Govt accepts 11th Finance Commission report

The government on Thursday accepted the 11th Finance Commission report which has recommended devolution of 28 per cent of net proceeds of shareable central taxes to states for five years from April 1 this year.

The report tabled in Parliament, along with the Action Taken Report of the government, has also recommended devolution of additional 1.5 per cent central taxes to those states which do not levy sales tax on sugar, tobacco and textiles during the year.

Minister of State for Finance Balasaheb Vikhe-Patil tabled the report in the Rajya Sabha.

The 11th Finance Commission was constituted on July 3 1998, with economist A M Khusro as chairman, to recommend on specified aspects of centre-state fiscal relations from 2000-05.

The commission submitted its report on July 7 this year to President K R Narayanan. It had submitted its interim report earlier which was accepted and tabled in Parliament on March 16 last.

The Finance Commission is constituted every years.

It has recommended grants totalling Rs 49.73 billion towards upgradation of standards of administration and special problems of states. The commission also recommended Rs 100 billion for local bodies during the five-year period and both these recommendations have been accepted.

The Rs 100-billion grant is to be utilised for maintenance of civic services during the five-year period. Of this, Rs 16 billion per annum is for rural local bodies and Rs 4 billion per annum is for urban local bodies.

The commission has recommended the continuance of the existing scheme of Calamity Relief Funds in states with an aggregate size of Rs 110.07 billion for 2000-05. This includes the Centre's share of Rs 82.56 billion and the states' share of Rs 27.52 billion worked out in the ratio of 75:25.

But it has suggested discontinuation of the existing National Fund for Calamity Relief because calamity of rare severity cannot be anticipated and provided for in advance through regular budgetary mechanism.

Instead, the commission recommended that central assistance to the states in the national calamities should be financed by levy of a special surcharge on central taxes for a limited period.

"A surcharge can also instil a feeling of national participation for a national cause," the report said, adding that collections from such surcharge should be kept in a separate to be known as National Calamity Contingency Fund with an initial core amount of Rs 5 billion.

However, withdrawals from the fund should be accompanied by imposition of the special surcharge so it is immediately 'recouped'.

Accepting this recommendations, the government said it would set up the fund after necessary legislation is enacted.

PTI

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