Ecological fiscal transfers did not increase spending on forests but should still be retained by the 15th Finance Commission, suggests a new study
As the 15th Finance Commission (FC) finalizes its recommendations for how the centre’s tax revenues are shared with states, new research suggests that the sharing formula should retain forest cover as a criterion. Jonah Busch and others in a paper published by the Center for Global Development analyse state budgets to examine whether ecological fiscal transfers (EFTs) has impacted state forestry expenditures. EFTs are meant to reward states that protected their forests. Within the total centre-state disbursement, 7.5% was set aside to be divided among states based on the area of forests within states. Consequently, states that preserved forests stood to gain in terms of greater disbursement from the centre. To measure the effect of this, the authors compared state expenditure on forests between 2012-13 and 2014-15, before the reform was implemented, with spending in the three years (2015-16 to 2017-18) after the reform.