The Union Cabinet on Wednesday (November 29) approved the Terms of Reference (ToR) for the 16th Finance Commission, although the chairmanship and members of the commission will be notified in due course, Information and Broadcasting (I&B) minister Anurag Thakur said.
A finance ministry source later added the President’s nod is awaited for the gazette notification and a clear timeline cannot be given for how quickly the commission will be constituted. The 15th Finance Commission was already notified on November 27, 2017. Another source said consensus was yet to build upon who will head the panel, hence the delay.
The commission will submit its report by October 31, 2025, and the recommendations will be implemented thereon for the next five financial years starting from April 1, 2026, till March 31, 2031.
The Centre has stuck to the book in terms of keeping the ToR for the 16th Finance basic and simple. As per a government release, the commission will recommend the formula for distributing the Centre’s tax revenues to states
and also the allocation between the states of their respective share of these taxes.
The principles governing the grants-in-aid to the states out of the Consolidated Fund of India and the sums to be paid to the states.
The need to augment the Consolidated Fund of a state to supplement the resources of the panchayats and municipalities in the state on the basis of the recommendations made by the Finance Commission of the state.
The commission may also review the present arrangements for financing disaster management initiatives, with reference to the funds constituted under the Disaster Management Act, 2005, and make appropriate recommendations thereon.
In comparison, the 15th Finance Commission had a very detailed ToR, covering issues like reviewing the deficit, debt levels, cash balances, and fiscal discipline efforts of the union and the states, recommending a fiscal consolidation roadmap and whether revenue deficit grants need to be given at all.
The 15th Finance Commission was also asked to consider proposing performance-based incentives for states on a number of key parameters like deepening the GST net, increasing capital expenditure, eliminating losses of the power sector, adoption of Direct Benefit Transfer (DBT), and promotion of ease of doing business (EoDB) among others.
First Published: Nov 29, 2023 6:48 PM IST
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