16th Finance Commission: Conclave of Finance Ministers calls for fair division of resources, cap on cesses and surcharges levied by Centre

Finance Ministers demand fair resource division, cess cap, and stop to penalizing states; call for higher share in divisible pool.

A one-day conclave of Finance Ministers organised here on Thursday in the context of the 16th Finance Commission expressed concern over the growing imbalances in Centre-State fiscal relations while demanding fair and equitable division of resources to the States, capping of the cesses and surcharges collected by the Centre and a stop to “penalising” States that perform well.

Participating in the conclave organised by Kerala,  Finance Ministers of five Opposition-ruled States demanded a raise in the States’ share in the divisible pool from 41% to 50% and a reduction in one-size-fits-all Centrally sponsored schemes.

They also suggested that the cesses and surcharges collected by the Centre be capped so that anything above the limit gets routed to the divisible pool.

Inaugurating the conclave, Kerala Chief Minister Pinarayi Vijayan said that the 16th Commission should factor in the rising trend in surcharges and cesses collected by the Centre when drafting its recommendations.

“In the last decade, the surcharges and cesses have shown a rising trend and now comprise around one-fifth of the Gross Tax Revenue of the Union. Its direct consequence is the shrinkage of the divisible pool of taxes,” Mr. Vijayan said. The  demand for a higher share for States in the taxes collected by the Union has “continued relevance,” he said.

The 16th Finance Commission, Mr. Vijayan said, has the task of “delicately balancing” the interests of the States with low per capita income but a larger share of population and others that have achieved the aims of the National Population Policy, 1976.

“In this act of delicate balancing, the 16th Finance Commission will have to carefully decide on the tax distribution formula and put to use effectively the constitutional provisions of Article 275 for disbursing grants to States-in-need,” he said.