Centre to set up Sixteenth Finance Commission by year end
The panel will recommend the formula for sharing revenues between the Centre and states for the five-year period from 2026-27
- Aug 18, 2023,
- Updated Aug 18, 2023 3:53 PM IST
The Sixteenth Finance Commission is likely to be constituted in the next one to two months, top government sources have indicated. “The outer limit for setting up the Commission is the end of the current calendar year 2023. It will be set up soon,” said a person familiar with the development.
The Sixteenth Finance Commission would recommend the formula for sharing revenues between the Centre and the States for the five-year period from the fiscal year 2026-27.
Setting up the panel by the year end would give it sufficient time to prepare its report in the following two years and present it ahead of the Union Budget 2026-27. Typically, it takes about two years for the Commission to finalise its report.
The terms of reference of the Finance Commission have to be finalised. Setting up the finance panel will also require approval from the Union Cabinet.
The Union Budget 2023-24 has also made an allocation of Rs 10 crore to the Finance Ministry for establishing offices attached to the Sixteenth Finance Commission.
The Finance Commission is a Constitutionally mandated body under Article 280 of the Constitution that decides on the devolution of taxes between the Centre and the States for a five-year period.
The Fifteenth Finance Commission, chaired by NK Singh, was set up in November 2017 with a remit for the period 2021-26. The finance panel had been given an extended mandate for a six-year period due to the Covid 19 pandemic and an expansion of its terms of reference. The Commission was asked to submit two reports --- a first report for financial year 2020-21 and a final report for an extended period of 2021-22 to 2025-26.
DK Srivastava, EY India Chief Policy Advisor and a member of the Fourteenth Finance Commission had noted in a recent article that the Sixteenth Finance Commission must address issues of vertical, horizontal, and fiscal imbalances.
“Given the greater dependence on tax devolution as an instrument of transfers, FC16 needs to modify the tax devolution criteria to better target the inter-state distribution of transfers,” he had said, adding that it should also consider the possibility of setting up a ‘Loan Council’ to oversee the debt and fiscal deficit profiles of the central and state governments.
Also read: Sharad Pawar responds to buzz on Union Cabinet offer in 'secret meeting' with Ajit Pawar
The Sixteenth Finance Commission is likely to be constituted in the next one to two months, top government sources have indicated. “The outer limit for setting up the Commission is the end of the current calendar year 2023. It will be set up soon,” said a person familiar with the development.
The Sixteenth Finance Commission would recommend the formula for sharing revenues between the Centre and the States for the five-year period from the fiscal year 2026-27.
Setting up the panel by the year end would give it sufficient time to prepare its report in the following two years and present it ahead of the Union Budget 2026-27. Typically, it takes about two years for the Commission to finalise its report.
The terms of reference of the Finance Commission have to be finalised. Setting up the finance panel will also require approval from the Union Cabinet.
The Union Budget 2023-24 has also made an allocation of Rs 10 crore to the Finance Ministry for establishing offices attached to the Sixteenth Finance Commission.
The Finance Commission is a Constitutionally mandated body under Article 280 of the Constitution that decides on the devolution of taxes between the Centre and the States for a five-year period.
The Fifteenth Finance Commission, chaired by NK Singh, was set up in November 2017 with a remit for the period 2021-26. The finance panel had been given an extended mandate for a six-year period due to the Covid 19 pandemic and an expansion of its terms of reference. The Commission was asked to submit two reports --- a first report for financial year 2020-21 and a final report for an extended period of 2021-22 to 2025-26.
DK Srivastava, EY India Chief Policy Advisor and a member of the Fourteenth Finance Commission had noted in a recent article that the Sixteenth Finance Commission must address issues of vertical, horizontal, and fiscal imbalances.
“Given the greater dependence on tax devolution as an instrument of transfers, FC16 needs to modify the tax devolution criteria to better target the inter-state distribution of transfers,” he had said, adding that it should also consider the possibility of setting up a ‘Loan Council’ to oversee the debt and fiscal deficit profiles of the central and state governments.
Also read: Sharad Pawar responds to buzz on Union Cabinet offer in 'secret meeting' with Ajit Pawar