MP pitches for non-tax revenue inclusion in tax pool, suggests multi-dimensional poverty as new criteria
Bhopal (The Uttam Hindu) : Aravind Panagariya, the Chairman of the 16th Finance Commission, on Thursday, highlighted the fervent appeals from Madhya Pradesh, which is seeking an increased allocation from the central divisible pool, aiming to raise its share from the current 41 per cent to a more substantial 48 per cent. Regarding vertical devolution of taxes, Madhya Pradesh has advocated for a 10 per cent share of cess and surcharge, as the state currently receives no portion of these funds. The chairman added that the MP government also suggested including non-tax revenue in the vertical divisible pool. Panagariya stated: "Madhya Pradesh government has suggested if cesses, surcharges, and non-tax revenue are included in the divisible pool, then the current level of 41 per cent is acceptable. If not, then 48 per cent of the share should be allocated to the states."
Other states are demanding a 50 per cent share from the divisible pool, he mentioned in Bhopal while addressing media persons. On the topic of the horizontal divisible pool, Panagariya noted that Madhya Pradesh would benefit from the income distance criterion as against the rich state where per capita income is more. The state has also proposed a new criterion—multidimensional poverty—to be added to the share allocation. Regarding the remaining criteria for tax devolution, the MP government suggested that the Finance Commission should give weight to the Scheduled Caste and Scheduled Tribe (SC/ST) population. Madhya Pradesh also demanded an additional 10 per cent allocation for the SC/ST population.
The state also emphasised the importance of demographic performance, specifically the total fertility rate, and the state's contribution to the total GDP. Previous commissions have used the income distance criterion, which allows for a larger devolution. Madhya Pradesh proposed the following weightages: 10 per cent for population, 10 per cent for the state's share in the SC/ST population, 5 per cent for demographic performance (total fertility rate), 40 per cent for income distance, 5 per cent for the multidimensional poverty index, 10 per cent for area, 15 per cent for forest cover, 2.5 per cent for tax collection and fiscal efforts, and 2.5 per cent for the state's contribution to the total GDP (excluding union territories) in tax devolution from the horizontal pool.
Additionally, Panagariya mentioned that other states have also expressed a desire for a portion of the cess and surcharge currently being levied by the Central government. Historically, cesses and surcharges collected by the Centre have not been mandated for sharing with the states, as the Constitution does not permit it, the Finance Commission chairman explained. The chairman ducked a volley of questions on freebies offered by the state and Central government.
