Decision on recommending revenue deficit grants for states yet to be made: Finance Commission chief

A decision on recommending providing revenue deficit grants to states is yet to be made, its Chairman Arvind Panagariya said here on Monday. The full team of the 16th Finance Commission, led by Panagariya, is in Aizawl to hold consultations with the Mizoram government. Addressing a press conference, he said the Post Devolution Revenue Deficit (PDRD) Grants are given to states to bridge the revenue gap post devolution and have been a part of recommendations of most past Finance Commissions. "However, it is not possible to say conclusively about recommending the revenue deficit grants now as the commission has not visited all states," he said. "Only after we visit all the states, a decision will be made. I think it is too early to predict that," he said. Panagariya said the finance commission has so far visited 19 states, including Mizoram, to assess their fiscal needs and fund allocations. Out of these, 16 states, including Mizoram, have proposed to hike the share of states in the vertical devolution of funds (divisible pool) to 50 per cent from the current 41 per cent, he said. In terms of horizontal devolution, some states have suggested a different approach compared to the criteria used by the 15th Finance Commission, he added. Panagariya said that at the meeting with Chief Minister Lalduhoma, the Mizoram government proposed the weightage given to income distance may be reduced from the current 45 per cent to 40 per cent. The Mizoram government also suggested that for allocating the state's shares, the weightage given to the population be increased to 25 per cent from the present 15 per cent, and the weightage given to the state's area be reduced to 10 per cent from the existing 15 per cent, he said. Panagariya said the Mizoram government also suggested the weightage to tax and fiscal efforts, and demographic performance (fertility rate) may be dropped by the 16th Finance Commission. The state government proposed some new criteria, such as the achievement of states on Sustainable Development Goals at 7.5 per cent and another 7.5 per cent of state shares based on the cost of essential commodities, he said.