ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Eleventh Finance CommissionSubscribe to Eleventh Finance Commission

The Long Haul

Why is it that it is only when disasters occur that we wake up to the need for a disaster management plan? Not that disaster management is a totally forgotten issue, but it is only after disasters that attention turns to the problems which they give rise to, namely, of rescue, relief and rehabilitation. Even then the focus of attention is the additional expenditure involved and how such expenditure is to be financed by the state governments whose constitutional obligation it is to deal with natural calamities. It is significant that practically all the finance commissions, except the very first one, were asked in their terms of reference to review issues in coping with natural calamities insofar as the states concerned have to incur additional expenditure and that too within a relatively short span of time. The Sixth Finance Commission, for instance, was specifically asked to review the policy and arrangements in regard to the financing of relief expenditure by the states. The commission, while recommending the continuation of existing arrangements under which in the assessment of the revenue needs of every state a margin was provided “for meeting the expenditure…on natural calamities”, had called for “systematic development of the drought- and flood-prone areas through a Plan programme”.

EFC on States' Fiscal Reform : One-Sided and Impractical

While the Eleventh Finance Commission (EFC) did not itself draw up a state-specific fiscal reform agenda, it has gone to some length in working out and suggesting the lines on which fiscal reform at the state level could be undertaken and that too under the direction and supervision of an agency to be established by the centre as part of the monitorable fiscal reform programme designed by the commission.

Finance Commissions in a Cul-de-sac

The reports of successive finance commissions make it clear that the institution of the finance commission is progressively getting trapped in a cul-de-sac. The reports have become a ritual and for the most part have hardly anything new to contribute though the fiscal position of the states and the centre has deteriorated sharply over time. The elaborate quinquennial exercise, lasting over three years on each occasion and involving intensive discussion with all the state governments and central ministries, academics, representatives of trade and industry and other knowledgeable persons, has hardly thrown up any new idea. The successive commissions have instead merely tinkered with the percentages of horizontal distribution among the states along with effecting marginal increases in central devolution.
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