Cabinet approves amendment in terms of reference for 15th Finance Commission

The Union Cabinet chaired by Prime Minister Narendra Modi today approved the extension of the term of Fifteenth Finance Commission up to 30th November, 2019. It will enable the Commission to examine various comparable estimates for financial projections in view of reforms and the new realities to finalise its recommendations for the period 2020-2025, said the government statement, adding that the panel also got approval to address serious concerns regarding the allocation of adequate, secure and non-lapsable funds for defence and internal security of India.

Constituted by the President on 27tn November 2017, the Fifteenth Finance Commission was to submit its report on the basis of its Terms of Reference (ToR) by 30th October 2019 covering a period of five years commencing from 1st April, 2020. Under the Terms of Reference, it is proposed to ensure an assured allocation of resources towards defence and internal security imperatives.

The amendment provides that the Commission will also examine whether a separate mechanism for funding of defence and internal security ought to be set up and if so how such a mechanism could be operationalized, the statement said.

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The Commission was constituted in the backdrop of various major fiscal/budgetary reforms introduced by the Centre in the past four years like closure of the Planning Commission and its replacement by NITI Aayog, removal of distinction between non-plan and plan expenditure, advancing the budget calendar by one month and passing of the full budget before commencement of the new financial year i.e. on 1st February, introduction of Goods and Services Tax (GST) from July 2017, and New FRBM architecture with debt and fiscal deficit path.

Further, the Commission's ToR takes into account the task of determining expenditure and receipts of the Union and state governments based on which it will make its recommendations.