The Centre, while accepting all major recommendations of the 15th Finance Commission, has rejected its recommendations for ‘special grants’ worth `6,764 crore to Karnataka, Telangana and Mizoram for the financial year 2020-21. The commission has been asked to reconsider its recommendation as it introduces a “new principle for tax devolution”.

“We believe that during FY 2020-21 no state should, as a result of our recommendations, get in absolute terms less than the total amount of devolution and revenue deficit grants estimated to be received in FY 2019-20. It is believed that this is a sound principle and should be adhered to. We have noted that the sum of tax devolution and revenue deficit grant is projected to decline from FY 2019-20 to FY 2020-21 for three states, namely Karnataka, Mizoram and Telangana. Hence, we have provided grants to these states aggregating to `6,764 crore in FY 2020-21,” the 15th Finance Commission had said in its interim report tabled in the Parliament on Saturday.

NK Singh, Finance
Commission chief

However, the Centre says that there was a formula for devolution of grants and “this recommendation introduces a new principle” and was not accepted by it.It has also asked the 15th Finance Commission to reconsider its recommendations for special nutrition grants worth `7,735 crore to the states. “The impact of malnutrition on development of the brain, and hence on early education, has prompted us to recommend additional grants of `7,735 crore to the states for nutrition in FY 2020-21, in addition to the grants allocated by the Union government under Centrally Sponsored Schemes (CSS),” the commission had proposed.

The Finance Commission had also said that these grants are “not to be substituted for either the state share or Union share, and are an additionality” and that they should be released in two installments — first by May 2020 along with the Union share of the CSS related to nutrition.However, the Centre has said that Finance Comission should “review this recommendation as part of its overall proposal of measurable performance-based incentives for states, as per the Terms of Reference in the main report”.