Devolution of taxes - Centre allocates Rs 5.24 lakh Crore out of Rs 8.36 Crore to States so far

NEW DELHI : THE Union Government accepted the recommendations of the Fourteenth Finance Commission (FFC) under which there was a phenomenal increase in the tax devolution to the States due to increase of share in the divisible pool of taxes from 32% to 42%. As per its commitment, in

the Union Budget for 2015-16, the Ministry of Finance made a provision of Rs. 5.24 lakh crore under devolution of taxes to States as compared to the allocation of Rs.3.38 lakh crore in 2014-15(RE). So far, Rs. 411681.66 crore (78.56%) has been released to the States by way of tax devolution and as per convention, three more installments will be released in March 2015 based on the tax collections till then.

Apart from the devolution of the taxes to the States, FFC recommended other grants namely revenue deficit grants, local body grants and grants under State’s Disaster Response Fund (SDRF). Against allocation of Rs. 48906 crores for 11 revenue deficit States during 2015-16, Rs. 44,829.62 crore (91.66 %) has been released so far in eleven installments. Similarly, local bodies grants are estimated to be at Rs. 29987 crore in the year 2015-16 as against Rs. 22,399 crore released in 2014-15. In the current year 2015-16, Rs.21,227.50 crore (70.78 %) has been released to States for the duly constituted local bodies till date. Under SDRF, an allocation of Rs. 8512.50 crore has been made during 2015-16 and Rs. 8320.09 crore (97.73 %) has been released to the states.

Apart from the release under SDRF, to meet the requirements of increase in expenditure for relief due to natural calamities in the current year, the Central Government has released Rs. 8672.47 crore under NDRF against a Budget Estimate of Rs. 5690 crore. The additional expenditure was met by obtaining supplementary grants.

The States are also receiving Central share towards State plan/ Centrally Sponsored Schemes(CSS) under different sectors and programmes. The Budget Estimates for 2015-16 provide Rs. 2,04,110 crores for such transfers in the Union Budget of different Ministries/departments. The total expenditure up to January 2016 has been Rs. 1,72,594 crore

In the Budget Estimates of  2015-16, the total transfers to States is estimated to be at Rs. 8.36 lakh crore as against Rs. 6.77 lakh crore during 2014-15 (RE) and Rs. 6.36 lakh crore during 2013-14. The composition of statutory transfers has increased to over 73 % of the total transfers. In the true spirit of cooperative federalism, the discretionary transfers from the Central Government has gone down from 38% in 2013-14 to 24 % in 2015-16. There is thus greater predictability and certainty now in the quantum of funds flowing to the States apart from the overall increase in untied funds.