Financial Insights That Matter
Goa has sought a specific grant of Rs 32,706.45 crore for 13 projects and a four-fold hike in its share from the overall divisible pools of taxes. The state asked the 16th Finance Commission that the share of states in the divisible pool of taxes be raised from the current 41 per cent to 50 percent.
The 16th Finance Commission, which is visiting Goa, held a meeting with Chief Minister Pramod Sawant, members of the cabinet and government officials on Thursday. After the meeting, Arvind Panagariya, the Chairman of the 16th Finance Commission, said: “On vertical devolution, Goa said that the share of states be raised from the current 41 per cent to 50 per cent. This is a common recommendation that has been made from the states. Goa is the 15th state we are visiting. We have visited 14 other states and 14 out of the 15 states have said: ‘Raise it to 50 per cent,’” he said.
On a question on states often requesting for funds for projects, but spending them for social welfare schemes to distribute “freebies” instead, Panagariya said that if the money has been allocated for a project, it has to be used for that project. “That cannot be used for freebies. Freebies come from the general budget, to which funds can come from state’s own tax revenues, but they can also come out of the devolution that the Finance Commission makes. In the end in a democratic society, the elected government makes those decisions. Those decisions are not made by the Finance Commission,” he said.
“The Commission … cannot control…obviously, it should not control how the state governments choose to spend their money. In the end, you all as citizens have to take that particular stand when you vote a government in. If the citizens vote for governments based on freebies, then they are asking for freebies. So, ultimately the citizens have to decide whether they want better amenities, better roads, better sewage, [better] access to water or they want these cash transfers…freebies,” he added.
On horizontal devolution, Goa proposed some changes, he said. “The objective of the income distance criterion is to promote equity. On income distance criterion, the 15th Finance Commission had divided 45 per cent of the divisible pool. Goa has asked to reduce that to 30 per cent. Goa has also suggested a new criterion called sustainable development goals (SDGs) and proposed that 12.5 per cent of the divisible pool should be based on achievements of SDG,” Panagariya said.
“…what Goa is suggesting is to reduce income distance weightage from 45 per cent to 30 per cent. So, there is a 15 per cent change, of which Goa has proposed 12.5 per cent for sustainable development goals and remaining 2.5 per cent for tax and fiscal effort. According to the calculations that state government has provided, this will raise Goa’s share from 0.386 per cent of overall divisible pool under the 15th Finance Commission to 1.76 per cent of the divisible pool under the 16th Commission — that’s practically more than four-fold increase in the share of Goa,” Panagariya added.
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