The 22nd Congress of CPI(M) expresses deep concern about the anti-federal and anti-democratic underpinnings of the Terms of Reference (TOR) of the 15th Union Finance Commission (FC). They are intended to reduce the share of the States in the overall tax devolution, squeeze the fiscal space available to the States, impose unacceptable conditionality and privilege centrally sponsored programmes over State programmes.As a result of the proposed change in the population base year, the TOR threaten also to seriously impair the finances of State governments that have performed well with respect to population control.

1)      The TOR suggest that the 15th FC should review the recommendation of the 14th FC to raise the share of States in central taxes to 42 per cent. Further, the TORalso ask whether the constitutional provision to provide revenue deficit grants to States be continued at all.The policies that follow from both of these will certainly reduce resource devolution to the States.

2)      There are clear suggestions that the FC enforce the recommendations of the Fiscal Responsibility and Budget Management Act Review Committee Report. Any such move will significantly reduce the fiscal deficit and Debt-GDP ratio permitted for the States, and will severely curtail the fiscal space available toStates.

3)      In contravention of the solemn assurance given in the National Population Policy and the resolutions of National Development Council and Parliament, the base year for calculation of population weight has been shifted from 1971 to 2011.Thiswould result in heavy loss of revenue to States that have effectively implemented appropriate health and family planning programmes, such as the southern States and also West Bengal, Orissa, Punjab, and other States.

4)      There is a bias in the TOR towards giving primacy to central government programmes. It may also be noted that the objectives of most of these centrally-sponsoredprogrammes fall within the domain of the States.

5)      There is even a reference to discouraging “populist”programmes in the TOR. Whether a programme is populist or not is a decision to be made in the political domain and not by the FinanceCommission.

The fiscal imbalance between the Centre and the States has widened over time despite the recommendations of successive FCs. From the 11th FC onwards, the grants have increasingly tended to be subject to conditions imposed on the States. The adoption of GST has been a blow to the resource mobilisation potential of the States. The BJP government is trying to utilize the 15th FC to further centralise financial powers.

The 22nd Congress of the CPI(M) commends the efforts of the Government of Kerala led by the Left Democratic Front to bring States together to demand that the Terms of Reference be amended. The first major step in this direction was the successful Conclave of Finance Ministers of Southern States on April 10, 2018. The Government of Kerala is now making efforts bring more States to support the demand to amend the current TOR.

The 22nd Congress of the CPI(M) appeals to the people to rally to demand amendments to the TOR, in order that the Fifteenth Finance Commission, which is a Constitutional body, be able to function in a free and just manner.