Government constitutes 13th Finance Commission

The Government has constituted the Thirteenth Finance Commission, which will be headed by Dr. Vijay L. Kelkar, former Union Finance Secretary and Adviser to the Finance Minister.

The Finance Commission is a Constitutional body set up every five years to make recommendations relating to the distribution of the net proceeds of taxes between the Union and the States, the principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India and the measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and the Municipalities. In addition, any other matter may be referred to the Commission by the President in the interests of sound finance.

Apart from the terms of reference specifically laid down in the Constitution, the Thirteenth Finance Commission will review the state of finances of the Union and the States keeping in view the operation of the States’ Debt Consolidation & Relief Facility 2005-2010(DCRF) and suggest measures for maintaining a stable and sustainable fiscal environment consistent with equitable growth. The Thirteenth Finance Commission will also review the present arrangements as regards financing of Disaster Management with reference to the National Calamity Contingency Fund and the Calamity Relief Fund and the funds envisaged in the Disaster Management Act, 2005.

As in the case of the previous Finance Commissions, the 13th Finance Commission will also take into consideration various aspects while making its recommendations. These relate to assessment of the resources of the Centre and the State for the five year period, taxation efforts and the potential of additional revenue mobilization, demands on the resources of the Central Government, the requirement of States to meet the non-salary component of maintenance expenditure on capital assets and plan schemes, the objective of not only balancing receipts and expenditure but also generating surpluses, and the need to ensure commercial viability of irrigation and power projects, departmental undertakings and public sector enterprises through various means including levy of user charges and adoption of measures to promote efficiency.

The 13th Finance Commission will also take into consideration the likely impact of the proposed implementation of Goods and Services Act (GST) with effect from 1st April, 2010, including its impact on foreign trade. The Finance Commission has also been asked to consider the need to improve the quality of public expenditure to obtain better outputs and outcomes. The need to manage ecology, environment and climate change consistent with sustainable development, which is an issue of national concern will also be taken into account by the 13th Finance Commission.

Shri B.K Chaturvedi, Member, Planning Commission will be the part-time Member, and Dr. Indira Rajaraman, Emeritus Professor, National Institute of Public Finance and Policy, Dr. Abusaleh Shariff, Chief Economist, National Council of Applied Economic Research, Prof. Atul Sarma, Former Vice-Chancellor, Rajiv Gandhi University (formerly Arunachal University) shall be the full time Members of the Commission. Shri Sumit Bose will be the Secretary to the Commission.

The recommendations of the Thirteenth Finance Commission will cover the period of five years from Ist April, 2010 to 31st March 2015. The Commission is expected to make available its report by 31st October, 2009.

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