The Union Cabinet, chaired by the Prime Minister, Narendra Modi, on Thursday approved the creation of three posts for the 16th Finance Commission, which was constituted on December 31, 2023.
The three posts include two posts of joint secretary and one post of economic adviser. “The newly created posts are required to assist the Commission in carrying out its functions. All other posts in the Commission have already been created as per the delegated powers,” a government statement said.
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On November 29, the government approved the terms of reference (ToRs) for the 16th Commission without revealing the names of its chairman and members. The government then appointed former NITI Aayog vice-chairman Arvind Panagariya as the panel’s chairman on December 31, 2023, and bureaucrat Ritvik Ranjanam Pandey was named its secretary. The members of the Commission are yet to be appointed, which may further delay its functioning.
The new panel has to submit its report by October 31, 2025, covering a period of five years that will come into effect on April 1, 2026.
The ToRs for the Commission strictly align with what is broadly enshrined in the Constitution.
The Finance Commission is a constitutionally-mandated body established once every five years to devise a formula for distributing net tax proceeds between the Centre and the states, as well as among the states and local bodies. Currently, India shares 41 per cent of federal taxes with the states as recommended by the 15th panel.
The Commission will also review the present arrangements for financing disaster management initiatives with reference to the funds constituted under the Disaster Management Act, 2005.
The erstwhile 15th Finance Commission under N.K. Singh had recommended that states be given 41 per cent of the divisible tax pool of the Centre during the five-year period 2021-22 to 2025-26, which is at the same level as was recommended by the 14th Finance Commission.
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