Do we need a Finance Commission or not? There has been much debating
on this of late, as the nation faces a ’committee fatigue’, and there
are questions on whether it is an ’apolitical’ body and remains so in
letter and spirit, given its restricted terms of reference.
Reacting
to these comments, NK Singh, who heads the 15th Finance Commission,
told a select gathering of editors here on Wednesday that though the
Commission is an ’old creature’, the latest one has some firsts attached
to it. For instance, it is the first to be set up after the abolition
of the Planning Commission, and the first with no Plan and non-Plan
expenditures. It is also the first after the GST rollout.
Singh
and his team want to finish the consultation process by this year, as
they have to submit the report by October 2019. "It is our intention to
complete the State level consultations substantially this year
itself…some States may be slightly staggered with elections likely to
take place — we will take into account the convenience of the States,"
he said.
The task may not be very easy, as the basis of data and resource sharing with States remains a challenge.
The
sharing of resources, and the kind of flexibility the 15th Finance
Commission may have when deciding on it, are widely debated about.
A
senior official in the know said: "If you read the terms of references
of this Commission, there is one very specific term which allows it to
revisit recommendation of the 14th Finance Commission — revisit not
necessarily by altering it, but by reviewing it."
Terms of reference
The
terms of reference reads that while making recommendations, the
Commission shall study "the impact on the fiscal situation of the Union
government of substantially enhanced tax devolution to the States
following the recommendations of the 14th Finance Commission, coupled
with the continuing imperative of the national development programme
including New India - 2022."
As the Commission sets out to review
the finance, deficit, debt levels, cash balances and fiscal discipline
levels of the Centre and States, it has also been mandated to examine
whether revenue deficit grants need to be provided, measure the impact
of GST and abolition of a number of cesses, and earmarking thereof for
compensation to the States.
So, the 15th Finance Commission will
examine it, the official added. But does this mean it also has powers to
cap the number of cesses levied? Another official said cesses and
surcharges are out of the purview of the Commission, but it may do a
study on their legal framework.
The data challenge
Agreeing
that data remains a challenge, the official said: "It has been a
challenge for other Commissions also. It is true that given the fact
that there is discontinuity in the work of the Commission, a lot of data
gathered is difficult to get...accuracy verification of data will also
be a challenge."
The Commission will be depending on some obvious
sources like the RBI, State governments and other traditional sources.
In fact, for population, the Commission will be looking at the census
data of 2011. This has led to fear among some States that the base year
could be loaded against them.
On the uncertainties that GST
collections is creating, the official said: "The revenue receipts under
GST is very important from the point of view of the Commission. It is
important to know the expenditure commitments of the Centre and the
States and also the revenues of both."
"This year, GST revenues
may not reflect the appropriate picture to take a view and make
projections for 2020-25. But, next year, the Commission has to give the
report in October 2019 with GST revenues in 2018-19, which will be
available by May. That will guide the Commission, presenting a more
realistic picture," the official pointed out.