgeting and accounting
standards and practices; the existing system of classification of receipts and
expenditure; linking outlays to outputs and outcomes; best practices within the
country and internationally, and make appropriate recommendations thereon.
6.
The Commission may review the present arrangements as regards financing
of Disaster Management with reference to the funds constituted under the
Disaster Management Act, 2005(53 of 2005), and make appropriate recommendations
thereon.
7.
The Commission shall indicate the basis on which it has arrived at its
findings and make available the State-wise estimates of receipts and
expenditure.
8.
The Commission shall make its report available by the 31st
October, 2014, covering a period of five years commencing on the 1st April,
2015.
