On a day three non-BJP ruled states and a union territory held a meeting denouncing the terms of reference of the 15th Finance Commission, Finance Minister Arun Jaitley said a "needless controversy" was being created.
A conclave was organised in Thiruvananthapuram on the behest of Kerala government to express their apprehensions about the Terms of Reference of 15th Finance Commission. Apart from Kerala, finance ministers from Karnataka, Andhra Pradesh as well as the Congress-ruled Puducherry participated. They said the Terms of Reference (ToR) were in contradiction to the principles of federalism enshrined in the Constitution. They said it would result in revenue loss to the performing states.
They opposed the ToR recommendation to use the 2011 Census to calculate allocation of central tax revenue in place of 1971 census, which was used by the previous Finance Commissions.
The AIADMK-ruled Tamil Nadu and TRS-ruled Telangana opted out of the conference.
Rubishing the concerns Jaitley said a wrong impression was being created that the Terms of Reference (ToR) of the 15th Finance Commission were loaded against any particular region of the country. "Nothing could be farther from truth," Finance minister said in an article released by the BJP.
Jaitley added that the share in central taxes was allocated to the states based on recommendations made by the Finance Commissions (FCs) to help states meet the fiscal deficiency in providing a minimum standard of services to their people.
"This calls for assessing states’ ‘needs’ on rationale and equitable basis. FCs use appropriate criteria to assess true needs of states. Population proxies very well for the needs of the people in quantitative sense. Another criterion, the Income Distance, which captures very well relative poverty of people in the states, is used to assess qualitative needs. These two parameters allocate more resources to the populous and poorer states, which need additional funds for providing education, health and other services to the people, which own resources of these poorer states may otherwise not allow, " he argued.
Rederring to objection about the use of 2011 Census data, Jaitley said, "The 14th FC had no specific mandate for using 2011 Census. Yet, 14th FC rightly used the 2011 census population data to capture the demographic changes since 1971 to make realistic assessment of the needs of the states. It allocated 10 per cent weight to 2011 population. The 14th FC had allocated a 42 per cent share in the Central taxes to the states more than ever before."
He said another 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.
As the issue was turning out to a political, with Opposition ruled states turning against the BJP-run central government, Jaitley said, "there was no inherent bias or mandate in the ToRs of the 15th FC which can be construed as discriminatory against the states which made good progress in population control."