Date:25/12/2008 URL: http://www.thehindu.com/2008/12/25/stories/2008122556711900.htm

Business

Finance panels’ role undermined: study

K. Venkiteswaran

‘Centre binding them with terms of reference’

Regaining the Constitutional self has become the primary task of the present panel
The fiscal position of the States continues to be in bad shape

KOCHI: The Centre has been undermining the impartial arbitrator’s role of the Finance Commissions envisaged in the Constitution, says a study.

K.K. George, Chairman, Centre for Socio-economic and Environmental Studies here, and K.K. Krishnakumar, Fellow, have conducted the study, titled “Regaining the Constitutional identity of the Finance Commission: A daunting task for the Thirteenth Commission.”

The study says that regaining the Constitutional self has become the primary task of the present panel.

One measure adopted by the Centre to undermine the umpiring role of the commission is binding it by longer and longer terms of reference. These are framed without consulting the States. Besides, these are unnecessary as the Constitution has defined the terms of reference. In addition to the Constitutional impropriety, the terms of reference are objectionable as they are loaded heavily in favour of the Centre. The terms of reference give a detailed roadmap on how and in which direction the commissions should proceed, limiting the freedom and flexibility of the Constitutional body.

The working of the present commission may be seen in the context of the poor fiscal position of the States, the Centre’s own reform agenda and the economic slowdown. The fiscal position of the States continues to be in bad shape despite compressing development expenditure. The reform agenda envisages the governments to reduce their direct role in economic activities and concentrate on providing social and community services, such as education, health care and social and food security.

Under the Constitutional dispensation, these services come largely under the State or Concurrent lists.

In the present times, some of the terms of reference on balancing the budgets and creating revenue surpluses have become outdated.

They stand in the way of the Union and the State government in providing a fiscal stimulus to the economy by running deficits in their budgets and stepping up public expenditure for infrastructure development and social protection.