South states to get 12.5 per cent weightage: Finance panel

NEW DELHI:  While retaining the 41 per cent share of states in the central tax pool, the Fifteenth 
Finance Commission (FFC) gave 12.5 per cent weightage for ‘demographic performance’ to compensate southern states which have done better in reform parameters.  

The FFC, chaired by NK Singh, has used the 2011 census data to decide on how much share each state will get from the central tax pool, which favours states with large populations. It has been learnt to have given 15 per cent weightage to population and 15 per cent to area, among other parameters, which remain tilted mainly towards northern states — the main cause of protest by southern states as they felt they are being punished for population control.

Officials aware of the contents of the report said the commission tried to partially compensate southern states in its term of reference for tax sharing, by giving 12.5 per cent weightage for “demographic performance” as they have done better in reform parameters. However, only after reading the finer details it can be decided how much each state will gain or lose in the new scheme. 

The commission has already submitted its report to the finance ministry and the President. It will be made public after being tabled in the Parliament. Sources have also revealed that the commission has, on the request of the centre, has recommended a Modernisation of Defence and Internal Security Fund (MDISF), which is likely to be called Rashtriya Suraksha Naivedyam Kosh — a non-lapse fund, which will be funded partially by the consolidated fund of India.

The FFC is also learnt to have recommended Rs 2.9 lakh crore as revenue deficit grant for states. It has also recommended the Centre to hike expenditure on healthcare to 2.5 per cent of GDP with Rs 1 lakh crore specific for healthcare facilities in the wake of the pandemic. It has also asked state governments to keep aside at least 8 per cent of their FY22 budget for building healthcare capacities.