The 15th Finance Commission has recommended performance incentives and grants, including Rs 45,000 crore to states that undertake farm reforms, including amendments to land-related laws, steps to augment groundwater, promote agriculture exports and boost production of oilseeds, pulses, wood and wood-based products. The steps come months after the government amended three key farm legislations, which led to large-scale protests.
Union finance minister Nirmala Sitharaman told TOI that the details of the defence and internal security modernisation fund will be worked out in the coming days, including the period for which the funds will not lapse and other administrative issues. For long, there’s been a demand for defence acquisitions to be delinked from the annual budget cycle.
The commission has proposed Rs 2.5 lakh crore be allocated to the modernisation fund over the next five years and the funds, apart from the Consolidated Fund of India, should come via monetisation of defence land stake sale in defence PSUs. For internal security, Rs 50,000 crore is the proposed allocation from 2021-22 to 2025-26.
While sticking to the sharing formula from its first report tabled last year, the Finance Commission has made minor tweaks to the funds allocated to each state. With gross tax revenues at an estimated Rs 135.2 lakh crore, the divisible central taxes after deducting cesses and surcharges is pegged at Rs 103 lakh crore, resulting in an estimated flow of Rs 42 lakh crore to the states between April 2021 and March 2026. In addition, close to Rs 3 lakh crore is to be provided as revenue deficit grants to states.
Further, in line with its mandate, grants of Rs 4.4 lakh crore are to be provided to local bodies with Rs 2.4 lakh crore for rural local bodies. At the same time, the constitutionally mandated body has recommended an increase in the ceiling on professional tax from the current Rs 2,500 to Rs 12,000, which will require amendments to the Constitution.
A major focus of the report is on healthcare infrastructure, with states recommended to step up spending to over 8% of their budgets in 2022, along with an all-India service like the IAS and IPS for medical and health professionals.
An annual incentive of Rs 1,200 crore has also been proposed for states that promote enhanced educational outcomes with another Rs 500 crore for online learning and development of professional courses, like medical and engineering, in regional languages.
