Arun Jaitley: No inherent bias in 15th Finance Commission's terms of reference

Finance Minister Arun Jaitley today said there is no inherent bias or mandate in the Terms of Reference (ToR) of the 15th Finance Commission that could be construed as discriminatory against the states which have made good progress in population control. He was responding to concerns expressed by Kerala, Karnataka and Andhra Pradesh as well as the Congress-ruled union territory of Puducherry over the ToR of the Commission. In a first-of-its-kind initiative, the finance ministers of south Indian states at a conclave at Thiruvananthapuram said that ToR was against the principles of federalism enshrined in the Constitution and also would result in revenue loss to the performing states.

"The ToRs of 15th FC rightly balance both the 'needs' represented by latest population and 'progress towards population control' very well," Jaitley said in a Facebook post. He further said that a needless controversy was being sought to be created that the terms of reference of the Commission were loaded against any particular region of the country. "Nothing could be further from truth," he added. The share in central taxes, he said, is allocated to the states based on recommendations made by the Commissions to help them meet 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 allows," he added.

Although the 14th Finance Commission had no specific mandate for using 2011 census, he said, it has rightly used the 2011 census population data to capture the demographic changes since 1971 to make realistic assessment of the needs of the states. The 14th Finance Commission had allocated a 42 per cent share in the central taxes to the States more than ever before, he said.

Pointing to the specific inclusion of reference -- efforts and progress made in moving towards replacement rate of population growth -- he said it recognises the efforts of all the states which have done well in population control. "This 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," he added.