Extension of Finance Commission term

29/11/2019

The Finance Commission jurisdiction is confined to the States and not the Union Territories and the Centre has decided to relax conditions through a Presidential order to facilitate the Finance Commission award to the Union Territory of J&K to boost its development. Changes in terms of reference were required because of the Kashmir development. Since the Finance Commission’s recommendation on devolution is meant only for States and as Jammu & Kashmir had been bifurcated into two Union Territories, there was a need to change the terms of reference, which was approved by the Cabinet. The Union Cabinet has extended the term of 15th Finance Commission by 11 months as it needed more time in the wake of change of status of Jammu and Kashmir, an erstwhile State which was divided into two Union Territories of J&K and Ladakh in August. Term of the Finance Commission which was scheduled to end on November 30 has now been extended till October 30, 2020. The Commission will submit an interim report on November 30 suggesting formulae for tax devolution for the year 2020-21 fiscal year as validity of previous formulae ends on March 31, 2020.
Normally, grants for a Union Territory are provided by the Home Ministry and the Finance Commission Award is confined to the States. Section 83 of the Jammu and Kashmir Reorganization Act, 2019 reads: “On the appointed day, the President will make a reference to the 15th Finance Commission to include Union Territory of Jammu and Kashmir in its Terms of Reference and make award for the successor Union Territory of Jammu and Kashmir.” The extension of the term will enable the Commission to examine various comparable estimates for financial projections in view of reforms and the new realities to finalize its recommendations for the period 2020-2026. The Terms of Reference for the Commission are wide-ranging in nature. Comprehensively examining their implications and aligning them to the requirements of the States and the Central Government will require additional time. The proposed increase in coverage of the period, for which the Commission’s recommendations are applicable, will help medium-term resource planning for the Centre and the State Governments.

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