Govt constitutes 13th Finance Commission

The government today announced the formation of the 13th Finance Commission. Vijay L Kelkar, former union finance secretary and adviser to the Finance Minister has been appointed Chairman, while Indira Rajaraman, emeritus professor, National Institute of Public Finance and Policy, Abusaleh Shariff, chief economist, National Council of Applied Economic Research, Atul Sarma, former vice-chancellor, Rajiv Gandhi University (formerly Arunachal University), shall be the full-time Members of the Commission.

Sumit Bose will be the Secretary to the Commission, while BK Chaturvedi, member, Planning Commission, will be the part-time member.

The 13th Finance Commission will also take into consideration the impact of the implementation of the Goods and Services Act (GST) with from April 1, 2010, including on foreign trade. It has also been asked to consider the need to improve the quality of public expenditure for better outcomes.

The commission will also take into account the need to manage ecology, environment and climate change consistent with sustainable development, which is an issue of national concern.

The recommendations of the commission will cover five years from April 1, 2010. Its report is expected by October 31, 2009.

The Finance Commission is a constitutional body set up every five years to make recommendations for distributing the tax collected between the Union and state governments, the principles that should govern the grants-in-aid of the revenues of states out of the Consolidated Fund of India and steps needed to augment the consolidated fund of states to supplement the resources of panchayats and municipalities.

In addition, any other matter may be referred to the commission by the president in the interests of sound finance.

Apart from the terms of reference laid down in the Constitution, the Commission will review the state of finances of the Union and state governments keeping in view the operation of the states' Debt Consolidation and Relief Facility 2005-2010 and suggest measures for maintaining a stable and sustainable fiscal environment consistent with equitable growth.

The Commission will also review the present arrangements as regards financing of Disaster Management with reference to the National Calamity Contingency Fund and the Calamity Relief Fund and the funds envisaged in the Disaster Management Act, 2005.

As in the case of the previous Finance Commissions, the 13th Finance Commission will also take into consideration various aspects while making its recommendations.

These relate to assessment of the resources of the Centre and the State for the five year period, taxation efforts and the potential of additional revenue mobilization, demands on the resources of the Central Government, the requirement of States to meet the non-salary component of maintenance expenditure on capital assets and plan schemes, the objective of not only balancing receipts and expenditure but also generating surpluses, and the need to ensure commercial viability of irrigation and power projects, departmental undertakings and public sector enterprises through various means including levy of user charges and adoption of measures to promote efficiency.