Bengal govt calls for 50% devolution of taxes to states

Kolkata, Dec 3 (PTI) Sixteenth Finance Commission Chairman Arvind Panagariya on Tuesday said the West Bengal government has urged the panel to increase the devolution of taxes to states from the current 41 per cent to 50 per cent, while proposing significant changes to the criteria for weightage in horizontal allocation.

Panagariya, who was in the city, said, most of the 13 states the commission has visited so far have demanded raising the devolution of taxes to 50 per cent, while several others asked the panel to increase it to 45 per cent from the existing 41 per cent.

"In vertical devolution, the West Bengal government, in its plea, demanded that the devolution be increased to 50 per cent," the commission's chairman said.

Vertical devolution is the distribution of tax proceeds between the Centre and states in the country.

Chief Minister Mamata Banerjee met the commission and made several suggestions. She also raised the issue of "deprivation of the Centre".

The state government suggested the introduction of a new urbanisation-based weightage of 7.5 per cent in the horizontal devolution criteria framework, while advocating the exclusion of forest and ecology as a criterion, which had a 10 per cent weightage in the 15th Finance Commission, Panagariya said.

The state government also proposed adjusting population weightage to 10 per cent with a granular approach to account for Scheduled Caste (SC) and Scheduled Tribe (ST) populations to better reflect demographic realities, officials said.

On tax efficiency, West Bengal recommended a weightage of 2.5 per cent.

The state further suggested raising the demographic criteria's weightage to 20 per cent, up from the 12.5 per cent recommended by the 15th Finance Commission, they said.

Highlighting the state's fiscal challenges, Banerjee advocated increasing the income criteria weightage from 45 per cent to 50 per cent, arguing that this adjustment would address disparities in income distribution across states and help resource-starved regions like West Bengal.

The Mamata Banerjee government also asked the commission to raise the weightage of 'area' criterion to 20 per cent from 15 per cent with adjustment of the locational complex areas.

Panagariya, who chaired the meeting, acknowledged the state's submissions and assured that the commission would carefully evaluate the suggestions after consulting all the 28 states, which will continue till mid-May.

The Finance Commission is tasked with recommending the distribution of tax revenues between the Centre and the states.

The chief minister's proposals come as West Bengal continues to push for "greater fiscal autonomy and equitable resource distribution in the face of rising welfare expenditures and development challenges", the officials said.

Panagariya stated that the chief minister raised several issues at the meeting, which were not necessarily under the ambit of the Finance Commission.

According to sources, during her 35-minute address at the meeting, Banerjee raised concerns over the alleged "deprivation of funds for centrally sponsored schemes".

Banerjee apparently criticised the restrictions on the branding of centrally sponsored schemes, despite states funding 40 per cent, and opposed direct fund transfers to panchayats, which, she said, disrupts state administrative efficiency.

During the day, the five-member panel also met trade bodies, industry associations and representatives of political parties.

The Congress delegation, which was present in the meeting, also submitted a memorandum to the commission, supporting the state government.

Former MLA and Congress leader Sukhvilas Verma and advocate Indrajit Roy attended the meeting.

"Fifty per cent share of central tax should be paid to the state governments, which is currently 41 per cent, and the amount of allocation should be increased in the field of education. Alongside, there should be a simplification of the GST and the income tax system," the Congress memorandum said.

The party suggested an increase in municipal and gram panchayat allocations.

The CPI(M) also backed the state government's demands and submitted its memorandum to the commission.

"Given the growing regional imbalance, we urge the commission to emphasise devolution of more funds under the head of grants-in-aid to the states and union territories so as to uplift the group of states with lower SGDP and sliding proportional share of primary and secondary sectors," the Left party said in the memorandum.

Devolution of funds in the central schemes, like MGNREGA, Awas Yojana, NRLM, Sadak Yojna, and Health Mission, requires conditionalities fulfilled by the state government, it said.

"These have not been resolved for a long time whereas the people of the state are suffering," the CPI(M) said.

It also urged the commission to review the present arrangement for financing disaster management initiatives.

"West Bengal suffers from climate disasters like cyclones, eroding the banks in the delta region like Sundarbans. Similarly, there were reports cloud burst or landslides in north Bengal and resultant flash floods in sub-Himalayan terrain. In addition to such natural calamities, districts like Malda and Murshidabad face the additional problem of changing the course of river Ganga which has left a sizable number of homeless population," it said. PTI