Bengal urges 16th Finance Commission to increase states’ share in tax devolution to 50%

Kolkata: The Bengal government, on Tuesday, urged the 16th Finance Commission (FC) to increase the vertical devolution of funds to states from the current 41 per cent to 50 per cent.

Interestingly the majority of the 13 states, including BJP-ruled ones, that the 16th FC has already visited have made similar requests.

Commission Chairman Arvind Panagariya said: “In vertical devolution, the West Bengal government in its plea demanded that the devolution be increased to 50 per cent. Most of the 13 states the commission has visited have demanded raising the devolution to 50 per cent, while a few have sought to raise it to 45 per cent from 41 per cent currently.” Chief Minister Mamata Banerjee met the Commission at Nabanna Sabhaghar with suggestions and raised the issue of deprivation of the Centre.

Banerjee raised concerns about the deprivation of fund release under Central-sponsored schemes and was critical of the branding of such schemes despite state funding of 40 per cent.

According to Panagariya, Bengal suggested introducing a new urbanisation-based weightage of 7.5 per cent in the horizontal devolution criteria framework and called for the exclusion of forest and ecology as a criterion, which had a 10 per cent weightage in the 15th FC.

The state further suggested raising the demographic criteria’s weightage to 20 per cent, up from the 12.5 per cent recommended by the 15th FC.

Regarding tax efficiency, the state recommended a weightage of 2.5 per cent.

According to sources, Banerjee advocated increasing the income criteria weightage from 45 per cent to 50 per cent and also asked for raising the weightage of ‘area’ criteria to 20 per cent from 15 per cent with adjustment of the locational complex areas.

Panagariya, who chaired the meeting said that all the state’s submissions have been noted carefully. He maintained that the Commission would evaluate the suggestions after consulting all 28 states, which will continue till mid-May 2025.

The Finance Commission is tasked with recommending the distribution of tax revenues between the Centre

and states.