16th Finance Commission in Kerala: State’s political parties demand higher share

The Opposition Congress-led United Democratic Front (UDF) has requested the 16th Finance Commission to enhance the share of States in the divisible pool to 50%, continue the revenue deficit (RD) grant to Kerala and sought measures for sharing the cesses and surcharges levied by the Centre with the States.

Leader of the Opposition V.D. Satheesan handed over the UDF’s recommendations to the Commission headed by Arvind Panagariya during the commission’s meeting with representatives of political parties on Tuesday. The UDF has demanded that the weightage for population, based on the 2011 census, be decreased from 15% to 10% as States like Kerala that have ensured population control are being penalised with a lower tax share.

He sought a special allocation to Kerala, given the State’s vulnerability to natural calamities. The commission should also prepare an index on States facing the vagaries of climate change, he said. The UDF also sought sector-specific incentives for Kerala, given its large forest cover, human-wildlife conflict and related agricultural woes.

Mr. Satheesan urged the commission to continue the RD grant to Kerala, pointing out that the State’s high spending on health and education has increased its revenue expenditure.

In a memorandum submitted to the commission, the Communist Party of India (Marxist) [CPI(M)] urged the panel to enhance the divisible pool to 50% and recommend amendments to the Constitution to bring the “heightened non-tax revenues” of the Centre from sources such as dividends from profit-making public corporations and spectrum sales into the divisible pool.

The CPI(M) noted that the RD grant is a Constitutional right of States that find themselves facing deficits even after tax devolution. “It is important that cost disabilities on account of in-migration, agricultural rehabilitation, high social sector recurring expenditure, human-animal conflict and an ageing population be factored in while making the revenue expenditure projection for the period 2026-27 to 2030-31 period,” the CPI(M) said in a statement.

The Commission had held discussions with the State government on Tuesday morning. Later in the day, the panel met the State Finance Commission, political parties and representatives of trade and industry.