Nitish writes to Jaitley raising concern over devolution

PATNA, Sept 26:
Bihar Chief Minister Nitish Kumar has written a letter to Union Finance Minister Arun Jaitley expressing concern over devolution to the state over the next five years as per the 14th Finance Commission recommendations, while thanking the finance minister for his “unwavering commitment” towards development of Bihar.
“I thank you for expressing an unwavering commitment of the Union Government towards overall development of Bihar and betterment of its people. However, a lot is desired in deeds, which, it seems, doesn’t appear to be forthcoming,” he said in a letter to the Union Finance Minister yesterday.
Claiming that the state government’s concern over proposed devolution on the basis of 14th Finance Commission recommendations has not been assuaged, Kumar claimed Bihar had been let down by the horizontal distribution of funds under the divisible pool of resources as per the 14th Finance Commission recommendations.
“Statistically, it appears that the allocation recommended by the 14th Finance Commission out of the divisible pool is 136 per cent more than what was allocated by the 13th Finance Commission, but both the allocation figures are not comparable at all,” the Chief Minister said.
The commission itself has noted that since there was little scope to increase the share of aggregate transfers from the Union Government to the states, all that it has done is to suggest compositional shift in the total transfers, Kumar said.
Elaborating, he said that as regards vertical distribution under the 13th Finance Commission, the size of the divisible pool of resources was 32 per cent of the net tax revenue receipts of the Union Government, but there were other transfers through grants-in-aid to the states.
Under the 14th Finance Commission, the divisible pool of resources has undoubtedly become larger at 42 per cent of the net tax revenue receipts of the Centre, but all other transfers to the states would be less which the Commission itself has noted, Kumar said and claimed that component-wise comparison of different transfer figures was bound to be misleading.
“We ought to compare only total transfers to the state. The impact of changes in vertical transfer patterns is similar in all states. But, whether the recommendations are fair to Bihar can be judged only by analysing the horizontal distribution pattern,” the chief minister pointed out.
The chief minister wrote in his letter, “A decrease in the share of divisible pool of taxes for Bihar from 10.92 per cent to 9.67 per cent is not insignificant, but a sizable reduction of 1.25 percentage point. The reasons for the decrease in allocation are surprising and untenable.”
He said that Bihar would receive less allocation because, first, “Income distance” was given less weightage thus failing to capture Bihar’s historical disadvantage; second, “Area” was given higher weightage penalising a densely populated state like Bihar; third, assigning some weight to “Forest area” which is very low in the Gangetic plains, thus a disadvantage to Bihar.
Bihar has also been penalised for financial prudency which was maintained by constraining our non-plan expenditure, the Chief Minister said.
On the contrary, the states with revenue deficits have been rewarded, Kumar said.
“It is startling that 14th Finance Commission has in fact penalized states which have observed financial discipline as standards set by previous Finance Commissions,” he noted.
He also regretted that the state government’s endeavour to increase the green cover has not been recognised by the Commission as well as loss of lives and property in Bihar due to annual occurrence of floods from rivers originating in Nepal which accrued additional financial burden on the state.
The Chief Minister further lamented that Bihar’s backwardness on physical and social infrastructure parameters and the lowest per capita income of the people have been ignored and said that the allocation pattern under the 14th Finance Commission recommendation was not only unfair but also defied equalisation principle.
“I would again like to reiterate that the total central pool available for all states is Rs 39.48 lakh crore, out of which Bihar will be getting Rs 3.83 lakh crore at 9.6 per cent of total resources over the next five years (2015-20) which is a substantial decrease both in percentage terms (10.8 per cent) and percentage points (1.2) in comparison to Rs 1.58 lakh crore that our state had got from a total financial kitty of Rs 14.55 lakh crore under the 13th Finance Commission recommendations,” he said. (PTI)

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