In maiden meet, 16th Finance Commission acknowledges need to widely consult states, stakeholders

The 16th Finance Commission held its first meeting on Feb 14.

In its first meeting on February 14, the Arvind Panagariya-led 16th Finance Commission (XVI-FC) acknowledged the need for wide ranging consultations with various stakeholders, including states, local bodies, ministries of Government of India, and experts.

These comments assume significance at a time when there is a raging debate between the Union government and a few southern states on sharing of Central funds, with the latter accusing the Centre of unfair treatment towards them in tax devolutions and grants-in-aid over the past few years. Responding to these allegations, Union Finance Minister Nirmala Sitharaman on February 7 termed these claims "wrong and mischievous."

The Commission said that in a bid to carry out detailed analytical work, it would require to rope in all the expertise that it can garner, including that from leading research organisations, key think tanks and other organisations working in the area of fiscal federal relations.

The 16th finance panel also approved setting-up of its office at Jawahar Vyapar Bhawan on Janpath in New Delhi, according to a government release.

This Commission will make its report available by October 31, 2025 covering a period of five years starting April 1, 2026.

The Cabinet on November 29 had approved the terms of reference for the 16th Finance Commission, which will recommend how taxes are shared between the Centre and states, and also among states. It will also provide its recommendations on the principles that should govern the grants-in-aid of the revenues of the states out of the Consolidated Fund of India and the sums to be paid to the states by way of grants-in-aid of their revenues, among others.

The panel's predecessor, the 15th Finance Commission, which was set up on November 27, 2017, was chaired by the member of the erstwhile Planning Commission, NK Singh. The recommendations of this commission is valid for a period of six years from April 1, 2020 till the financial year 2025-26.

At present, as per the recommendation of the 15th Finance Commission, 41 per cent of the divisible tax pool of the Centre is transferred to states in 14 instalments annually.