West Bengal govt calls for 50% devolution of taxes to states

Kolkata: Sixteenth Finance Commission Chairman Arvind Panagariya on Tuesday said the West Bengal government has urged the panel to increase the devolution of taxes to states from the current 41 per cent to 50 per cent, while proposing significant changes to the criteria for weightage in horizontal allocation.

Panagariya, who was in the city, said, most of the 13 states the commission has visited so far have demanded raising the devolution of taxes to 50 per cent, while several states asked the panel to increase it to 45 per cent from the existing 41 per cent.

"In vertical devolution, the West Bengal government, in its plea, demanded that the devolution be increased to 50 per cent," the commission's chairman said.

Vertical devolution is the distribution of tax proceeds between the Centre and states in the country.

Chief Minister Mamata Banerjee met the commission with suggestions and raised the issue of "deprivation of the Centre".

The state suggested the introduction of a new urbanisation-based weightage of 7.5 per cent in the horizontal devolution criteria framework, while advocating the exclusion of forest and ecology as a criterion, which had a 10 per cent weightage in the 15th Finance Commission.

The state government also proposed adjusting population weightage to 10 per cent with a granular approach to account for Scheduled Caste (SC) and Scheduled Tribe (ST) populations to better reflect demographic realities, officials said.

On tax efficiency, West Bengal recommended a weightage of 2.5 per cent.

The state further suggested raising the demographic criteria's weightage to 20 per cent, up from the 12.5 per cent recommended by the 15th Finance Commission, they said.

Highlighting the state's fiscal challenges, Banerjee advocated increasing the income criteria weightage from 45 per cent to 50 per cent, arguing that this adjustment would address disparities in income distribution across states and help resource-starved regions like West Bengal.

The Mamata Banerjee government also asked the commission to raise the weightage of 'area' criteria to 20 per cent from 15 per cent with adjustment of the locational complex areas.

Panagariya, who chaired the meeting, acknowledged the state's submissions and assured that the commission would carefully evaluate the suggestions after consulting all the 28 states, which will continue till mid-May.

During the day, the five-member panel also met trade bodies, industry associations and representatives of political parties.

The Finance Commission is tasked with recommending the distribution of tax revenues between the Centre and the states.