Prime Minister Narendra Modi with Governor Banwarilal Purohit at the inauguration of the diamond jubilee building and a series of other facilities at the Cancer Institute in Chennai on Thursday. Photo: PTI
Prime Minister Narendra Modi with Governor Banwarilal Purohit at the inauguration of the diamond jubilee building and a series of other facilities at the Cancer Institute in Chennai on Thursday. Photo: PTI

Narendra Modi: 15th Finance Commission doesn’t favour North Indian states

Critics of 15th Finance Commission's terms of reference have missed the fact that the government has asked the panel to consider incentives for states that have worked on population control

New Delhi: Prime Minister Narendra Modi on Thursday weighed in on the debate regarding the mandate of the 15th Finance Commission (FFC) allegedly favouring northern states over their southern counterparts, claiming the allegation is “baseless".

The terms of reference of FFC decided by the government directed the commission to use the latest census data of 2011 for allocation of resources, against 1971 census data used earlier, Mint first reported on 16 January.

The southern states led by Kerala opposed the terms of reference, demanding the use of the 1971 census so as not to penalize southern states that have achieved replacement rate of population growth.

Speaking at a cancer institute in Chennai, Modi said the critics of FFC’s terms of reference have missed the fact that the government has asked FFC to consider incentivizing states that have worked on population control.

“By this yardstick, a state like Tamil Nadu, which has devoted a lot of effort, energy and resources towards population control, would certainly benefit. This was not the case earlier," he added.

Kerala finance minister Thomas Isaac, taking note of Modi’s comment on Twitter, posted saying that while he appreciates the response of the Prime Minister in the matter, the incentives will be inadequate to compensate the potential loss of revenue due to the change in the population base year from 1971 to 2011.

“I hope Hon. PM will explain how incentives clause which normally accounts for 2-3% of the FC award will compensate for the loss suffered from tax devolution, which accounts for 90% of the award, due to shift in population base year," he added.

Union finance minister Arun Jaitley on Tuesday called the controversy “needless". He said though the 14th FC had no specific mandate for using the 2011 census, yet it rightly allocated 10% weight to 2011 census population data to capture the demographic changes since 1971 to make a realistic assessment of the needs of states.

“The ToR (terms of reference) of 15th FC rightly balance both the ‘needs’ represented by latest population and ‘progress towards population control’ very well. There is no inherent bias or mandate in the ToRs of the 15th FC which can be construed as discriminatory against the states which made good progress in population control," he added.

Among major states, Bihar (25.1%), Chhattisgarh (22.6%) and Jharkhand (22.3%) have the highest decadal (2000-2011) population growth rates, according to the 2011 census. On the other hand, southern and eastern states like Andhra Pradesh (11.1%), West Bengal (13.9%) and Odisha (14%) have among the lowest decadal population growth rates.

FFC is chaired by former revenue secretary N.K. Singh, also a member of the ruling Bharatiya Janata Party. Apart from Singh, members of the commission are former economic affairs secretary Shaktikanta Das and adjunct professor at Georgetown University Anoop Singh. Former chief economic adviser Ashok Lahiri and NITI Aayog member Ramesh Chand are part-time members.

The commission, whose recommendations will be in force for five years starting 1 April 2020, has been asked to submit its report by 30 October 2019.

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