Disaster Relief
The existing system of financing relief expenditure mainly revolves around the CRFs (Calamity Relief Funds) maintained at the State level and the NCCF (National Calamity Contingency Fund) at the Central level. Both. these funds target immediate relief measures and exclude measures for mitigation or post-calamity reconstruction. The CRF is a resource available to the States to meet the expenses of relief operations for a range of specified calamities. The NCCF is a national fund to assist States for calamities of rare severity, beyond the coping capacities of the States’ CRFs. While the total amount of assistance for the CRFs is decided by the Finance Commission on the revealed needs of individual States, the NCCF has a dedicated source of funding through a special duty on selected items. The Central government has released Rs. 12,208 crore under the CRF in the four year period 2005-09 against the Rs. 12,547 crore share recommended by the Twelfth Finance Commission for the same period. Under NCCF, the Central Government has released Rs. 7,677 crore over the period 2005-09 for various calamities. The Thirteenth Finance Commission has recommended that the NCCF should be merged into the National Disaster Response Fund (NDRF) and the Calamity Relief Fund (CRF) into the State Disaster Response Funds (SDRFs) of the respective States. Contribution to the SDRFs should be shared between the Centre and States in the ratio of 75:25 for general category States and 90: 10 for special category States. Balances under the State CRFs and the NCCR as of March 31, 2010, should be transferred to the respective SDRFs and NDRF. The total size of the SDRF has been worked out as Rs. 33,581 crores, to be shared in the ratio given above, with an additional grant of 9Rs. 525 crore for capacity building.
Local Bodies
The recommended grants for local bodies for the five year period 2010-15 have been placed at Rs. 87,519 crore. Of this, the share of ‘general basic grant’ is Rs. 56,335 crores, the share of ‘general performance grant is Rs. 29,826 crore and the share of ‘total special areas grant’ is Rs.1,357 crore.
Revised Roadmap for Fiscal Consolidation
The Thirteenth Finance Commission has made a number of recommendations for fiscal consolidation. Some of these recommendations are as follows:
The revenue deficit of the Centre needs to be progressively reduced and eliminated, followed by the emergence of a revenue surplus by 2014-15. The target of 68 per cent of GDP for the combined debt of the Centre and States should be achieved by 2014-15. The fiscal consolidation path embodies a steady reduction in the s om augmented debt stock of the Centre to 45 per cent of GDP by 2014-15, The Medium Term Fiscal Plan (MTFP) should be reformed and made a statement of commitment rather than a statement of intent. session. The FRBM Act needs to specify the nature of shock that would require a relaxation of FRBM. In case of macroeconomic shocks, instead of relaxing the State’s borrowing limits and letting them borrow more, the Centre should borrow and devolve the resources using the Finance Commission tax devolution formula for inter distribution between States. 1. An independent review ‘mechanism should be set up by the Centre to evaluate its fiscal reform process. The independent review mechanism should evolve into a fiscal council with legislative backing over time.
Total Transfers to States
The Thirteenth Finance Commission has recommended the total transfer of resources from the Centre to the States for the period 2010-15 to the fixed at Rs. 17,76,676 crore. The share of taxes and duties in this transfer is Rs. 14,48,096 crore while the share of grants-in-aid is Rs. 3,18,581 crore. The allocation of grants-in-aid under different heads has been presented in the table earlier.
Fiscal distance is obtained for each State by the distance of its estimated per capita revenue from the estimated per capita revenue of Haryana, the second-highest in the per capita income ranking after Goa. The distance so computed for all States, barring Haryana and Goa, defines the per capita revenue entitlement of each State based on fiscal distance. For Haryana and Goa, a revenue entitlement of Rs. 100 per capita has been assigned. These per capita entitlements are then multiplied by the respective 1971 population figures of each State to arrive at the share of each State in tax devolution. As is clear from the table, the Thirteenth Finance Commission has assigned a weight of 47.5 per cent to the fiscal capacity distance criterion. The case of service tax is taken up separately. The maximum share here also is of Uttar Pradesh (19.987 per cent) followed by Bihar (11.089 per cent ), West Bengal (7.379 per cent), Madhya Pradesh (7.232 per cent) and Andhra Pradesh (7.047 per cent). Since service tax is not levied in Jammu and Kashmir, the share of this state in net proceeds from service tax is nil.
Here are the notes for Thirteenth Finance Commission.