Date:01/01/2009 URL: http://www.thehindu.com/2009/01/01/stories/2009010150400100.htm

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Cabinet nod for State memorandum

Roy Mathew

To seek higher devolution of funds and financial autonomy for States

THIRUVANANTHAPURAM: The Cabinet on Wednesday approved the memorandum to be submitted to the 13th Finance Commission on sharing of taxes between the Centre and States and related terms of reference of the Commission.

The memorandum seeks an increase in the share of States in Central taxes from the present level of 30.5 per cent to 50 per cent along with a reduction in the devolution of funds through Centrally sponsored schemes.

The State wants the Central government not to encroach upon the domain of State governments through Central schemes, Chief Minister V.S. Achuthanandan told journalists after the Cabinet meeting. The number of Central schemes carried out as part of State Plans should be gradually brought down and the funds transferred to States for its projects.

Borrowal limits

The State was also demanding that the borrowal limits for State governments from the open market should be increased in steps. Allocations to local self-government institutions should be determined on the basis of population, area, backwardness and degree of decentralisation. Sea erosion, water logging and lightning should be treated as natural calamities eligible for assistance from the Central Calamity Relief Fund.

Finance Minister T.M. Thomas Isaac told The Hindu that the memorandum dealt with issues from the broad framework of the joint memorandum submitted by State Finance Ministers to the Commission. At the same time, it sought allocations for special problems faced by the State.

The State was seeking higher autonomy for the States in financial matters. The Centrally sponsored schemes, special assistance and other grants from the Centre should be reduced with a corresponding increase in the share of the States in Central taxes. It was also seeking an overall increase in devolution which now stood at 60 per cent of the tax revenues. The main conduit of funds to the States from the Centre should be through a transparent mechanism of tax sharing.

The share of the States in internal market borrowings was only 30 per cent. This should be increased to 50 per cent. Besides, the devolution should be unconditional.

Dr. Isaac said the Commission should give greater weightage to population in determining the grants to the States. Last time, population got only 20 per cent weightage while per capita income got greater weightage.