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TN to suffer serious loss
The recommendations of the Fourteenth Finance Commission (FFC) are unfavourable to Tamil Nadu: estimated annual loss of Rs 6000 crore.

In a well-reasoned analysis, a press note issued by the Commissionerate of Planning explains the drop in the share in the divisible pool of Central taxes: the 13th Finance Commission fixed this at 4.97 per cent whereas in the FFC it has come down to 4.02 per cent resulting in a sizeable loss.

 Tamil Nadu Chief Minister represented the FFC to increase the share of the state in the divisible pool of Central taxes. There is, satisfaction that the FFC has recommended a increase of states’ share from 32 per cent to 42 per cent.

 

Adverse impact of change in criteria

 The FFC changed the formula for devolution giving weightage of 17.5 per cent for population in 1971, 15 per cent for area, 10 per cent for demographic change in 2011 and 50 per cent for income distance.

 Better attention to population growth paid by Tamil Nadu is penalised by this change. Tamil Nadu has moved to a small family norm and thus a lower weightage for 1971 population (from 25 per cent to 17.5 per cent) adversely affects this.  The increase in the area criterion from 10 per cent to 15 per cent is another point of discomfort. The state points to the protection of smaller states by a minimum two per cent share. Tamil Nadu’s share in the weighted area at 3.373 per cent does not attend to the higher density of population.  Likewise, weightage for the forest cover also adversely affects Tamil Nadu which has only 3.32 per cent forest area.

 Income distance criterion of 50 per cent weightage understandably favours poorer states many of which have also performed poorly in terms of fiscal prudence and efficiency. The press note points to the three-year average per capita GSDP for 2010-11 to 2012-13 for Tamil Nadu at Rs 98,237, is more than 50 per cent over the national average of Rs 64,290.

 

Prudent fiscal management punished

Under the income distance criterion of the FFC, Tamil Nadu’s share works out to just 2.689 per cent relating to a population share of 5.96 per cent. This has grievously affected the state.

For decades Tamil Nadu has been known for its prudent fiscal administration. There is, understandably disappointment and resentment over the lack of recognition to this aspect.

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