Chairman of the 16th Finance Commission, Arvind Panagariya, on Thursday said Assam Chief Minister Himanta Biswa Sarma expressed concern over the "steady decline of tax devolution" for the state and sought arrest of the trend.
Panagariya and other members of the panel held a meeting with Sarma, his cabinet colleagues, and top government officials earlier in the day.
Devolution declining steadily
"The CM expressed concern that since the 13th FC, Assam has seen its share of devolution declining steadily. He said it's connected to lower taxes on petroleum products and liquor in neighbouring states," Panagariya said at a press conference.
He said Sarma pointed out that lower taxes in neighbouring states are compensated by the commission, leading to revenue loss for Assam.
"The CM strongly pitched to reverse it. The Assam government suggested different criteria for devolution for different states. The 15th FC had devolved 15 per cent of states' shares. Assam has suggested reducing it to 10 per cent," Panagariya said.
Multi-dimentional poverty
The Assam government also advocated a new criterion of "multi-dimensional poverty" and wanted five per cent of the total pool of the state be allocated under this head, he said.
Panagariya said that Sarma also made a strong pitch for higher allocations for disaster relief funds.
"He told us that money is coming from the Centre as relief, but not for rebuilding. It usually takes three years to rebuild roads and other infrastructure damaged in floods or natural disasters. This figured very prominently in the presentation and CM's speech," he said.
Assam's debt-to-GDP ratio
Asked about the fiscal health of Assam, Panagariya said the debt-to-GDP ratio of the state currently stands at 23.5 per cent and it is "well within the tolerance limit."
The FC found "merit" in the suggestions and requests by Assam over various monetary issues, he said.
Panagariya said the state government made a detailed presentation regarding taxation and fund-related issues in three different parts.
"The first part was on the history and geography of Assam. The second was related to developments in different areas like health, education, and financial aspects, while the last part was on devolution," he said.
Panagariya said Assam is the seventh state in the country that the Commission has visited, and each one has presented itself as a "special state."
Allocation of tax revenue is a balancing act
"That is the diversity in India. The allocation of tax revenue will be a balancing act. The arguments of the states are all good. We will certainly go back and look at them," he said.
The Commission reached Assam on Wednesday for a four-day tour, during which it would discuss monetary issues with various stakeholders.
