15th Finance Commission won't discriminate against any region: Jaitley

15th Finance Commission won't discriminate against any region: Jaitley

Finance Minister Arun Jaitley said on Tuesday that a "needless controversy" is being created over the Terms of Reference (ToR) of the 15th Finance Commission (FC).

Some vested interest are trying to generate this impression that the ToR is biased against some region of the country over the use of the 2011 census, he said.

This comes in the backdrop of first-of-its-kind southern finance ministers' meet in Kerala.

"Nothing could be further from the truth," he said in a statement.

He said there is no inherent bias or mandate in the ToRs of the 15th FC which can be construed as discriminatory against the states which made good progress in population control.

Jaitley, who was discharged from the AIIMS after being kept under observation for a kidney ailment, held that the ToRs of 15th FC rightly balances both the 'needs' represented by latest population and "progress towards population control" very well.

The FM said there was a specific inclusion of another reference, i.e., efforts and progress made in moving towards replacement rate of population growth' in the Terms of References of the 15th FC.

"This ToR recognises the efforts of all the states which have done well in population control. This specific ToR would allow the 15th FC to propose a specific incentive scheme to reward the states which have achieved a replacement level of population growth, and also if the 15th FC wishes to do so, to assign appropriate weight to the progress made in population control while allocating resources," he said.

The FM said the share in central taxes is allocated to the states based on recommendations made by the finance commissions (FCs) to help states to meet the fiscal deficiency in providing a minimum standard of services to their people.

This, he said, calls for assessing states' 'needs' on the rationale and equitable basis. The FCs use appropriate criteria to assess true needs of states. Population proxies very well for the needs of the people in a quantitative sense.

Another criterion, the Income Distance, which captures very well relative poverty of people in the states, is used to assess qualitative needs.

These two parameters allocate more resources to the populous and poorer states, which need additional funds for providing education, health and other services to the people, which own resources of these poorer states may otherwise not allow, according to Jaitley.

Jaitley recalled that the 14th FC had no specific mandate for using 2011 census. "Yet, 14th FC rightly used the 2011 census population data to capture the demographic changes since 1971 to make a realistic assessment of the needs of the states. It allocated 10% weight to 2011 population. The 14th FC had allocated a 42% share in the Central Taxes to the States more than ever before."

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