In a first, the Finance Commission, which recommends how much money states should get out of the taxes collected by the central government, will define what a populist measure is and recommend incentives for states that do not resort to them.
The NK Singh-led 15th Finance Commission has many firsts to do in the nearly six-decade-old history of the constitutionally mandated body.
Commission will decide what a populist policy is: Singh
"The Commission has been asked to look at monitorable performance criteria on things like progress made on ease of doing business, demography management, and whether or not a state is deliberately pursuing a populist policy," Commission Chairman NK Singh said.
Commission to propose incentives for states, too
The Commission was asked to propose measurable performance-based incentives for states that made efforts to expand and deepen the tax net, slowed population growth, promoted the ease-of-doing-business, and saved money by adopting Direct Benefit Transfer where government dole is paid via users' bank accounts.
It was also asked to recommend incentives for states that could control or eliminate incurring expenditure on populist measures.
14th Commission gave 10% weightage for 2011 population data
For the purpose of devolution of funds, the 14th Finance Commission has been asked to take census of 2011 as the basis for population data instead of 1971 census which was the basis of recommendations till the 13th Finance Commission, drawing some criticism from southern states where the population was comparatively slower.
The previous commission gave a 10% weightage for Census 2011 data.
14th Commission recommended 42% tax revenue share to states
The previous 14th Finance Commission had recommended that states should get a record 42% of the tax revenues collected by the Centre. Recommendations of all the previous Finance Commissions have been accepted by the central government.
But, 15th Commission provides incentives to states with controlled population-growth
Chairman NK Singh reasoned that the Terms of Reference of the 15th Finance Commission provide for incentives to states that have seen controlled population growth and so it balances out the concerns.
The Commission was also asked to submit its report by the end of October 2019. Its recommendations would be valid for a five-year period beginning 1 April 2020.
Commission to hold consultations with all states, stakeholders
NK Singh said that the panel would hold wide-ranging consultations with all stakeholders and would tour all the states beginning with Arunachal Pradesh in April, followed by a trip to Jammu and Kashmir and Kerala.
It intends to complete the consultations with the states within 2018.
Multilateral agencies like OECD, IMF, World Bank, and EU would also make presentations.
First Commission after abolition of Planning Commission and GST rollout
The NK Singh-headed 15th Finance Commission is the first after the abolition of the Planning Commission as well as doing away of the distinction of plan and non-plan expenditure.
Also, it will be the first one after the rollout of the Goods and Services Tax (GST), which has subsumed 17 indirect taxes of Centre and state including excise duty, service tax, and VAT.
Panel has no say in fixing ToRs
The Commission has no say in fixing the Terms of Reference and it's expected to adhere to the guidelines given by the government. "We have no say in fixing of Terms of Reference but we are expected to adhere to the ToRs," an official said.