15th Finance Commission’s tenure extended by a year

15th Finance Commission’s tenure extended by a year

The Union Cabinet Wednesday extended the 15th Finance Commission's term by one year till October 2020 to make more detailed estimates of states’ fiscal requirements for its awards.

The commission had sought more time to submit its report in the wake of the new economic realities after the government undertook a host of economic reforms.

The commission will submit two reports now. The first report is expected before the next financial year 2020-21 so that the devolution of fund formula could be incorporated in the Union Budget.

“The Commission, on account of the restrictions imposed by the Model Code of Conduct, completed its visit to States only recently. This has had a bearing on the detailed assessments of States requirements. The Terms of Reference for the commission are wide-ranging in nature. Comprehensively examining their implications and aligning them to the requirements of the states and the central government will require additional time,” an official statement said after the union Cabinet meeting chaired by Prime Minister Narendra Modi.

The Finance Commission is constituted by the President under Article 280 of the Constitution mainly to give recommendations on distribution of tax revenues between the Union and the states and amongst the states themselves.

The extension of the term will enable the Commission to examine various comparable estimates for financial projections in view of reforms and the new realities to finalise its recommendations for the period 2020-2026, it said.

Making a five-year coverage available for the commission beyond April 1, 2021, will help both state and central governments to design schemes with medium to long term financial perspective and provide adequate time for mid-course evaluation and correction.  It is anticipated that the impact of the economic reforms initiated in the current fiscal year would be manifested in the data by the end of first quarter of 2020-21, it said.