Terms of discord

The Terms of Reference (ToR) announced by the Central government for the 15th Finance Commission kicked up a row, with some States alleging some terms are an affront to India's federal structure and spirit. There are eight main ToRs that the Commission, set up under Article 280 of the Constitution, has to examine over the next one-and-half-a-years. Some of the main elements have sub-clauses, taking the total ToRs to 26.

As of now, the main discordant points are the population basis for the study and the fiscal consolidation roadmap which is intended to rein in the states from borrowing left and right. Till now, 1971 census data is the basis for budgetary allocations by the Centre to the States. But the Commission has been asked to use the population data of 2011 while making its recommendations.

In this context, the meeting of finance ministers of non-BJP ruled states called for by the Andhra Pradesh government at Amaravati on Monday holds significance. AP and other States raised objection to the Commission taking 2011 population as basis. As AP CM N Chandrababu Naidu rightly pointed out at the meeting, Kerala, Tamil Nadu, Karnataka and erstwhile Andhra Pradesh topped the list of states which rigorously implemented the family planning schemes and controlled their population growth. These states will stand to lose central funds if the latest census data is used. They obviously want the 1971 data as the basis for devolution of central funds.

Representatives from all the seven states including West Bengal, who attended the Amaravati meeting, contended that they had problem with nine terms and sought to make a united appeal to the Centre to change them. Telangana was conspicuous by its absence. Already, discontent is brewing among southern states that they are being subjected to step-motherly treatment despite the fact that they are in the forefront of generating wealth for the country. Kerala went a step further and held a meeting of the finance ministers of southern states in April against the ToRs. The Amaravati meeting saw states from the North and the East taking part, which is clear indication of growing discontentment about the ToRs.

But one key aspect that went unnoticed is that the Centre has asked the Commission to examine whether revenue deficit grants should be provided at all. Devoid of a state capital and losing key income-generating Hyderabad to Telangana in bifurcation, AP is facing steep revenue deficit. The Telugu State will stand to lose out on the central funding if the Commission says no to revenue deficit grants.

Therefore, AP should be more worried about this than any other state. Against this back drop, AP did a right thing by calling for the meeting. But with 21 states or 70 per cent of India's population being ruled by BJP or its alliance partners, will such efforts bear meaningful fruits? Only time will have the answer. And there is enough time now as 15th Finance Commission recommendations will come into force from 2020. By that time, the country's political map may undergo many changes.