As revenue deficit, public debt rise, Maharashtra to seek increase in devolution of divisible funds

Amidst rising revenue deficit and higher public debt, the Maharashtra government will seek increase in the devolution of divisible funds to 50% from 42% which will not only increase the flow of unconditional transfers but also give more flexibility in its spending. This is 8% more than what the 14th Finance Commission had recommended. The government will press for higher devolution in its presentation to the 15th Finance Commission led by former union revenue secretary NK Singh during its visit to Mumbai between August 21 and 24.

Besides, the state government, ahead of the ensuing Lok Sabha and state assembly election slated for 2019, will demand for allocation of more funds by devising some new fund flow mechanism for the removal of regional imbalance. The high level committee led by economist Dr Vijay Kelkar in its report submitted in October 2013 to the state government had road map for speedy and effective development of Vidarbha and and Marathwada, the two regions lagging far behind rest of Maharashtra (excluding Mumbai).

Furthermore, the state government, in view of rapid urbanization in Maharashtra, will call upon the 15th Finance Commission to incorporate urbanization as new criteria for higher allocation of funds. The government wants that million plus cities in the state should get more funds in proportion of total urban population in India. At the same time, the dispensation of funds for rural areas should be done based on rural deprived population to total rural population.

State Finance Department officer told DNA Money, ‘’A committee headed by former secretary V Giriraj has prepared a set of recommendations to be submitted to the 15th Finance Commission. The government will project its ambitious plan to achieve a trillion dollar economy by 2025 with an annual growth rate of 15%. The increase in the devolution of taxes from the centre to 50% will come quite handy.’’

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The officer said the state government will also appeal to the 15th Finance Commission to revise the measurement of per capita income-distance criterion. In 2017-18, the per capita income of Maharashtra was estimated to rise to Rs 1,80,596 as against Rs 1,65,491 in the previous fiscal. ‘’The government wants that the district level income should be used instead of state level per capita income. This is essential as the progressive and richer state like Maharashtra should not be deprived of funds especially in the wake of issues arising out of inter district inequality and intra state regional inequality,’’ he noted.

Source: DNA Money