The West Bengal government has submitted before the 16th Finance Commission that the share of states in central taxes be raised to 50 per cent from 41 per cent.
In the 15th Finance Commission, the share of states was fixed at 41 per cent, and the West Bengal government’s plea is that it should be raised to 50 per cent, Arvind Panagariya, Chairman of the 16th Finance Commission, said on Tuesday. “This is a figure we have heard in almost all other states, except one or two that wanted it raised to about 45 per cent,” he added.
The 16th Finance Commission has been consulting states since mid-February before making recommendations on the states’ share in central taxes. Including West Bengal, it has visited 13 states, and the process of engagement with the states is expected to be completed by May.
In West Bengal, the Commission members held consultations with trade and industry bodies, as well as rural and urban local bodies. A “long” meeting with the West Bengal government followed, which included Chief Minister Mamata Banerjee and several members of the Cabinet, among others.
The West Bengal government is said to have called for certain adjustments to the criteria and weight in horizontal devolution. Income distance, population, area, forest cover, demographic performance, and tax effort are some of the criteria used to determine the share of states.
In the 15th Finance Commission, the weight on income distance was 45 per cent. “The West Bengal government has represented that this share should be increased to 50 per cent, which means that half of the divisible pool should be allocated across the 28 states based on this income distance,” Panagariya said.
Income distance looks at the difference between the income of a high-income state and the other states.
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The government has also advised that urbanisation should be introduced as an additional criterion with a weight of 7.5 per cent.
It has also proposed that 10 per cent of the state’s share should be divided based on population and adjusted for the SC/ST population share. Conventionally, Finance Commissions have used forest as one of the criteria, but the West Bengal government felt it should not be.
The Chief Minister is said to have raised certain areas which were not under the Finance Commission’s mandate, such as centrally sponsored schemes and difficulty in getting funds from the central government. “This is an issue that she wanted the Finance Commission to be sensitive about,” Panagariya added.
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