Mint Explainer: What to expect from the Sixteenth Finance Commission

livemint.com:

Arvind Panagariya is expected to start consultations with all states once the chairperson and members assume charge. Revenue sharing among states is a controversial subject given that there is always fund crunch and the welfare needs are different. Besides, in a vastly diverse country, the parameters have to accommodate the interests of all the states which are on different development trajectories.

This leads to complaints from some states, especially those in the South that they get a lesser share compared to the contribution of taxes from those states. In the case of the Fifteenth Finance Commission, one of the key terms of reference was to use the population data of the 2011 census. This prompted Karnataka and Tamil Nadu to express their concern that it would lead to reduced allocations to them as they have been successful in their population stabilization initiatives.

The commission under N.K. Singh eventually gave weightage to both population as well as 'population performance' for an equitable allocation. In the case of the Fourteenth Finance Commission, the government had suggested use of 1971 census data in general with the option to take into account subsequent demographic changes.

The terms of reference of the Fifteenth Finance Commission was also seen as prescriptive but in the case of the Sixteenth Finance Commission, the Central government chose to keep it short and direct. In addition to deciding on what share of the Centre's tax receipts should be devolved to states and how it is to be apportioned among them, SFC has been asked to suggest ways to augment the states' respective consolidated funds to supplement the resources of local bodies like panchayats and municipalities. SFC has also been asked to lay