15th Finance Commission Report

Why in News ?

The 15th Finance Commission (FC) final (second) report presented to Prime Minister Narendra Modi for the five year award period from 2021-22 to 2025-26. The report titled "Finance Commission in COVID Times" will be submitted to Finance Minister Nirmala Sitharaman.

This report will be laid on the table in the House of Parliament by the Finance Minister as per the Constitutionally mandated procedure.

The first report (interim report) consisted of recommendations for the financial year 2020-21. The Commission had recommended States be given 42% of all taxes, the 15th Finance Commission had for 2020-21 recommended a devolution of Rs. 8,55,176 crore, which is 41% of the divisible pool of taxes.

What is the Finance Commission ?

• The Finance Commission is a Constitutional body that is promoting Financial Federalism.

• It is constituted by the President of India under Article 280 of the Constitution.

• FC recommendations on distribution of tax revenues between the Union and States and among the States themselves.

• The FC Grants, in the Union Budget, provide funds to local bodies, state disaster relief funds and compensates any revenue loss to states after devolution of taxes. 

Major Reforms during 15th Finance Commission Formation :

• Replacement of Planning Commission with NITI Aayog

• Implementation of GST reforms

• Abolition of the Planned and non-Planned expenditure

15th Finance Commission :

• It's Constituted by the President in November 2017.

• Headed by N K Singh

• The recommendations would be applicable for the period from 2020-2025

• The report titled "Finance Commission in COVID Times"

• The distribution of tax proceeds between the Centre and States.

• Principles governing grant in aid to the states.

• The Commission may also examine whether revenue deficit grants be provided at all.

• Enhance devolution to local bodies compared to 14th FC.

Apart from the vertical and horizontal tax distribution, local government grants, disaster management grant, it was also asked to examine and recommend performance incentives for States in many areas like power sector, adoption of direct benefit transfer, solid waste management etc.

The 15th FC was also asked to examine whether a separate mechanism for funding of defence and internal security ought to be set up and if so how such a mechanism could be operationalised.

References

Pib

The Hindu

E-notes