'Evolve fair system for fund transfer'

[sharmila banu.m]

AIADMK general secretary J Jayalalithaa has called for fixing the financial allocation of Central funds to States in a fair and equitable manner.

In a statement issued here on Thursday, the AIADMK supremo pointed out the need to establish a federal system by granting maximum fiscal autonomy to the States.
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Referring to the report of the 13th Finance Commission, she said the guiding principles in dividing financial powers between the Centre and the States had to be considered on the basis of 'efficiency, economy, fiscal discipline and adequacy.'

Citing the example of the four southern States, she said classified as middle income States, they contributed more than a quarter of the output in India. Their tax bases were increasing and contribution to Central taxes was growing accordingly. But their share of tax devolution and grants-in-aid given by the Centre was coming down which impacted the capacity to offer services. On the other hand, the share of Central taxes for non-performing States had gone up, but their performance had not improved, she said.

Hence, she called for redesigning the pattern of fund transfer  to ensure that non-performing States were not rewarded at the cost of those doing well.

Given the changed political landscape marked by a rise of strong regional parties and coalition governments at the Centre, the allocation of Central funds and releasing grants-in-aid were skewed in favour of States governed by alliance parties of ruling coalition at the Centre, she said.

In this context too, it was necessary to have a fund allocation formula not dictated by political expediency, she said.

Further, Jayalalithaa said the Centre had to provide buffer funds for exigencies and the State Finance Commission's reports had to be made available to the Centre, so that it could make allocations accordingly, she said.

Funds for local bodies must be allocated separately and routed through the State government to make it more effective.


SOURCE - NEWS TODAY
DATE - 06.06.09