REPORTOF THE ELEVENTH FINANCE COMMISSIONFOR 2OOO-2005

CHAPTEIT V from 1987-88onwardsand the fbrccastlor the

ASSESSI\{ENT O}' STATES' RI'SOURCDS
period 2000-05 on an year-wise basis. ln
5 . l . l n m a k i n go u r r e c o m m e n d a t i o rnesg a r d - response,the Stateshave furnishedtheir prc-
in-utax devolutionandgrants-in-aid to the States, devolutionforecastof planandnon-planrevcnuc
wc are requiredunderour tenns o1'refbrencc to receipts and expenditure. Thc assurtptions
assess theresources ofthe Statesfbr thcfive years underlyingthc lbrecasts,howevcr,vary widcly
comnrencing on l" April, 2000 and their acrossthe States,basedas they arc on varying
lcquirementsl'or meetingthe plan and non-plan
anticipationsof the growth ol' Cross Statc
rcvenueexpenditure, kecpingin view theneedfbr
Domestic Product (GSDP), inflation and thc
gencratingsurplus for capital investnrentand
reducingIlscaldellcit. likely responseof revenucsand cxpcnditure.A
summarvof the pre-devolutionrevcnuereccipts
-5.2.In clrdcrto help us in this asscssment, we and plan/non-plan revenueexpenditurcconsoli-
sougl.rt inlbrnrationliom theStatesandthc Union datedlbr the 25 Statesand compilcd {krrn their
g()vcrnmcnton their receiptsand expcnditure tbrecastsaregiven bclow:

Tablc 5.1. l'rc-devolution I'orecast - All Statcs

(RevenueAccount)
( l l s r n c r o r e s)

SI I 999-2000 I
20()0-0 2(x)'l-05
r\(r
o / c t oG . l ) . P ' r o t o( l I ) . P
B.E % t oG . D . P
(rj (l) (3) (4) (5) (6) iur
l l e v e n u cl l c c e i p t s
i) Tax Rcvenue 1,03.648 5.37 1,08,80t 4.98 1.62.221 ;1.56
ii) Non Tax Revcnue 18 . 3 7 9 0.95 24.199 l.l4 30.491 0.tt6
iii) N o n - P l a nG r a n t s l . 7 lI 0.09 r,691 0.08 ),.265 0.(Xr
T o t a l( i - i i i ) I,23,71u 6.41 I.35.291 6.20 1.9.1.979 5.4n

R c v c n u eE x p e n d i t u r c 2.40.557 t2.45 3 ,1 5 , 2 5 1 14.44 5.01.670 l:1.09

Plan 42.889 2.22 48,665 :./-) 16.012 11,1

Non-Plan 1.97,66{t 1 02 3 2.66.5tt6 12.21 ,1.15.657 I196

S u r p l u s / l ) c l i c iot n
R e v e n u eA c c o u n t , t . 16 , 81 9 -6.05 -1.79.960 -8.21 -3.06.691
N o n - P l a nl { e v e n u e
Su r p lu s / l ) c l i c i t -73.930 -3 tJ3 -t 1t 1q5 -6.0r -1.30.678
Estirnatcd G . l ) . P .a t
Current Market Prices 1 9 . 31 . 8| 9 21.82,956 1 5 . 5 9 . 21 5

For computingthe ratios to GDP in the abovc a proportiono1'GDP,NPRE is projectedto go up

table,nominalGDP growth hasbeenassunred at fiom 10.23 per ccnt of GDP in the base year
with whathas
I 3 per ccntper annumconsistently ( 1999-00)to I I .96 per ccnt by the tclrninalvear
been assunredfor assessment of the Centre's 2004-05,growingat the ratc o1'16.6pcr cent per
resourccs. annumagainsta trendgrowth rate (TGR) ol l6
p e r c e n t o v e r t h e t w e l v c y e a r s .l 9 l l 7 - 1 9 9 9T . ax
'fhc on theotherhandasa proportionof CDP
5.3. lorecastsand the resultingrevenuc revenue,
gapsindicatedby the Statcspresentan alarrning i s s h o w nt o d e c l i n ef r o m 5 . 3 7p e rc e n to l ' C D Pt t r
picture.In the aggregatethey show a rise in thc 4.56percentby theterminalyear,the underlyin-u
pre-devolution deficit on non-Plan revenue growthratebeingonly 5.7per cenlin the l'orecast
accountl'rom 3.83 per cent ol Gross Domestic period,as against14.8per ccnt observcddurin-u
P r o d u c t( C D P ) i n 1 9 9 9 - 0 0t o 6 . 4 8 p c r c e n t i n 1987-1999.The projectionol non-taxrevcnues
2004-05.In part, this resultsfrom the projection a l s of o l l o w a s i m i l a rp a t t e f ni,n d i c a t i n -aed c c l i n c
ol'non-Plan revenueexpenditure(NPRE) at a f r o m 0 . 9 5p e r c e n to f C D P i n 1 9 9 9 - 2 0 ( [( B . t s . )
slowth ratemuch lower thanthat of revenue.As to 0.86 per centby 2004-05.
 VOI,.]2 NO.2 REPOITT OF"THE EI.EVENTH FINANCE COMMISSION FOR 2OOO,2OO5 267

5.4. If restructuringoi public finances to 5.6.The normativeapproachservesto ensurc

restorebalancein the budgetis to takeplace,it is inter-Stateequity in that no Statecan obtain a
irrrperative that the trendsdepictedin the States' larger sharethan what is warrantedby the defi-
fbrecastsare rcversed.Our assessment of the ciencicsof its revenuebase attributableto its
resources of'theStatesis intendedto indicatehow backwardness or low incomeIevelor otherfactors
this can bc achieved,keepingin view the needs that havea bearingon its taxablecapacitybut are
and also the capabilitiesof the Statesjudged by beyond its control. Nor can any State expect
whateverexpenditureit may chooseto incur,
their potentialand past perfbrmance. In making
regardlessof what might be justifiable norrna-
the asscssnrent, whilc taking note of the trends
tively,to be underwrittenwithoutquestionby the
a n dt h c l i k c l y g r o w t ho f G D P i n t h ec o m i n gf i v e
FinanceCommission. For variousreasonsit is not
ycarsas rvell as other relevantfactors,we havc
possibleto implementthe normativeprincipleall
followedas lar aspossible.arnonuativeapproach. the way. The heterogeneity of the Statesin their
Thc intentionis to applysomerulesuniformlyto e n d o w m e n tasn d p r e s e n lte v e l so 1 ' d e v e l o p m e n t
all Stateswith appropriatcvariation whercver poseproblemsin settingup standards which can
necclcd to telkcaccountof thctorsthatunavoidably be applieduniformlyeven alier making suitable
a l l e c t t h e i r r e v e n u ec a p a c i t ya n d e x p e n d i t u r eallowancefor theirspccificsituation.Then there
n c c d s .I n t h c a l l o c a t i o no l ' C e n t r a l r e v e n u e . areacutedataproblemsas well. Nevertheless, as
a l r o n g t h e S t a t e s ,b o t h c q u i t y a n d e l ' l i c i e n c y faraspossrhle, we haveintroducedsomeelements
dcrnanclthat the rcvenucrecluircmcnts ol' cveri of the nornrativeprinciplein our assessment of
Stateareasscssed on thc basisol'sonrcob.jective therevenues andexpenditurc<lftheStatesfor the
norrnsinstcadol rclyingon whatthcyproject,and l'ive year period for which wc are requiredto
recommendtax sharingand grants-in-aid.
aficr duc considerationol' thcir limitationsand
necdsrn cachcase.
5.7.We haveapplicdthe normativeapproach
in two stages:first, by introducingsomenorma-
5 . 5 .A s i n d i c a t e di n C h a p t e IrI , t h ee s s e n coef tive elementsin computing
revenueand expen-
thenormativcapproachin assessment ol'revenuc clitureof the baseyear and next, by moving the
c a p a c i t yl i c s i n c s t i m a t i n gt h e r e v e n u c sa, S t a t e baseyeal figureslorward to dcrive revenueand
can raise by cxcrcising its powers under the expenditureestimatesfor 2000-05by applyin,u
'reasonablc'
C o n s t i t u t i o nw i t h e l ' f b r t .T o m i n i - appropriategrowth ratesstipulatedon thc basis
nrisc the scope lbr any subjectivejudgement. 0 1 ' s o m e r e a s o n a b lneo r m s .S a l i e n p
t o i n t so 1 ' o u r
'rcasonable' in thiscontextrnaybe takento mean assessment exercisefbr Statcs'resourcesare set
an averasceffort. the averagebeing thc level at out in the followingparagraphs.
which the Statcsin generalhavc beenobsclved
to bc perforrningin revenuc raisin_u.On the BaseYear Assessment:f 999-2000
cxpenditureside,the normativcapproachwould
5.8. In estimatingthc rcsourceso1'the States
i r n p l y i n c s s e n c et h a t t h e c x p e n d i t u r er e q u i r e -
fbr the five yeals,2000-0-5, our first concernhas
mentsol'cach Statewill bc worked out broadly
beento set the basefiom which the projcctions
on thebasisol'theaverageexpenditure percapita
are to be made,i.e., iiguresof revenuereceipts
lhat a Statehas to incur on t.hcrevenueaccount
and expenditurefbr each State fbr the baseyear
to providepublicservicesat a 'reasonable' level, 1999-00.The simplestway of going about it
altcr allowing lirr cost diff'erentials amongthem would be to proceedon the basisof the estimates
arisingliom factorsnot within theircontrol,such furnishedby the Statesin their budgets,i.e.,
as tcrrain,age-profileof the population,varying budget estimates(BE) figures in the 1999-00
ratcsof inflationand otherrelevantfactors. budgetandwhereveravailable,revisedestimates
26u JOURNAL OF ]NDIAN SCHOOI, OF POI,ITICAI, ECONOMY APRIL-JUNE 2OOO

(RE). It is however.well known that often there that influencc the tax baseand other l'actorsthat
aresignificantvariationsbetweenBE/RE figures determincthetaxyield but arebeyondthecontlol
and the actuals.That apart,it appearedto us that of the State.
it would not be appropriate to project future
revenues andexpenditurctakingeitherBE,or RE 5 . 1 0 .W h i l e i n p r i n c i p l et h er e p r e s e n t a t i tvacx
ligures the base.This is because
as the budgetsor systemapproachis pref'erable, it wasnot possiblc
even actuals for a year ref'lect receipts and for usto adoptthismethodbecause ol'sevct'c' data
cxpenditurcas they emergefrom the structureoi' problernsregardingthe individualtax basesand
tax and non-taxrevenueson therevenuesideand complicationsarising from heterogcneous tax
compositionof expcnditurein actualoperation practices acrosstheStatesandthevaryingirnpact
and not what a Statecan be expectedto raisein of cxogenouslactorson their taxablecapacity.
revenueor spend on a normative basis aftcr For instance.the restrictionsimposed by thc
allowing for its handicaps.Hence, the budget CentralSalesTax Act, 1956on theStates'powers
liguresof the baseyear or even the actuals,if of sales taxation in respect of commodities
availahle,requiresomemodificationto setup thc declaredto be goods of specialimportrinceto
baseyearl'igure.This nodificationhasbcenmade inter-Statetradeor comn-rcrceimpact difl'erently
by us partlyon the basisofpast trendsandpartly on dit-ferent States, dependingon thccomposition
by using certain objective norms. Unless the o f t h e i ro u t p u ta n d t h c v a r i u t i t t nisi r c n ( ) lc r s ) 't ( )
BE/RE figures of the base year are adjusted capturein the absenceof reliablcdata on intcr-
normatively, the assessmentsmade by the Statetrade.Thenagain,whilc Statccxcisedutics
Finance Commission lose their efficacy in yield substantial revenuein mostStatcs.thcreare
inducingprudentfiscalbehaviourandcverytime Stateslike Gu.;aratwhere full prohibitionis in
a ncw Financc Commissionis appointed,the vogue,andTamil Naduwhelepartialprohibition
actualsol' the baseycar are presentedas a fuit is in fbrce.Also. thercarc taxeswhich arc lcvied
tu<'utnrpliwith little regardfor what the previous andcollcctedin somcStatesby localgovernments
FinanceConrmissionshad considereda reason- Iikc octroi fbr which completeinl'otmationts not
ablc budgct scenariofor individualStates.The availablewith us. Wc, therefore,optcd lilr thc
rulesof adjustments or modificationsfollowedby aggrcgate tax revenueapproachinsteadof look-
in
us derivingthe base yearfiguresofrevenue and ing at the taxablecapacityol-thc Statcs.tax by
expenditure, item-wise,are indicatedbelow. tax.'

Tax Revenue 5 . 11 . F o r t h i sp u r p o s ew. e h a dc t l m m i s s i o n c d

a study at Indian StatisticalInstitute(ISI), Cal-
5.9.For settingup the baseyearfiguresof tax cutta. Applying the regression approach.thc
revenueof a State normatively,there are two study set up a rnodel to cstimatethe relativc
possiblcapproaches. The first one is to estimate contributionsof variablcswhich rnight bc ccln-
the potcntialofrevenuefor eachtax individually sidcred as signil'icantdcternrinantsol' taxablc
it can raise undcr the Constitutionlaking into c a p a c i t yo f a S t a t es u c ha st h ep e rc a p i t aS D P .A
:iccountthc variationsin the respectivetax base numberofvaritrbles wereidentifiedin thisre-sald.
in thc givcn Stateas comparedto the generalor a n da l o n gw i t h s o m es c l e c t e d u m m y v a r i a h l c s .
averagepattcrnand applyingthe averagerateol' r c g r e s s i o n c q u a t i o n sw e r c e s t i m a t c do b t a i n i n g
y l i a b l cr c s u l t sH. o w c v e rt,h cr c l i a n c c
taxto thebase.This is knownasthereprcsentatives t a t i s t i c a lrl e
tax systemapproach.An all.ernative way is to o n a l a r g e n u m b e ro 1 'v a r i a b l e sa n d d u m n t t c s
estimatcthc taxablecapacityol'a Statetakingthe raisedqucstionsas to which oi thcn.rcould bc
aggregate revenueliorn all taxesthata Statecan consideredto be within thc controlol'thc Statcs
raiscunderits Constitutionalpowersand setting and which wcre not. There arc also acutc data
up relationshipbetweentax rcvenueandvariables problemsas reliable infortuationre-garding the
v()t,.t2 No.2 REPORT OF THE ELEVENTH FINANCE COMMISSION FOR 2OOO-2005

identifledexplanatoryvariableswere not avail- the tax ratio of that Stateand the averageratio of
ablc. Figures of per capita State incomes.for the group in question.Where, however, the per
examplc.aresimplynotcomputed.What we have capita GSDP of a State was not less than the
is data on Statedomesticproductwhereasit is relevantgroup averageby more than I 5 per cent,
well knownthattaxablecapacityis determined to thatis to say,theState'spercapitaGSDPis close
a grcatcxtentby levelsof percapitaincome.Data to the group average,the tax ratio was adjusted
tin severalof the explanatoryvariablesalso are by 30 per cent of the differencebetweenthe tax
dated.Further,theresultswererathersensitiveto ratio of that State and the averageratio of the
the assumptionsregardingthe combinationof relevantgroupon thereasoning thatStatesshould
variablesas was evident from the alternative be able to havetax ratio approximatingto their
lbrnrulations.Hcnce, we proceededon some group average.For example, with the group
broad jud-uementsto determine the taxable averageo1'taxratio at"J per cent, the tax ratio ol'
capacityof the States. a givenStateat 6 percent,if the percapitaGSDP
of the Statehappensto be 85 per centor more of
5 . 1 2 . K c c p i n gi n v i e w t h e l i m i t a t i o n sm e n - theaverageof the group,the tax ratio of that Statc
tionedabove,for estimatingthe tax revenuesof for thebaseyearis takento be 6.3 percent(6 plus
the Statcsfor the baseyearnormatively.we first 30 percentof7 ninus 6). For thespecialcategory
wurkcd out thc trendgrowth rates(TGR) of the States,the upwardadjustmentin thc tax ratio fbr
totalown taxrevenueof eachStateovertheperiod thc baseyearhasbeenrestrictedto I 0 per centol
lL)81-91)and thenappliedthe TGR so derivedto thedifferencebetweenthc tax ratio of a Stateand
thc actualsol' 1998-99.We havenot goneby the the groupaveragein all cases.The effectof this
,srowthratesof individualtaxesbecauseof the normative adjustmentfor States which were
varyingtax practiccsamongthe Statesas men- below the respectivegroupaveragesin their tax
t i o n c da b o v ca n d t h e p o s s i b i l i t yo f s u b s t i t u t i o nr a t i oi s g i v e ni n A n n e x u r eV . L
lrnong dil'f'crcnttax handles.
Non-Tax Revenue
5 .I 3 . H a v i n gd c r i v e dt h eb a s cy e a rt a xr c v e n u e
l i g u r e si n t h i sw a y .w e w o r k c do u t t h ct a x - G S D P 5 . 1 4 .T h c m a i n c o m p o n e n tosf n o n - t a xr e v c -
ratio( hcrealtertaxratio)of eachStatefor theyear ntre ol' thc Statcsarc intcrcstrcccipts.rcvenur'
1999-00.The Stateswere thcn divided into two from forestryand wildlil-c.irrigationratesand
groups, viz., spccial category and gcncral or royaltyon minerals.It was nol.icedthat theseare
non-spccialcategory.The tax ratio of eachState heterogeneous in nature,andarenot amenableto
wos compared with the averagc ratio of the a uniformtreatmcntacrossthe board.Hence.we
rc'spcctivc groups.Wheretheaveragetax ratioof haveproceededto estimatcthe baseyear figures
a -uivenStatcl'cll hclow the relevantgroupaver- of each major item individuallyin most cases
agc,wc niadeupwardadjustmentin the rati<lon Separate normswerc appliedfbr diff'erentitems
the reasoningthat all Statesshouldtry to move of non-taxrevenues,namely. interestreceipts,
towardstheil groupavcrageovera periodof time. dividcnds.revcnuefrom forestryand wild lif'e.
Tlrc ad.justment we havc in view is intendedto irrigationratesandroyaltyon minerals.The basis
's
reducethc gapbetweena State tax ratioandthe ol'derivationof the baseyearfigures,item-wise.
avcrageratiool'thc group.Keepingin view their i s i n d i c a t e d below:
relativcrevcnuecapacityas reflectedin theirpcr i) Intcrestreceiptshavebecnestimatedsepa-
c a p i t aC S D P . w h c r et h e p e r c a p i t aG S D P o f a ratcly lbr intcrcstfronr loansand advances
Statefell bclow thc averagcper capitaGSDP ol andintercstftom others.Intcrestfhlm loans
thercspective groupof Statesby morethan l5 pcl and advanceshas been estirnatedon thc
ccnt, wc acljustedthe tax ratio of thc State in basis of TGR applicd to the actuals o1'
questionby l0 percentof thedifl'erencc betwcen 1998-99. For others.thecstimates arehasec
 JOURNAI- OF INDIAN SCHOOI, OF POI,ITICAL ECONOMY APRIL.JUNF:2CIOO

on the averagerealisationin thc threepre- RevenueExpenditure

ceding yeirrs.Interestaccruing from the
irri-eationdepartmenthas bcen excluded 5 . 1 6 .A s i n t h c c a s eo f r c v e n u cl c c c i p t sc, o n -
fi'om non-taxrevenuereceiptsand expen- siderations of both equityand cfficiencyrequirc-
ditureas theseare merelycontraentrics. that thc revenue expcnditurcol'theStatesalsobc
i i ) F o r d i v i d e n d sa n d o t h e r m i s c e l l a n e o u s e s t i m a t e do n a n o n n a t i v eb a s i s . I d c a l l y . a n
rccciptsundergeneralservices, the average equitable system of'fedcral transl'crs shouldbring
realisationin the threc precedingyearsis about a measurc ol'parity in the capacity ol' thc
c o n s t i t u c nut n l t s t ( ) p r o v r d e b a s i cc i v r c s e rvlccs
takcnas thc basc.
t o a l l c i t i z c n a
s ta r c a s o n i i b o
l cr a t l c a s a
t m i n i rnunr
iii; Rccciptslionr l'olestrvand wild lil'c. anc
l e v c l .T h c d c t e r r n i n a t i oon[ ' t h c r e l a t i v cr e v c n u e
royalty on rnincralswerc estimatedlbr thc
c a p a c i t yo f t h e S t a t c so n a n o r m a t i v eh a s i si s
b a s cy c a ri n t h c s a m ew a y a sd i v i d en d s .i . i i . .
intcndecl to scrvethis pulpose. Variationarnong
o n t h eb a s i so 1 ' a v e r a goef t h r c cy c a l s .
t h cS t a t c si n t h cc a p a c i t tyo p r o v i d cc i v i cs er v i c e s .
i1,)In the caseol'receiptsfrom irrigation,TGR
however.can arisealso ll'om dif'f'crcnce in necds
basedestirnatesor BE for thc baseyear, suchas a lar-ee proportionof thc agcdor children
whichcveris higherwas adopled. i n t h ep o p u l a t i o no,r m o r b i d i t ya. n da l s ob e c a u s c
v) Lottery receipts constitute a significant o f v a r i a t i o nisn t h e u n i t c o s to l p r o v i d i n gp u b l i c
sourccof non-taxrcvenuesin somc States. scrviccsstemmin_e lionr terrain(hilly tracts.t, and
N o c l c a rl r c n dw a sd i s c er n i b l ei n t h cr e c e i p t s s o c l n .H e n c ci n d c s i g n i n ga n c q u i t a b l es y s t c nol l '
f'rornlottcricsand the -urossrecciptsvary transt'ers,it is nccessitryto cornplernentthe
wrdclyli'onryearto year.Henccnctrcccipts a s s e s s r n eonl i' r c l a t i v cr c v e n u cc a p a c i t yw i t h a n
of' 1998-99was taken iol the baseyear, assessment o1'cxpenditurenccds.
w h c n c v c rt h c l ( ) t l c r yr c e c ' i p tosc c u r ' .
vi.; For rest of' thc items under gcneral.eco- 5 . 1 7 .D e t e r n r i n a t i oon1 e ' x p c n d i t u rn e e c d so n
nonricand socialscrvices.recciptsfor the a normativc basis is. howevcr. nrore problcmatic
baseyearhavebcencstimatcdby projccting thantl.rato1'taxablccapacity.Tlrc rcasonis that
t h c l 9 9 u - 9 9a c t u a l sw i t h t h e ' I G R . d i f l ' c r e n c e si n t h c l e v e l i i n d c o m p o s i t i o no l '
c x p c n d i t u rcca na r i s cf r o m v a l i a t i o ni n t h c l c v c l s
5 . 15 I n t h cp r c s c nct x c l c i s en. ( ) n - t i rrxc v c n u c s ol' income and consunrptionand also ll'onr thc
havebecncstimatedon the linesindicatedzrbove prcl'ercnccs or choiccsof'tlrepeoplc rcgardingthc
with onemorechange.In thecaseo1'some States, scrvices they desirefhrnrthc _qovcrnment scctor
One way ol'gettingovcr theseproblemswould bc
user chargesas a proportionof their rcvenuc
to look atthedi ffbrcntialsin thepcrcapitarcvenuc
cxpenditure(excluding interest and pension)
cxpenditureof diff'erentStatesin the services
werefound to bc undulyIow as comparcdto the
which are basic to govcrnanceerndare usually
averagcof thc groupof generalcategoryStates,
comnronamongall Statcs.For instancc.thethrci:
In ordcr to givc a clear messagethat all States
f u n c t i o n acl a t e g o r i eosl ' s e r v i cse i n t o w h i c h t h e
shouldmake at leastaveragecflbrl to rccovera e x p e n d i t u roef g o v e r n m e natr eu s u a l l yc l a s s i fe d .
p a r t o f t h e c o s t o 1 ' p r o v i d i n gp u b l i c s c r v i c e sa s n a m e l y .g c n e l a l s e r v i c e s s. o c i a l s c r v i c c sa n d
r e l l c c t c di n t h c i r r c v c n u cc x p c n d i t u r cr.. l eh a v c economicservices. contiiinnrajorhcads.suchas.
adjustedthc ratio of non-taxrevenucto revenuc i n t c r e s tP, e n s i o n a s n d p o l i c c u n d c rg e n e r asl e r -
expenditure ofsuchStates(excludingintelestand v i c c s ,a n de x p e n d i t u roen c l c m e n t a r cy d u c a t i o n .
pensionbenel'its)in order to rcducetheir gap as rural primary health,family wclfarc and other
comparedto thc group averageby 50 pcr ccnt. s o c i a w l c l l ' a l ca c t i v i t i seu n d c ls o c i a sl e r v i c c sA. r r
T h i s r u l e h a s , h o w c v c r ,b e e n a p p l i e do n l y t o attcmptcouldbe madeto exanrincthcdil'l'cre nccs
Statcsbelongingto the gencralcatcgory. i n t h c p c r c a p i t ae x p c n d i t u r cn e c d so l ' d i l ' l ' c r e n t
v ( ) 1 .t 2 N O . 2 REPORT OI;'THI-: EI,EVENTH FINANCE COMMISSION FOR 2OOO.2OO5 271

Statestbr thc servicesundertheseheadsderived expenditureofall Stateshad grown at a fast pace

normativelyand seehow the actualsfall shortof d u r i n g t h e n i n e t i e s .H o w e v e r , s o m e r e s t r a i n t
thenorm-based needs.The differences
multiplied becamevisible in the provisionof expenditurc
by the populationof the Statcwould then serve undercertainmajor headso accountsrecently.It
as the basc for determining revenue needsfor was thereforedecidedas a secondstepthat if the
purposesof'equalisation transfers. TGR basedestimateshappenedto be higher than
the BE of a particularmajor item. the BE would
5 . 1 8 .W e c o m m i s s i o n cads t u d ya t t h eI n s t i t u t e be adopted. The IGR based estimates were
o l ' S o c i a la n d E , c o n o m iC c h a n g eB , a n g a l o r et,o retainedfor others.In ofherwords.in the second
work out the levenucexpenditureneedsof the
step, the TGR basedestimatesprojectedliom
Statesbased on thc normativc approach.The
I998-99 or the bud-uetestimatesfor 1999-00,
studyprovidedestimatesof revenueexpenditure
whicheverwas lowsr, was taken.
of the individual States for the main items
excludinginterestpayments,pensionsand a f'ew
werederivedby fitting 5.20. However, it was noticedthat in many
othcritems.The estimates
regressionequationswith selectedcxplanatory States expenditureunder the hcadsol'account
variables.Although. the equationssatisfiedthe relating to pensionsand intcrcstswere unduly
standard statisticaltcsts.it wasnotpossiblefbr us high, whichever way they were estimated,
to usc thc rcsultsmainly tbr the reasonthat in whether by using the TGR or by adoptingthe BE.
severalcasesthe estimateswere way out of Considering that the upwardrevisionof pay and
alignmentwith the actualexpenditureand since pensions wouldhavebeencarriedoutby I 998-99,
wc arenot startingfrom a cleanslate,imposition the growth of pensionsin the year 1999-00was
y o u l d b e t o o d i s - limitedto l5 percentovertheactualsof l998-99.
o l ' n o r m sd c r i v c ds t a t i s t i c a l lw
ruptive.Bcsides,theexpenditure needsofa State Similarly, interestpaymentsfor 1999-00were
fbr purposesof equalisation shouldbc viewedin estimated by projectingthe 1998-99actualsby l5
juxtapositionwith, or as supplementto l'evenue per cent on the reasoningthat the Statesshould
capacityequalisationtransfersand not in isola- cxercise some check on thc growth ol' their
tion. Thcre werc also conceptualas well as data borrowingsand no one shouldexpectthat what-
problems as in the case of taxable capacity evercommitmentsthey may makeon accountol
cstimalion.For instance,tbr policeexpenditule, interestliability will be acceptedby the Finance
i n f b r m a t i o nw h i c h c o u l d h e l p t o q u a n t i f yt h e Commissionfor purposcsof asscssment of thcir
rcquirementsol' Stateshaving insurgcncyprob- revenueneeds.To go by the actualsof intercst
l e m sw a sn o ta v a i l a b l eT.h c o n l y o p t i o na v a i l a b l e paymentsin all caseswould be unfair
to States
to us, thcrcfbrcwas to impart elementsof the
which havebecn more prudentin the matterof
n o r n r a t i v ep r i n c i p l ei n e s t i m a t i n gt h c r e v c n u e
borrowing.We have, therefbre,made another
cxpenditureof the Statesin the baseyear in a
adjustmentin the interestliability in the cascof
l i m i t c dw a y a s i n d i c a t e dbclow.
Stateswhoscinterestpaymentsasa percenta_9e of
p r i n c i p l ei n v i e w rcvenue receipts were fbund to be higher than
5 . 1 9 .K e e p i n gt h en o r m a t i v e
asiaraspossible,lbrestirnating non-planrevenue their respectivegroup average.Thus, for Statcs
cxpenditureof the Statesfbr the baseyear,i.e., whoseinterestpaymentsas a proportionol rev-
1999-00.wc proceededin threesteps.The first enuereceiptsas indicatedabovedid n()texceed
step was to look at the figures arrived at by thegroupavcrage,theestimates arrivedat by the
a p p l y i n gt h e T C R o n t h e a c t u a l so f ' 1 9 9 8 - 9 9 . rule TGR/BE whicheverwas lowcr. were not
Where thc TGR turned ou1to be negative,the disturbed.However,for Statcslbr whom theratio
avcrageofthe threeyears.1996-99.wastakenfor wasabovethe groupaverage,only 80 per centol'
t h c y e a r 1 9 9 9 - ( n .I t w a s n o t i c e dt h a t r e v e n u c theexcesswasaccommodated in our assessmcnl.
 JOURNAL OF INDIAN SCHOOI, OF POI,]T-ICALECONOMY APRlI,-JUNL,200()

AnnexureV.2 providesdetailsof thecompression r a n g i n gf i o m l . l t o 1 . 3 5 .T h e S t a t e sw e l e t h e n

carriedout in respectof interestpaymentsfor groupedaccordingto CSDP growth-rarc( 12. I3
variousStates. and l4 per cent) as also with rcspcctro rhc tax
buoyancies.A Statewas placed in a higher <lr
Projections for 2000-05 lower growth rate categorydepcndin-eon thc
constraints to growth thcy may faceas rellectcd
5.2| . After firming up thebaseyearfiguresin by respective TGRs ol'GSDP.Further,the Starcs
thcmannerindicatedin theprccedingparagraphs.wereplacedin a higheror lower buoyancygroulr
wc pnrcecdedto make projcctionsl'or our rei'er- depcndingon whether.conrparcclto lhcir own
c n c c p c r i o d . n a n r c l y , 2 0 0 0 - 0 5 b y a p p l y i n g past.tlreyin.rproved or dctclioratcdin tcrrnsttl'the
appropriatc growthratesandby relyingon ccrtain tax ratio. For this purpr)sc.r.rctrmparisonwlrs
reasonable norms.The growth ratesalso havezr madcbetwecnthc avera-uc tax ri.ltioover l9c)4-95
noimativc thfust. orientcd to the restructuring to 1996-97to the correspondingaveragcrultio
scheme.Thc method lbllowed fbr plojecting o v c r l 9 f l 7 - t l 8t o 1 9 8 9 - 9 0A. S r a t cw . h c r ct h c r a x
revenucsand cxpenditurcof thc Statcsliom thc r a t i oi s l o w c o m p a r e dt o i t s o w n p a s t .s i g n i l y i n - v
baseyear is describedbriefly bclow: d c t c r i o l u t i o ni n t h c 'r ' c c c n )t ' c r l r s w
. us put in l
hi-uhertax huoyancy-uloupwith thc cxpcctation
Tax Revenue t h a ti t s h o u l db e a b l ct o i n r p l o v ei t sp o s i t i o nb a c k
to whcreit was in terntsol'tl1clax ratio.A State.
:.22. fnc tax latio of thc Centrc ancltlrcState. w l r i c hs h t l w c di m p r o v c n r e n I nt i t s p r r s i l r t r un u. s
l e g i s t c r eadd c c li n ed u r i n gt h cn i n c t i c sI.n t h cc a s c placedin a lower buoyancvgroup so that it was
ol'theStatesthedeclinehasbeenlesspronounced not penalisedlbr showinga bettertax eflblt. Bur
but all thc samc,the sluggishgrowth ol'States sincethe buoyancieswe have prescribedarc all
taxescontributcdto theirrcvenuegap.This trend a b o v el . ( 1 . 1 0 ,1 . 2 0 .1 . 3 0 .1 . 3 5 )a. l l S t a t e sa l s o
can be revcrscdonly with dcterntinedcf'tbrtby will be requiredto makc cftbrtsto raiscthcir tax
thc govcrnmcntsto raisemorc rcvenucthrough fatios fiom thc prcsentlcvcls. In thc casc ol'
taxation. spccialcatcgoryStates.all ol thcm werc placccl
in the lclwcstbuoyancysfoup cxccpt {'urthrec.
5 . 2 3 . I n o u r d i s c u s s i r )(n) n r e s t r u c t u r i nw
g c which were put in thc ncxt higherbuoyancy
havc indicatedthat the irnprovcnrcntin the tax c a t e g o r yA. n n c x u r cV . 3 p l o v i d c si n l i r r n t a t i oonn
ratio lbr all thc Statesconsideredtogctherclver c l u s t e ro 1 ' S t a t e si n t h r e c g r ( ) u p s .p l c s c r i p t i v c
thc l'ive-year period underconsideration should buoyancies and buoyancy'hascdgrowlh ratcs.
be tlf theurdcrof I . I 5 percenta-ge pointsol GDP.
W i t h a n u n d c l l y i n gg r o w t hr a t co l ' G D Po f I 3 p e r Non-Tax Revenue
cent. this tlanslatesinto a -srowthrate ol' about
1 7 . 5p c rc e n ti n t h et a xr e v e n u e sH. o w c v c r r. a t h c r 5 . 2 4 .A b a s i cs o u r c eo l ' w c a k n c s so l ' s o v c r n -
than applyin_ta growth rate ol' this order uni- n r e n tl ' i n a n c eisn t h c S t a t e s( a s a t t h e C c n t r c )i s
{blmly acrossthc Stateswc considcredit desir- t h e p o o r r e t u r n o n t h e c a p i t a l i n v c s t c da n d
ableto allow lbr reasonable inter-State variatiorr n e g l i g i b l er e c o v e r yo l ' c o s to l s c r v i c c sl e n d c r e c
in the tax revenuegrowth rate dcpendin-eon b y t h e g o v e r n m e nbt y w a y o l ' u s e rc h a r g e sT. h e
difl'erenccsin their potentialrevenuebase.In total investmentmade by the Statcsin Govcrn-
particular,we took into accountthe difl'crential mcntcompanies andstatutorycolporationsin thc
constraintsarisingfrom variationsin the rate of f b r m o l ' e q u i t ya n d l o a n ss t o o da t R s . l . 1 6 . . 1 6 8
growthof GSDPamongthc Statesand alsotl.reir c r o r ea s o f 3 1 . 3 . 1 9 9 7T. l r c s ei n v c s r m e n tysi c l d
existingtax ratiosrelativcto their past.Thr tax very little to thc Statc'scxcheclucr in the fbrnr ol
revenuegrowth rates for the projectionperiod dividends,interests or profits.As li;r uscrchar-ucs.
wcredcrivedby usingprescriptive taxbuoyancies o n l y 2 .I 3 p e rc e n to l ' t h er e v c n u ec x p c n d i t u r o en
 \/OL. I2 NO. 2 lll:PORT.OI:7'HE I'l,Ll/liNl'H I:lN.'\NCI-.COMMISSION I'-Ott2(nO-2(t)5

s o c i asl e r v i c eiss r e a l i s e b d y t h eS t a t e sI .n t h cc a s e l e v e lf o r 2 0 0 4 - 0 5i s c l o s c de a c l rv c a r o n a p r ( ) -
r r l - c o' en t l n r i cs c r \i c c s .t h c r c c o v c r yr ' : r t ci s s o r r r c - portronalbasis. Frtr States rvl.richarc-alrcady
whal bcttcr, mainly becauseol' royalty liorn r c a l i s i n g9 p e r c c n t o r n l ( ) r ca s i n t c r c s o t n loans
rnineralsandrccciptsf}om lbrestry.But thescare and advanccs.the cstintatesi'urnishcdbv thent
more in thc nature ol' taxes rather than usef havc heenadoptcd.Fol dividends.wc havcsct a
'I'herc
chargcs. can bc no enduringsolutionto nornr ol' at lcast 2 pcr ccnt on ccprityrlr thc
l i s c a lp r o b l e r n os f t h e S t a t e su n l c s s- g o v o r n m c n a t c t u a l s / RiEn l 9 c ) 9 - 0w 0 h i c h c v c irs h i g h c rl i r r t h e
invcstnrcnts yicld a reasonable rcturnanclthc ratc y c a r 2 0 0 0 - 0 1 .T h e r c a f t e dr i v i d e n d sh a v c b c c n
o l ' r c c o v e r< v l f ' t h c o s to f p u b l i cs c r v i c c st h r o u g h pr<ljcctcd to -!:rowto 5 pcr ccnt by 200,X-0-5 on thc
u s c rc h a r g c ss h o w ss o m ea p p r c c i a b l icr r p r o v c - hasisol'propor(ionalincrcase. cvcry yclr.
n r c n t .S t u d i c ss h o w t h a t r c c < l v c r rva t e sc a n b e
u - n h a n c cscul h s t a n t i a l li yn t h c c a s eo 1 ' n o n - n t c r i tItoyalties
g o o d sa n c tl h c r n t p l i c i st u b s i d i elsl o l v i n gt h r o u g h
q ( ) v c r n n l c n taAcl t i v i t i e sc a nb c r c c l u c c d . - 5 . 2 6R. o y a l t i c sr r r .rrr t l j o l r r r i n c r a l sc .r u ( l c( ) i l s
a n dn a t u f agl a sa r cc l c p c n c l connt p r o d u c t r oann d
I n t e r c s ta n d D i v i d e n d s t h e r a t c s l i x e d h y t h c C o r , e r n r n c nit) l l n ( l i l r .
H o ' " vvec r . t ( ) k e r ' pp a c cw i t h i n l l a r i o n a . growth
- 5 . 2 - 5C. o m i n - ul o s p c c i f i ci t c n t s o l ' n o n - t o x r a t co l ' - 5l ) c rc c n th a sb c c na d o p t c dl i l r p r o j c c t i n g
rcvenucs. intcrcst ll'clm loans and advancc.sr c v c n u c sl r r r n r o y a l t i c st t n n r a j o rn t i n c r a l s .
l c c c i v c db v t h c S l a t c si s , o n a n i l v c r a g cu. r o u n c
'fhc
3 p c r c c n to n t h c o u t s t a n d i nagr n o u n t s . l o a n s Irrigation Receipts
a n da d v a n c c a s r c c x t e n d e do u t o f ' t h e b o r r o w c d
l u n d so n l ya n dt h cb o r r o w i n ghs a v ct o b c s e r v i c c d - 5 . 2 7T . h c o t h c r i n t p o l t a n ti t e m o f ' n o n - t a x
I'r'omrcturn on invcstrnentsrnadc out ol' thent. rcvenuers rccerptsfrclmirrigationcharges.Irri-
H c n c ci t i s p r o p o s c dt o s c t a n o r m o f ' 9 p c r c e n t _gation ratcsaltprescntarc nonrinillln miulv ci.rscs
lcturn by wry ol' intcreston loansand advanccs and covel only a l'ractionol' thc opcrati()nirn(l
rn order [() narro\\,thc -capbetwcenthc ratio ol- n r a i n t c n a n c( cO & M ) c x p e n c l i t u r cI d. c a l l _ vt h. c
r c t u l na n dc o s to i ' f u n d sH . o w e v e rt.o a l l o ws o m c targctshouldbc to l'ix irrigationratcsin such a
t i n r c t o t h c S t l t c s t o c o n t c u p t o t h i s l c v c l o l ' w a y t h a tt h c r c c c i p l .cso v e rn o t O n l yt h c l ) t a i n t c -
i n t c l c s rt c u l i s a l i o nw. e p o s t u l a t tch c n < t r nsr c tb y n a n c ec x p e n d i L u rbcu t a l s ol c a v cs o m cs: u r p l u su s
us to bc achicvedover a l'ivc ycal pcrioclso that r c t u r nf i o m c a p i t a li n v e s t c dW . c r c c o g n i s ct h a t
thc 9 pcr ccnt ratc is rcaliscd by 2004-0-5. t h i s c l b . j e c t i vcca n n o tb c a c h i c v e -idn r n ' r c d i a t c l y .
A c c o r d i n g l vi .n t c r c srtc c c i p t sf r o m 2 0 0 0 - 0I h a v c Hcncc. wc proposcto m()deratcLhctar-gctslitr
becn cstinrate clin sucha way (hatthcgapbctwcc-n i n c r e a s ei n i r l i g a t i o nr c c c i p t si n t h c I i r l l o w i n r r
t l . r cc u r r c n tl c v c l o 1 -r ea l i s a t i o na n d t h c t a r g c t c d l T l a n n e r :
'l'ablc
5.2: Projectcd ltcturn liom N{a,lor.andNlcdiunr Irrigation t)rojccts

Sl No I ( a n g co f l l . c v e n u cI { c c ei p t s f r r r r n P r o j c c t e dl n c r r ' u s c l{c tnarks

M l j o r a n d M c d i u r nl r r i g a t r o n P c r Y e a r( 7 t
. Pro.le cls Per Hcclarc
(l) (2) (3r (.1)

I. llelow lls 150 2-5 S u b j c c tt o a n r i u i r n u r no f

R s l l 0 p c r h c et a r c i n I ( X X ) - O 1
2. l l s I 5 ( )t o 2 5 0 l5
t. A b t r v el l s 2 5 0 t0
 ,IOURNAL OI: INDIAN SCHOOI, OF I'OI,I7'1CALI'CONOI'IY /lPRll,'JLtNl:2(n0

Forestry & Wildlife entitics has been underlincdin ChtrpterII. In

conformitywith this objectivc.wc have postu-
-5.2fi. Rcccipts1'rorn lirrcstryand wildlil'ehavc lateda higherrcturnin the tbrrnol'dividcndsand
b c c nd c c l i n i n g n . o l o n l y a s a p r o p o r t i o no l ' t o t a l interests nndthcschavebeenincorporated in our'
non-taxrecc'iptsbut also in absolutctefllls.Se\'- estinratcs firr revenuc receipts during thc- forecast
c r a l S t a t c sh a v c u l g e d t h a t t h e s c o p et i l - r a i s i n g period.We arc awarethat a 5 per ccnt dividend
m o r c r c v c n u cl r o m t h i s i s d w i n d l i n gh c c a u s e o f on equity and 9 per cent intereston loans and
last dcpletingforcst rcsourcesand also duc to advancesare not adequateto meet the cost cl1'
court rulings rclatingto l - c l l i n g o l ' t r e c s a n q borrowingsol'the Statcs.Hclwevcr,ksL'pingtn
transp()rtation ol timber. We have had occasion view the currentrealities,it would be unrealistic
t() pcruse thc rclcl'ant coul't orders on thc sub.icct. to postulatea highcrretr-rrn. Bcsidcs.an clcmcni
W c l i r u n r lt h a t t h c c o u r t d i r c c t i v c sa n d o r d c r s o l ' s u b s i d yi n t h c i n t c r e s to n l o a n sc a n n o tb c
l c s t r r cot n l v i n d i s c r i n r i n alt'cc l l i n go l .l i r r c s t r c c s c l i n r i n a t c cal t o g e t h c rs.i n c cs o m eo l ' t h e i n v c s t -
'l-hc
v ui t h o u rt t l u l ya p p r o v c d s ci c n t Ii i c p l a n . l i r r e s t r n c n t sa l s oy i c l d a s o c i a lt ' c t u r ns u c hi t s i n v c s t -
p o l i c yo l t h c C c n l . r ca l s op o i n t si n t h i sd i r c c t i o n . nrentsto upliti backwardareasor on roads ttr
O n t h c s c c o n s i r l c r a t i o nw s .c d o n o t l ' i n d a n y connccIrural areas.Our nornlsof rcceiptsfi'onr
sourcesseckto strikea balancc
.justificationfirr kccpingtl.tcl'rcczcon thcl'cccipts non-tnxrcvcnuc
lhrrn firrc'stlyat thc 1999-00lcvcl andinstcad wc among all tltcse considcrtitions. Detailsol esti-
hrrvcrtssunrcd a -!Ifowthol -5 pcr ccnt llcr ycitr ln nrated nct return on the investrnents hy thc Statcs
I o r c s t r vr . c c c i p tosv c f t h c e s t i t n l t t cl i
s l l l 9 9 t ) - ( X ) . in thc power and transpot't sect()rs ilre sivcn lrt
A n n c x u l c sV . 4 a n d V . 5 r e s p c c t i v c l y
l-otteries
Non-Plan RevenueExpenditure
5 . 1 9 .S o n r cS t a t c sd c l i v c s u b s t a n t i ai tll l l o u n t s
o l n o n - t a xr c v c n u cl k t n r l o t t e r i c sI.n v i c w o l ' t h e 5.32.For pro.lecting thc t'cvcnucexpcnditulc
n a t i o n apl o l i c y t < ld i s c o u r a g lco t t c r i c sw. c h a v c of govel'nments in dif'felcnt Statestlvcr thc Iivc
takcn thc basc ycar l'igurcsof rcceiptsnet ol' year period, starting front the bascyear,wc had
cxpcncliturcas thc likcly rcvenucfl'om the lot- two alternatives: (i)adopt unifbrm -growthratelbr
t c r i c sl i l r a l l t h e y e a r s . all the three functional catcgorics ol'governmcnt
services.and apply the ratcs unilirrnllv to all
[JserCharges Statcs.ur (ii) work <tut clil'fercntialrates lirr
diilcrcntcate-uorics, namcly,thc gcncralscrvlccs,
5 . 3 0 .I n a l l c a s c st l f u s c rc h a r g c sa. 2 - 5p e rc e n t tl'resocialservicesandtheccononticscrviccswith
stcp-uppcr ycar tlvcr the base ycat' has bccn appropriatevariationas betwccnStatcs.
assuntcd in our cslitttatcs ol rcvenuereccipts.Wc
l l c l t h a t t h i s s t c p - u pi s c s s c n t i aill t h e i r n p l i c i t 5.33. Thc.justil'icationlirr adopting di l'l'crcntial
s u b s i d i easf c t o b c r e d u c c d . ratcs lirr diif'crcntcategories tll'serviccsis thlt thc
proportionol the two mitin crlmponcntsol' thc
Return from Public Sector Undertakings r c v c n u cc x p e n d i t u r cn,a m c l y .s a l a r i e sa n c lo t h c r
than salaries,vary considcrabl-v as bctwccnscr-
5.3 I . P a r a g r a p5h ( v i ) o 1 o
' u r T o R r c c l u i r eus s v i c e s F
. o r i n s t i i n c t
c h
. c s a l a l yi n t c n s i t yo t g c n c r a l
t o c o n s i d e rt h c n c c d f o r c n s u r i n gl c a s o n a b l c servicesin mttstStatesis I'righcrthanthat ol thc
r c t u r n so n i n v e s t mnet so 1 ' t h cS t a t c si n i r r i g a t i o n o t h e r t w o s e t ' v i c e sT.h c t w o c o n t p o n c n t a s lstr
projects,powcr projccts.transportundertaki ngs. grow at varyingratcs.Considcringtl.rcnet ilnpact
departrncntalundertakingsand public sector o f n o r m a la t t l i t i o n( 3 p c r c c n t . ti,n c l c m c n t s( 2 . 7
cnterpriscs. The ncedto obtainreasonable returns pcr ccnt) and inflation prtltcction(-5per cent),
ll'om invcstmcntsnladc by thc Statesin thcse salarybill glowth may reasonablybc takcn at ,5
 I/01, I2 NO, 2 IIEPORT OF 7-HEEI,EVENT'H FINANCII COMMISSION I.0R 2U)0,2(b5

p c f c c n t p e r a n n u m .T h i s g r o w t ha l l o w sl i l r o n e was realiseclthat thcrc lrasto be a chcck on the

per cent fiesh recruitmenta_uainst 3 per cent borrowinqsand thercbyon intcrcstpal,rncntsi1'
rctircnrents.Non-salarycolltponcntsclcterrninc thc I'inanccs arc to bc broughtin orcler.
t h eq u a l i t yo l ' p u b l i cs c r v i c e si n t h c s o c i a ls e c t o t '
a s i n t h c c a s co l h c a l t ha n d c d u c a t i o nc t c . ,a n d Pensions
shouldbc crpcctcd to grow at leastat thc sanre
rateas GDP. In orderto all<twlor, intprovcmcnt 5.36. As rcgarclspcnsions ancl othe:rltost
retircrncntbenefitsit is presunrcdthatthc Intpact
i n t l r c l c v c l o 1 ' t h e s sc c r v i c c sw. e h a v ea s s u m e d
o f p e n s i o nl c v i s i o nh a sl a r g e l vb c c na b s o r b c d by
a ni n c r c a so e l ' 2 p e rc c n to v e rt h eC D P g r o w t hi n
1 9 9 9 - 0 0a n d t h e f ' u t u r cr c q u i r e r n e n o t st ' c x p c n -
s o c i a ls c r v i c c st h a t i s l - 5 p c r c c n t g r o w t h p c t '
d i t u r ew o u l dd e p e n du p o ni h e l t e ti n c r e a s icn t h r ;
annum. Frlr gcnclal serviccs,thc -uror.vth lil' numberof retircdpcrsonsandtl.rcnccdto pr.ovidc'
n o n - s a l a rcyo n p o n e n t si s a s s u n r eadl 7 p c r c c n t i n f l a t i o np r o t c c t i o ni n t h c i r b a s i cp e n s r o n .
C<ln-
a n dl i r r e c o n o m i cs c r v i c c sa, t I I p e rc c n t .S e v c n s i d e r i n - teh c s et w o d i r n e n s i o n sa. l 0 p e r c c n t
pcr ccnt growtl.rin the non-salarycontponcnl.s ol' g r o w t h p e r y c a l ' i n p c n s i o n a n d t h c o t h c r
gcncral scrvices is assurncdto takc-care ol' f c t i r c n l c nbt c n c l ' i t so v c r t l r eb a s cv c a r h a s b c c n
inl'larion ( 5 p c r c e n t )a n d p o p u l a t i o ng r o r v t h( 2 c o n s i d e r crde a s o n a b l c .
p r ' rc c n t) . l - r t rc c o n r l m i cs c r v i c t ' sw. c l l s \ u m ca n
I I p e r c e n tg r o w l . hi n n o n - s a l a rcyo r n p o n c n ti sn Subsidies
v i c wo i ' t h cg r o r . v i ni gn v o l v e m e not[ ' p r i v a t sc e c t u r '
l n n r a n v a l c a s o l ' c c o n o n t i ca c t i v i t y i n c l u d i n g 5 . 3 7 . S u b s r d i c sa r e p r o v i c l c db v t h c S t a t c s
i n l i a s t r u c t u r ea.n d t h c d i m i n i s h i n gr o l c o l ' r h c i r n p l i c i t l ya n c lc x p l i c i t l y .O u r l c c o n r n t c n c l a t i o n s
p u b l i cs c c t o r . h t r r a i s i n -tuh c l c v c lc l lc o s t| c e ( ) v L . ri ryrr l r i - s a t i o n
a n d o t h c r p u b l i c s e r v i c c st h r o u g hh i g h c l u s c r '
c h a r g e sa n d r e t u r n so n i n v c s t m c n t si n p u b l i c
5 . 3 4 .A s w i l l b o s e c n w . e h a v cw o r k c do u t a n
s c c t o r e n t e r p r i s c sw o u i d s c r v c t o r c d u c c t h e
applopliatc srowth rate lbr each catcgory ol' i r n p l i c i t
s u b s i d i c s u b s t a n r i a l lA y .s l i r r s u b s i d i c s
s c l v i c c st a k i n gi n t c la c c o u n t h e s a l a l yi n t c n s i t y p r o v i d e dc x p l i c i t l vt h r o u - ethh eS t a t cb u d g c t s ,
wc
andthc varyingratcscll'growtlio1'thctwo major do not havecomprchcnsivcinlornrationrc-garcl-
c o n p o n e n l so l ' r c v e n u ce x p e n d i t u r ci ., e . ,s a l a r y i n g t h c a m o u n t si n v o l v e d .H o w c v c r 'w ^ hcrcwe
and non-salary.In this process,wc havc tricd tcr havcbecnablc to idcntily thr-nr.rl'rcsclra'"cbccn
introducc a normativc clcntcnt in the salary takcnas 'nil' tbr thc lbrecastpcliod. For depalr-
growthby groupingthc Statesundcrbroadbands n r c n t aul n d c r t a k i n gw s ,c h a v cn o ta l l o w e dl ' o ra n y
o l s a l a r yi n t e n s i t ay n db l i n g i n gt h e n td o w nn e a r c r l o s s .i m p l y i n gt h a t .i n o u ri i s s c s s m e nnto. s u b s i t.lr '
to thc avcrr.qcol'thc respcctive' w i l l b e c x t e n d c dt o t h c n rl i o r n r h c S r a r cb u d g c t .
-eloup.

Interest Maintenanceof Capital Assets

5 . 3 8 . I n m a k i n g o u r r c c o l n n t c n d a t i o ntsh,c
5 . 3 5 .I n t h cc a s co { ' i n t e r c spta y l n c n t sw. e h i i v c "foR
rcquireus to takeinto account.arlong other
a s s u m c da g r o w t h r a t eo l ' l 0 p e r c c n t w h i c h i s
consideriitions, the maintcnanccand upkccp ol
rralkedly lower than thc trend -urowthrate.A
c a p i t aal s s c tas n dt h c n o r n i so n t h cb a s i s< t l ' w h i c h
lower growth rate has been adoptcd to bring thc amountsnccessary
lbr rnaintenancc may hc
i n t c r e s t g r o w t h i n l i n e w i t h t h c n o r m a t i v e p r o v i d e da n d a l s o s p c c i f yt h e m a n n e ro l ' m o n i -
approach. ln our vicw the Stateshaveto exercise t o l i n g o f s u c h e x p c n d i t u r cI.t i s a m a l t e r o l
restraintin thenratterof borrowingandrely more conccrnthat our capital iissetsarc languishing
on rcvenucrcsources fbr expenditure. It is tirneit bccauscol'poor ntaintcnitncc. Thcre has bccn a
 JOURNAI, OF INDIAN SCHOOI, OF POI,I7'ICAI. I':CONOMY APRIL-.1(/NI:2000

tcnde-nc!t() takc up a number ol' new projects per hectarcfbr maintenanceof the unutilised
w i t h o u t n r a k i n ga d c q u a t cp r o v i s i o nl i r r m a i n - p o t e n t i a lF. o r t h c r n a i n t c n a n cocf ' u t i l i s c dp o t e n -
t a i n i n gt h c c x i s t i n ga s s e t sT. h e p o o rs t a t eo l ' o u r tial of minor irrigationprojcctsthc mcrnorandum
roacls. ilrigation projects, and govcrnntcnt suggcsted a provisionof Rs 22-5per hectareand
b u i l d i n g sb c a l t c s t i m o n yt o t h c s a d n c g l c c to f a p r o v i s r < lonf R s 7 - 5p c r h c c t a r cl o r u n u t i l i s e d
r n a i n t e n r n c cT.h i s h a s h a p p c n c di n s p i t co l ' t h c potcntial.Further,Rs 300 per hcctarelbr spccial
I a c tt h a ts u c c c s s i vFci n a n c cC o m r n i s s i o ni n s thc rcpairo s l c x i s t i n gi r r i g a t i o n
s y s t c m as n da s t c p - u p
p a s t h a v c n i u d c l i b c r a l p n l l ' i s i o n sl b r m a i n l . e - h y 3 0 p e r c c n t l i r r m a i n t c n a n c co f u t i l i s c d
n l n c c o l c u p i t a la s s e t si n t h e i r a s s c s s m c notl p o t c n t i a ol l ' p r o . i c c tlso c a t c di n h i l l S t a t e sh a v e
l c v c n u cc x n c n c l i t u rTc h . c l c a s o n sl i r t t h i ss t a t co l hcenrccomnrended by thc Ministry.
allairs a r c : o n c . m a i n t c n a n c c
c x p c n c l i t u r e
i s
' n o n - p l a na' n dt h u st h c s cg c t 5 . 4l . W c u n d c r s t a n dt h a t i t h a s n o t b c e n
u s u a l l vc l a s s i f i c a ds
a l r r wp r i o l i t vr n t l r cb u c l g cat l l o c a t i o n s[ w . o . t l r e p o s s i b l c1 o m a i n t a i n n r o s t o l ' t h c m a . j o ra n d
l l n d s u s s c s s cbdy t h e F i n a n c cC o m m i s s i o ngsc t mctlium irri-uationpro.jcctsat the desiredlcvcl
drl'crtcd to other areiis ol' cxpcnditurc as n<r p | i n r a r i l l , d utco p a u c i t yi n b u d g c a t llocation.'fhc
spccil'icl'undis crcatccllilr thc maintcnanceol' S t a n c l i n gC o n r m i t t c co n A g r i c u l t u r ei n t h c i r
c a p i t a l a s s c t s .a n d t h r c c . b u d g c t a l l o c a t i o n s .r c p o r tf i r r 1 9 9 8 - 9 d 9 r c wt h ci t t t c n t i o o n f ' l h cU n i o n
w h i c ha s i t i s o l ' t c nl ' a l ls h o r to l ' t h cr c q u i r c n r e n t sG , o v e r n n i c not n t h c i t n p c l a t i v cn c c d l b r g i v i n g
rurcusedup lar-uclyin nrcetingsalal'yexpenditure h i g hp r i o r i t yt o n r a i n t e n a n coct ' t h c s ca s s c t sW . c
a n d t h c r u n n i n gc o s to l ' c s t a b l i s h n r cint st el l ' .A l - haveadoptedthc norm.ol'Rs .tr,50 pcl hcctarclirr
t h r sn c c d st t rb c c h a n g c db u ti t c a n n oct o m ca b o u t t h e m a i n t c n a n cocl t h c u t i l i s c dp o t c n t i aal n d R s
witlroua t n a t t i t u d i n acl h a n g ct o w a r d st h ep r i o r i - I 50 perhectarcfilr unutiliscdpotentralin thccasc
t i c s .b u d g c t a rai ,l l o c a t i o nasn dm o n i t o r i n g o l ' s u c h o l ' m a j o ra n d m c d i u n ri r r i g a t r o na s s u g g c s t c b dv
c r p c n d r t u r cW . i t h t h i sc a v e aw t e n o r vp r o c c c dt o t h c M i n i s t r y .C o n s i d e r i n g t h c c o s td i 1 ' l c l c n t i a l s
indicatctl'rcnorms of cxpcnditurcrccluircdlirr l i r r r l a i n t e n a n cien t h c h i l l S t a t c sa. n a d d i t i t l n a l
rnaintainin-gcapital assctsspcci{'icalh' lirr i rri,tla- p r o v i s i o no l ' 3 0 p e r c c n t i s b e i n gm a d c i n t h c i r '
tion projccts.roadsand hridgcsand -govcrnntcntc i l s c .
buildings.
5 . 4 2 .O n t h e b a s i so f ' t h c d a t ao b t a i n c df i o n r
Irrigation Projects t h e P l a n n i n g C o m m i s s i o n ,t h c u t i l i s c d a n d
u n u t i l i s c di r r i g a t i o n p o t c n t i a l a t t h c c n c l o l '
5 . - 1 9I n . c o n r p u t i ntgh ca d m i s s i b lccx p e n d i t u r e 1999-2000has been workcd out lbr individual
on nraintcnance of irrigationpro.lccts, the Tenth States.Wc have assumcdthat thc Stateswhosc
F i n u n c cC o r n n r i s s i o(nT I r C )h a da d o p t c da n o r m u n u t i l i s e d p o t c n t i ailn 1 9 9 9 - ( Xw) a s l c s st h a n l 0
o l ' R s3 ( X p ) c l h c c t a r el o r u t i l i s c dp o t c n t i aal n dR s p e f c c n to l ' t h et o t a lw o u l db c f i r l l yu t i l i s i n gt h c i r
1 0 0 p c r h c c t t r c l i r r t h c u n u t i l i s c dp a r t . T h e p o t e n t i a lb y 2 0 0 4 - 0 5 .S t a t c s w i t h u n u t i l i s e d
C o r n r n i s s i ohna da l s ol o l l o w e dt h e p a s tp r a c t i c e p o t c n t i a lb c t w c e n l 0 t o 2 , 5p O rc e n t c o u l d h c
o l ' c n h a n c i r rtgh c n o r r n sb v 3 0 p c r c c n t l o r h i l cxpcctedto reduccthcunutilisccl partto -5perccnl
S t a t c sI.t h a d p l o v i c l c ds u i t a b l ei n c r c a s eisn t h c a n dt h o s cw i t h u n u t i l i s e d p o t c n t i ael x c c c c l i n2g5
nornrs in cach ycar ot' thc firrccastperiod to p o rc c n tw i l l l c c l u c ci t t o l 0 p c r c c n tb y 2 ( X ) 4 - 0 5 .
i n s u l a t ct.h c c x p c n d i t u r a c g a i n sitn l l a t i o n .
5.,13.'I'hc'f FC hadproviclcdRs I 50 pcrhcctarc
-5.40. In theirmemorandunr on thc suh.jcct. thc l i r r t h c r n l r r n t c n i r noclc r l i n o l i r l i g i r t r o np r ( ) i c c t s
'l'hclc
M i n i s t r yo l ' W a t e r R c s o u r c c h s a v c s u g g c s t ea d i n r c s p c c to f u t i l i s c c pl o t e n t i a l . wrs no
prtlvisionol' Rs 450 per hectarelilr nraior ano p r o v i s i o nf o l a n y u n u t i l i s c dp o t c n t i a ll.t h a da l s o
m c d i u mi r r i g a t i o np r o j c c t sl i r r t h c l n a l n t c n a n c crccomnrcnclcd an additional30 pcl ccntalkrclition
o l ' t l r cu t i l i s c dp o t c n t i aal n da p r o v i s i o no f R s I 5 0 t i r r h i l l s t a t c sa n d l r i l l a l c a so f ' o t h e rS t a t e sW . c
 t/()1,.
t2 NO.2 Rl. Po ltT'O1"7'HIi ELt:\/li N7'H I'.l NtrNOE COM lrll.\Sl ON I"OR )u n)' )(n)) 277

haveadopteda normof Rs 225 perhectarefbr the the Report of Sub-Con.rrnittec on Norms lirr
utilisedpotenlialin rcspectol. minor irrigal.ion M a i n t e n a n c e O,c t o b c r 1 . 9 9 9T . l r c s cn o r m sa r ca r
pro.jects with a 30 per cent step-uplbr hill States t h e 1 9 9 9 - 0 0l c v c l o l ' p r i c c sa n dd i v i d e di n t o t w o
a n dh i l l a r c a sa s s u g g e s t ebdy t h eM i n i s t r y . c a t e - g o r i c sv.i z . , i ) n r a i n t e n a n c e and rcpails
( n o r m a l ) a, n d i i ) n l i l i n t c n a n cacn d r c p a i l s( s p c -
5.,14.Whilc wolking out the requiremcnts l'or' c i a l ) .T h e n o t r n sl i r h i l l y a l c a sa r c u i v c n s c p a -
t h c n r a i n tneu n u et ) l i r r i s u t i o np r o j c c t s .i t w a s ratclyin thc Rcport.-fhc norn'rsrcccivcdlhrnrthc
noticcdthat in someStatcsthc TGR basedcsti- Statcswclc inconrplctcanclclatcdin rcspcctol'
miltcsare highcrthanthc nornr-based cstimates. l a r g cs e c t i o n o l ' r ' o a c l tsw. a st h c r c l i r l cc.o n s i d c l c d
For thc sakcol bettelrnaintenancc. we havenol r c a s o n a b tl co a d o p tn o r n t sp r o v i d c dh v t h cM o S ' [
disturbcdthe highcr cstirnates. An inclcmcntol' w i t h s o n r cn t o d i l ' i c a t i o n s .
-5pel cent pcr annumhas beenprovidedto takc
c a r co f t h cp o s s i b l p e r i c ei n c r ea s e A . n n c x u l c sV . 6 -5.217 M. a i n t c n a n c cc x P c n d i t u r cr r s p e r t h c
a n d V . 7 i n c l i c a t cp r o v i s i o nl o r m a i n t e n a n cocl ' M o S ' l ' n o l r r . r sl i r r n o r r n i r lr c p a i r s h a r . , cb c c r r
rna.jor& rncdiunrirrigationprojects,and minor w o r k e do u 1i n t h ca b o v cr n a n n clri r r t h cb a s cv c a r ' .
i r r i g u t i t ' rprl o . i c c t sr c, s p c c t i v c .l ) F o r c o m p a r i s o nm . l r i n l . e n a n ccex p c n d i t u l co n
roadsfirr tltc ycar 1999-(X) has bccn workcd out
Roads and llridges
o n t h c b a s i so f ' t l e n cgl n r w t l rr a t ca s r v c l l .I n t h c
cascol-Statcs whosccxpcntliturcaspcr thc Mos'l-
5.45.'l'hc' TFCIhadesLinrated thc rcqui rcntcnts
n o r m si n 1 9 9 9 - ( Xt)u l ' n s( ) u t t o h c t o o h i g h a s
lor nraintcnancc o1'roads andbrid-tlcs ol'thcStatcs
con.rpalcd to thc prtlcctcd eslinurtcsIor lt)99-(X)
on the'basrsof normssug-ucstcd by thc Ministrv
o n t h cl ' C R b a s i st,h cn o r r r r a t i vpcn l v r s i o nl i r r t h c
o 1 ' S u r l n c1c- r a n s p o(rM t o S T )a n di n l o l r n a t i o o
nn
b a s cy c a r 1 9 9 9 - 0 0w a sl i n r i t e ctlo l 2 - 5p c l c c r r to l '
road lcngth ol'dil'f'crcntcatc-uorics l'urnishcdby
{ h c a c t u a l so l ' l 9 9 i l - 9 c )I.n l c s p c e to l ' t h c o t l t c r '
thcStatcs.Thc recluirenrcnts of I'undsthuswtlrkcd
Statcs,thc projcctccl cxpcnditurclirr lc)99-(X) wls
out was lirundto bc ratherhi-chandthcrclirle.the
a l l o w c dt o l c n i a i nu n d i s t u r b c d H.a v i n gl - i r n t c ur lp
C o m m i s s i o nh a d l i m i t c d t h c t o t a lp r o v i s i o nl o r '
t h c b a s c y c a rc s t i n r a t cisn t h i s $ / l y . l . r- 5p c r - c c r r t
all the Statesto twicc theamountprovidcdby thc
lvasproviclcdin cachycar to takeca|e0l'
N i n t h F i n a n c cC o n r m i s s i o nl '.h c S t a t c - w i sdei s - stcp-up
i n l l a t i o n .W c h a v c e l s o p r o v i d c d - 3 0p c r e c n r
tributionwasnradeon the basiso1'tlieaveragcol'
thcir pcrcentagc sharein (a) thc all-Statcnolrrr s t c l ) - u p l i r l l l r c l r i l l u r e a si n o u r c s t i r r r u t c s
bascdaggrcgatc cxpcnditurc and (b) thc cstinratcd A n n e x u l e V . 8 i n c l i c a t ctsh e p r o v i s i o nl i r r n r a r n -
o l
5 .h e p r o - t c n a n c c r o a d sa n d b n d g c s .
a l l - S t a t ctso t a lc x p e n d i t u rien 1 9 9 , 1 - 9 T
v r s i o n sl i r r i n d i v i c l u aSl t a t e s o w o r k c do u t w c r e
s u i t a b l yn r o d i l i c dt o e n s u r et h a tc a c hS t a t cg o t a t Buildings
leasttwicc the amount provided by thc Ninth
F i n a n c cC o m m i s s r o nI t. w a sa l s oe n s u r c dt h a tt h e 5.48.Thc TFC hadconsidclccl thrcclirctorslirr
provisionswere at least20 per ccnt highcr than dctermining thc rcquircruents filr maintcnancc
t h e e x p e n d i t u r ci n 1 9 9 4 - 9 5 T . hc Cornnrission c x p e n d i t u r eo l ' b u i l d i n g s d u l i n - g thc lirrccast
thercafierprovidccla graduatedincreascin thc period, 1995-OO. Thesc thrcc f actors arc (i) thc
cxpenditurccachycarwithoutal'l'cctin_e thclotals. t r c n d si n a c t u u e
l r p c n d i t u r c , , n
r 'rt u i n tcnano e lc'
b u i l c l i n _ (r il is;,t h cs t c c pi n c r c a stch a th a do c c u r l c d
-5.46.Wc have obtarncdnurnrs lbr nraintc- i n t h c c o s t si n v o l v c da n d ( i i i ) t h e p o o r s t a t co l
nanceol roadsl'romthc MoS'l'.Thc Ministry has u p k c c p o l t h e S t a t c g o v c n r n r c n tb u r l d r n g s
suggcstcd zonc-wiscnornrslirr totalmaintcnancc K e e p i n gt h c s c f a c t o r si n v i c w . t h c T F C h a d
and rcpaircostsin dil'fclentrainlall arcasfbr all p r o v i d c da s t c p - u po l ' 2 - 5 p 0 c r c en t b 1 1 9 9 9 - 0 0 on
c a t e g o r i cosl ' r o a d sw i t h t r a l T i ci n t e n s i t yb a s c d0 n t h cn o r n r sl o l l o w c db y t h cN i n t hC o m r l i s s i o nl i r r .
 JOURNAI, OI: INDIAN SC'HOOI,OF POI.N'ICAI, E(:ONOM' t\PRIl.-JUNI:2000

I 99.1-95. Plovisionlirr cachycarlbr thcirlilrecast plan periodcontinucsto bc on plan accounttill

pcriod rvas r.vorkcdout taking inflation inttr thecnd of thatplanandettransl'ct' of nraintenancc
l c c o u n tw i t h i na n u p p c r a n d a l o w c r c e i l i n g . cxpenditure of plnn schemes completed duringa
g i v c np l a np e r i o di n t o n o n - p l a na c c o u n its d o n c
- 5 . - 1I9n.o r d c rt o c s t i n r a tteh cS t a t c - w i sacn n u a l o n l yi n t h cI ' i r syt c a l ' o f ' t hnec x tp l a n .Y c t . k c c p i n g
n r a i n t c n a n c ce x p c n d i t u r c o n b u i l d i n g s i n in view thetermsof ref'ercncc, theTFC hadtaken
1999-00.we havc uradca cotnpat'ison betwccn 30 percentol'thcplanrcvenucoutlayfbr theycar
thc l'i-eulcs workcd out tln thc basisol'tltc norms 1 9 9 4 - 9 5i n t h e n o n - p l a nr c v c n u ea c c o u n tt l l
o l ' t h cC c n t r aP l u b l i cW o r k sD c p a r t r n c n( C t P W D ) 1 9 9 5 - 9 6a s c o r n r n i t t e d l i a b i l i t yl i r r t h c g c n c r a l
l u n ctlh c S t a t cC o v c r n n t c nnt o r m s .F o r t h i s p u r ' - catcgoryStatcsandMe-uhalaya. ln rcspectol'thc
posc. wc hrivc-collcctcd inlirrrnationrclatccltrl specialcategoryStatesothcrthanMcghalaya.thc-
r c s i d c n t i aaln dn o n - r c s i d e n t ibaul i l d i n s sl l ' o ma l l p r o v i s i o nw n s h i g h e ra t 4 0 p c l c e n to n t h c c o n -
S t a t c su n d c r t r ' ' " ' coa t c g o t ' i c sn.a t n c l y ,c i v i l a n d sidc'rationthat these Statcs did not transfcr
c l c c t lcra i . r n a i n t e n a n c cc x p e n d i t u r c o l p l a n s c h c t n e s
c o m p l c t c dd u r i n gt h c S c v e n t hP l a n p e r i o di n t t r
. d el i v i n g t h ee s t i n r a t cosl ' m a i n t e n a n c cn o n - p l a na c c o u n td u r i n g t h c E i g h t h P l a n .T h e
5 . - 5 0l n
c x p c n d i t u r co n h u i l d i n g s l i x t h c b a s c y c a r E i , c h t hF i v e Y c a r P l a nc o n t i n u c du p t o 1 9 9 6 - 9 7 .
1 1 9 9 9 - ( X )St t l l c - w i s c . w c h a v c c o n r p a r e dt h c Thc TFC, howevcr,did not provide for inclc-
cstinratcs basccl on thcCPWD normsanclthcStatc nicntal recluirctnent ol l'undslilr plan schcnrcs
'fhc
llonus. lowcr ol' thcsc lrvo f igut'cs rvas conrpletcdduring thc last two yeirrsol' h,ighth
eo r n p a l c trlv i t ht l r cc s t i m a t cd' sc r i v c dl i r r t h c y c a r ' P l a n .i . c . . 1 9 9 - 5 - 9a6n d 1 9 9 6 - 9 7l.t f ' e l tt h a t t h c
1999-(X) hascdon TGR. Wc havc not disturbr-:dP l a n n i n gC o n r m i s s i o nr n i g h t c o n s i d c rn r a k i n g
'fGR
thc h a s c dc s t i n r a t e si 1, ' t h c yh a p p c n c d t o b c p l o v i s i o nl i r r s u c hs c h e n r ctsi l l 1 9 9 9 - ( Xu)n d c rt h c
lubovcthc nor-tn-basecl l'igurcs.In othcrcases.rvc plan irswas cloncfirr thc schemesol'two iinnual
havcadoptcdthc nolnrbasccl cstimatcssub.icct ttr p l a n so l . 1 9 9 0 - 9a1n d l 9 9 l - 9 2 .
i r n i a x i r r r u rt nr l 2 5 p c rc e n ts t c pu p o n t h c I 9 9 8 - 9 9
'fhcrc
l ' i g u r cl i r t h c a c t u a le x p e n c l i t u rocl ' t h c S t a t ct t r 5.52. a r c c o n c c p t u aal s w c l l a s o p c r a "
d c r i v ct h c b a s cy c a t ' c s t i r n a t cS.t a r t i n gl k r n r t h c t i o n a ld i f ' l ' i c u l t i ci ns p r o v i d i n ut ' u n d st i r r n r i i i n t c -
basc.tlrc lccluirctncnlslirr liuccastpcrioclwas n a n c co l ' p l a ns c h c u tsec o t n p l c t c d b y - jl s t M a l c h .
w o r k c r (l ) u tw i t h a s t c pu p o l - 5p c l c c n tc a c hy c a r . 2 ( X X ) .F i r s t , c x p c n d i t u r c o n r u n n i n g t l t c s c
t o a l l o w l i r l i n l ' l a t i o nA. n n c x u r cV . 9 s et s o u t t h c s c h c n r crsv i l l c o n t i n u ct o b c c o v e r e du n c l c p l lan
l.rlovi siorrrlaclclbr maintcnanccol' builclings. t i l l 2 0 0l - 0 2 . A n y p l o v i s i o nl i ) r m a i n t c n a n cocl
planscherncs lirr theycar 2(Xn-0I on thc basisol'
Comrnittcd Liability c o r n p l c t esd c h e msea s o n 3 l s t M a l c h .2 0 0 0 w i l
r e s u l ti n o v c r - e s t l m a t l nt g h c t o t a l n o n - p l a nt ' c v -
5 . 5 1 . W c a r c r c q u i r c d .a s p c r t h c t c r m s o l ' cnuc cxpenditulctll'thc Statesiror'2000-01 and
r c f e r e n e et.o c o n s i d e r ,i n t e r - u l i t t ,n t a i n t e n a n c e2 0 0l - 0 2 a st h c S t a t e sl i r l l o w i n gt h c g u i d e l i n cos l
c x p c n d i t u l co l ' p l a n s c h e m e cs o r r i p l e t chdy 3 l s t t h c P l a n n i n g C o n r t n i s s i o nw i l l c o u n t s u c h
'fhc
March. 2(XX). TFC was also rcquircd to c x p e n c l i t u locn t h c p l a n s i d c .S c c o n d s, i n c et h c
c o n s i c l ct lh c l i a b i l i t yo n a c c o u not l ' r n a i n t c n a n c cl ' o r c c a spt e r i o do l ' t h i s C o r n m i s s i o n g o e su p t o
o l ' p l a ns c h c m c cs o r n p l c t ebdy 3 l s t M a r c h ,l t ) 9 5 2(Xl4-05. thcrciluirentcntol'l'undsundclnon-plan
It rvaspointedout by the TFC thatthc transltr ol' r c v c n u cc x p c n d r t u rw c i l l n o tb e c o v c r c dl ' u l l yl i r r
r u r a i n t c n a n co cl ' p l a n e x p c n d i t u r cI o n o n - p l a n t h ey e a r s2 0 0 3 - 0 5i f ' t h cp l a ns c h c m e cs o r n p l e t c d
I r c c o u nitn t h c r n i d c l l co f ' t h c E i - s h t hP l a n w a s cluring thc ycars 2(XX)-02arc not takcn into
p r o b l c r n a t i cT. h c l e a s o n w a s t h a t a s p c r t h e c o n s i d c r a t i o n C.o n s i d e l i n -acl l t h c s c .r t a p p e a r s
g u i d c l r n cos f t h c P l a n n i n gC o t n n t i s s i o n .t a i n t c - : . r l ) p r ' ( ) | r rl'oi aut sc t h u tt t t a i n l c n a t t et 'cc r l u i r c n t c n t :
n a r rceo l p l a ns c h c n r etsa k e nu p d u r i n ga l ' i v cy e a r {'or plan schcrnesnray be provided only ll'oni
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2002-03.on thcbasisol-thecstimated exnendirure t h c a p p r o v aol f t h c P l a n n i n -C9o r n n r i s s i o S n .i n c e

o n p l a ns c h c n t eisn 2 0 0 1 - 0 2 f. h i s w i l l c o v c r p l a n wc are pror.'idin-u adecluatc grantsto thcscStatcs
s c h e m ccso r n p l c t ebdy 3 l s t M a r c h .2 0 0 0a l s o . t o n r c e td e l l c i t so n n o n - p l a nf c V c n u ci . r c c o u ni tt
shouldnot be necessary to divcrt plan vrantslirr
- 5 . 5 3 . - f h e r ca r e a n u m b c . ro l ' o p e r a t i o n a ln o n - p l a np u r p o s c sT. h e s cS t a t e sc a n t h u s l t i e c t
problemsin providin-uadequateI'undlbl main- c o m r n i t t c d l i a b i l i t i c so n t h c p l a ns i d c ,a s d o n ci n
tcnanceof planschelnL-s. No specil'icinforntation the past, without any adverscimpact on thcir
i sa v a i l a b lac b o u p t l a ns c h c m ecso r n p l c t ebdy 3 I s t d c v c l o p m c n t a c xl p c n d i t u t ' Hc .c n c e .n o p r o v i s i o n
M a r c h .2 ( X ) 0o r t o b e c o n r p l e t c b d y 3 l s t M a r c l . , has becn madc in thc case ol' spccralcatecory
2 ( X ) 2A . l s o . i t i s n o t c l e a r h o w m a n y o f t h c s c States l'or non-plan rcvcnuc expcnditurc-lirr
s c h c n r cw s ill hc in operation a l i e rc o r n p l e t i oonf c o n i m i t t e ldi a b i l i t ya r i s i n go u to f p l a ns c h c r . n cl tsr
theNinth Plan.Infbrmationwas soughtfrom thc b e c o n r p l c t c b d y 3 l s t M a r c h .2 0 0 2 .
PlanningCornrnission and alsofrontthc Statcsin
respcctol'rcquirenrento1'fundsfirr ntaintenancc 5 . - 5 5 A . r c l a t e d i s s u c i s t h c e s t i m a t i o no l
o l s u c h p l a n s c h e m c sS . o r n ei n l o r n r a l i c l n
w a s r c v e n u cc x p e n c l i t u roel ' t h c S l a t c su n d c rt h c p l a n
rcccrvedlionr the Statesin [his re-gald, but these t i l l 2 0 0 1 - 0 2N . c i t h e lt h c S t a t c sn o r r h c l ) l a n n i n s
r c l a t e dm o s t l y[ o t h cc x p e n d i t u rrcc q u i r e m c n ti n s Comnrissionwcrc ablc'to pr-or.'irlc anv f irnr or
1 9 9 5 - 9 6a n d 1 9 9 6 - 9 7T. l . r c srcc q u i r c m e n rws c r e l c l i a b l ee s t i m a t c os f r c v c n u cc x p c n d i t u r cu n c l c r .
i r n p l i c i t l yc o v c r c di n t h e p r o j c c t i c l on 1 ' n o n - p l a nthc Plansconrpletcdby thc c:nclol March 2(X)2
rcvcnuccxpcnditurcput li)r$,al'dby tlic Stateslitr I n l . h ea b s e n c o c 1 ' a n ys p c c i l ' r icn l i r r n t a t i o n
fhrnt
tlic lirrccastpcriodasthcv folmedan intcgralpart t h c s cs o u r c c st,h c o n l y a l t c r n a { . i vwca s t o a r l i v c
o l n o n - p l a nr c v c n u ee x p e n d i t u r icn t h e b u d - s c t sa t p l a nr c v c n u ec x p c n d i t u raer t h ce n do 1 ' 2 ( XI -)0 1
o l t h e S t a t c sl i o m 1 9 9 7 - 9 to3n w a l d s .H o w e v c r . on thc basisof trend_growth rates firr thc pcriocl
t h ci n fo r L n a t i o n .ricns p c cot 1 ' r e c l u i r e r nocln' ftu n d s 1981-99over thc cstimalcdplan revcnuccxpcn-
l i r r t r a n s { eor l ' t h c s es c h e n l ecsi t h c ri n 2 0 0 0 - 01 o r diturc lol tlrc bascycar 1999-(X). 'l'his
proiccrion
r n l ( X ) 2 - ( ) 3w a s n o t p r o v i d e db y r h c S t a t e sI.t i s i s o n l y l i r r t h c l i n t i t c d p u r p o s co f e s t l m a r i n g
r l s on o t r c e d t h a tt h c r ew a sn o d e l i n i t er r c n di n t h c r c q u i r c n r c n t so l ' c o r n m i t t c c l l i a b i l i t y . l ' h e
n o n - p l a nr c v c l l u ce x p e n d i t u rocl ' t h eS t a t e si n t h c r c q u i r c r n c n ft isr rc o m r n i t t c Idi a b i I i t yl t r i s i n gl ' r o m
p a s t t o i d e n t r l ' ya n i n c r e a s co f ' c x p e n d i t u f co n t h eN i n t hP l a ni n 2 ( n 2 - 0 3 .2 ( X ) 3 - 0a4n d2 ( X ) 4 - 0 5
ilccount o1' trans{'erof' plan expenditurcintcr Ibr thc gcncralcatcgor'1, Statcshavchccnwrlrkctl
n o n - p l a cn - x p c n d i t ulrocr t h c n r a i n t c n a n cocI ' p l a n o u t a t 3 0 p c r c c n t t l l ' t h cc s t t n r i l t cpdl a n t ' c v c l l u c
s c l r c n r cast t h cc n do l ' e a c hF i v cY c a rP l a n I. n v i c w c x p c n c l i t u rbcy t h c e n d o 1 '2 ( X ) l - 0 2 . S t a r c - ' , v i s .
o l ' t h i sw . c l c c l t h a t h cn u r m sa d o p r c b d y t h cT F C , p r o j c c t i o nl i l r m a i n t c n a n cocl ' p l a r sr c h c r r rlci k c l v
i . e . .3 0 p c r c c n t o f ' p l a nr e v e n u ec x p e n d i t u l cl o r to bc conrplctedup to cnd ol March 2(X)2wolkccr
gcncralcatcsoryStatesntaybe continucdasthere out lor l-5Statcsl'orthe vcars2(X)2-05is placcd
i s n o l a l g c s t r u c t u r acl h a n - uien t h c c o n r p o s i t i o na t A n n e x u r cV . 1 0 .T h c s ca m o u n l st l t n o t c o v c r
o l p l a nr c v e n u c x p c n d i t u ricn t h c l a s tf i ' , , ey c a r s . a d d i t i o n alli a h i l i t i e sa r i s i n go u t o l ' m a i n t c n a n c e
o l . C c n t l a l l yS p o n s o r eS d c h c r n e(sC S S ) .A l a r g c
5.-54.As rcgardsspccialcate-gor-y Statcs,it is nunrbcrol thesccontinucas plan schctncsll'ont
n o t i c c dt h a t t h e p c r c a p i t ap l a n e x p c n d i t u f ci s o n cI r i v cY c a rP l a nt o a n o t h cirn s o n r cl i t l m .S o r n c
n r u c hh i _ t h ctrh a nt h ca l l I n d i aa v c r a - gr n c a i n l yd u c o l t h c mg c t t c r n t i n a t eadt t l r cc n c lo 1 ' as i v c n[ : i v c
to lar-ucplan erantsl'romthc Centre.Thcy have Ycar Plan. 'fhc rccluircntcntol' thc Statcs lilr
a l s o b e c n d i v c r t i n g a s i g n i l ' i c a npr a r r o 1 'p l a n m a i n t c n a n cocl 'C l . S . S u . sn d c r ' n o n - p l a nt'h. c r c -
assistance tbr mceting non-planexpenditurcin fbre.is considcredto bc not substantial. Furthcr.
c o n s u l t a t i o nw i t h t h c P l a n n i n gC o m m i s s i o n . t h c N i n t h F i v e Y c a r P l a nh a se n v i s a g e tdr a n s l c r
Further, most of' them havc bcen incurrin-u o l . l a r g cn u m b e r o C l . S . St.o t h c S t a t c sW . h c nt h i s
m a i n t c n a n cccx p c n d i t u r cu n d c r t h e i r p l a n w i t h h a p p c n sw, c p r e s u n ) ct h a t s u c ht r a n s l c rw i l l b c
 JOURNAL OI' INDIAN SCHOOL OF POLftlCAl' l:('ONOMY APRll,-.lUNI:2000

rucconipanicw c li t h t r a n s l ' c ro l ' I ' u n d sa s w c l l . I n intr'oduccd so 1ar.Transparency ln accountln,g ls

rrcw o l thcsc c o n s i t l c r a t i o n s w
. c h a v c n o l p r o - i m p e r a t i v eH. e n c e w
, e e n d < l r st h
c e s u g g e s t i oonl'
v i d c d a n y s c p r r a t el u n d o n a c c o u n Io l c t l m m i t t e d TFC in this regard.
l i a b r l r t y l i r r n r a i n t c n a t r c tcl t ' C c n t r l l l v s p t t n s o r c d
schenrcs. 5.57. For nronitoring,the TFC had rccont-
rnendedthe tbrnrationof a High PowercdCom-
N{onitoring of' \laintenance expenditurc r n r t t e cc h a i r e db y t h c C h i c l ' S c c l c t a l y .w i t h
Sccretaricsol' thc I)cpartrucntso[' Financc.
-5.-56.Wc arc rcquilcd, undcr our tct'rtts ol P l a n n i n gI,r r i g a t i o na n d P u b l i cW o r k s a n d t h e
rclcrcncc. t() rcc(xnmcnd thc manner ttl' rnoni- Chicl'Engincersol' Works Dcpartntcntas ntcm-
toring cxpcnditurc lirr tlaintenance ancl upkcep bcrs.lt wasl'urthcrstipulatcdthatthisCornmitte c
ol eapitll assets and ntaintcnance of plan may revicw cvcry qual'tcrthe allocation and
schcrncs.Wc havc provided rcasonablcsunts ltlr' u t i l i s a t i o no f t h e l u n d s l i r r t r a t n t e n a n c ca n d
t h c r r r a i n t c n a n caen d u p k c c p o l ' c a p i t a la s s c t sa n d e n s u r cl l l a t a l l o c a t c df u n d s a l e n o t d i v c r t e dl o
l i r r r n a i n t c n a n c co f p l a n s c h c m c s .W c h a v c n o t - o t h e r a r c aF s .r o mt h cc x p e n d i t u rocn t l a i n t c n a n c e
iccclthat nraintcnanceof'capital assctsin the past shownin thcaccounts. it seett.ts tltatnothingntuch
has bccn poor not bccause ol' lack ol l'unds h a s b c e n d o n c i n t h i s d i r c c t i o na s c x p e n t l i t u r c
p n r v i r l e ' cbly t h c F i n a n c cC o n r n t i s s i < thnu t b c c a u s c l c v c l ss t i l l c o n t i n u ct o b c -l ' a rh c l t l wt h c t u l l o u n t s
'l'FC.
o l ' l a c k o l ' u d c c l u a t cb u d g c t a r y p r o v i s i o n w i t h i n p l o v i d c di n t l i c c s t i r n a t cosl t l r c
t h e t r v c r a l lr c s ( ) u r c c sa v a i l a h l ct o t h c S t a t c s . l - h c
'l'FC
h a d c x a r t t i n c dt h c r c a s o u sl i r r t l t c p o o t ' s t a t e 5 . 8 .W c h a v en t a d cr c a s o t r a b pl ct ' o v i s i o nlsi r r '
o l n r a i n t c n o n c co l c a p i t a l a s s c t sa t r di t w a s n o t i c c d thc rccluirenients ol-uraintcnancc ol capttalasscts
bv thcnr that thc tttain rcason had bccn the and lilr comnrittcd liability alising flrrnr com-
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c x h a u s t i o n o l a l a r g c p a r t o l ' ( h c p r o v i s i o n l i r r p l c t c dp l a ns c h e m c b ' sy t h c c n c lo l - 2 0 0l - 0 2 .
r r r i r i n t c n a r r cccx p c n d i t u l c b y s p c n d i n g( ) n c s t a b - States shoulcl rnakc- buclgctar-y provisioneachycar'
l r . l r r r r c r rltc. l r ri n g l i t t l c l i r l t t t t i n t c t t l t n clct e t ' . r t . t o a l c v c l a t l c a s tc c l u a lt o t h c p r o v i s i o n sf i r r
'l'hcy
l'urthcr notrccd tlrat thc intttrtnatton systcllt maintcnance recortttttcndccl by us. Wc are tll'thc
i n t h c S t a t c s w a s n o t g c a r c d f i r r p r t t v i d i n g e l a t a o p i n i o nt h a t t l i i s c a n b c a c l i i c v c do n l y i l S t a t c s
a k c r n i t i a t i v ct o I i x p r r o r i t i c sa n dt o
r c g i r r ' . l i r ttul l c c x l l et l t l l ) ( l L l tsl Ip c n t( ) n l l l i . l i n t r ' n l t n e ct h e n r s c l v ct s
a n c lo n r r r a i n t n e a n c cr el a t c d c : s t a h l i s h r r i c nI t .w a s providcsul'l'icient bud-uctaly supportlirr nraintc-
l i r r t h c r n o t i c c d t h a t t h o u g h t h c r c s p e c t i v cw o r k n a n c c .
I n t h i s c o n t c x t w
. c r e i t c r a t ct h c r e c o m -
-fFC
divisions cntrustcd * , i t h n t a i n t c n a n c c h a d t l r e - nrcnclation ol thc in rcgard to thc monitoring
ncccssary dctails, thcse werc not lcflcctcd in the b y a h i g h p o w c l ' c o r n r n i t t e Tc h
. c l ' u n c t i o n i nogl
i.rccountsor in any other rcprlrtttlg systcm ln a this cor.nrnittce at thc statclevel shouldbe acti-
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i a s h r o nr v l r i c l iw o u l d p c r m i t c a s yn t o n i t o l i n g . vatccl.Furthcr',thc budgctary pnrvisions and
'l'FC
h a d . t h e r c l i r r c . s u g g c s t c dc h a n g c s i n t h c c x p c n d i t u rlco r r n a i n t c n a n cocl c a p i t aa l s s e tas n d
s v s t c n lo l r r t a i n t e n a t t c ct t l a c c o u t t t si n s u e ha w a Y l i r rc o r r r n r i t t cl ida b i l i t i c s o n p l a ns c h c m ens r a yb c
t h a t t l r cc x p c n d i t u r co n t h c w o r k s c ( ) n l p ( ) n c l lat n d a s s s es c db y t h c P l a n n i n -Cuo n r n r i s s i oant t h ct i t u e
t h c c s t a b l i s h n r c l r c{ x p c n s c s g c l r c { l c c t c d s c l t a - o f a s s e s s n r conl 'tt h c i r c s o u r c easn dc s t i n r a t i r tonl
r a t e l ya n d a l c e a s i l ya c c c s s i b l cT. h c d c t a i l st l l t h c the balancc l'ronr curt'ctttrcvcnucs. Planning
r c - d c s i g n c da c c o u n t i n s s y \ t c n l t t n t r t i t i n t c t t r t n c cC o n r m i s s i o n m a y c o n s i d c rc l c v i s i n ga s u i t a b l c
cxpcnditurc p l o p o s c d b y t h c T I r C a s c x p l a i n c d i n rncchernism lirr this purpose.
A p p c n c l i x i o l ' t h c i r -r - c p o r td w c l t u p o n t h c n c c d
l i r l p r o v i d i n g t h c n c u , s u h - h c a d sa r r t ln t i n o r h e a d s 5 . 5 9 .T h c l - i s c apl o s i t i o no l t h eS t a t e si s u n d c r
i l r o r d c r t o r n a k c t h c a c c o u n t sn l o r e t r a n s p a r e n t . acutcstrL-ss. Wc bclieve thi,ita nrcretinkerin-tl with
[:rorn thc lcplies ol' tl'rcStatcs l'urnishetlto us, il tiix rateshcrcandthcre. or stnallinct'cascs in user
is sccn that thcsc ncw hcads har,'c nol been eliargesand n'rarginal cuts in cxpcncliture cannot
 v()L. t2 NO.: REPORT OF THE ELEVENTH FINANCE COMMISSION FOIt 2OOO-2005
281

be a lasting remedy to the problem.Structural (2) Such percentage, as may be prescribed,

changesboth in revenueraisingand expenditure ofthe netproceeds o1'anysuchtax orduty
are called for. Detailsof theseare discussecl
in in any financialyear shall not lbrm part
ChapterII. We have assessed own resourcesof ol' the ConsolidatedFund of India. bur
theStatesandtheirnon-planrevenueexpenditure. shall be assignedto the Stateswithin
keepingthescaspecrsin the background.In the w h i c h t h a tt a x o r d u t y i s l e v i a b l ci n t h a t
process.we have introducednorms,thoughin a ycar.andshallbedistributedamon-e thosc
limitedway. which are considereclrcasonable tt_, Statesin suchmanneretndliom suchtinrc
achieve.The resultsof our assessment of States' as may be prescribedin the mannerpro_
own resourcesare indicatedin AnnexuresV.l I v i d e di n c l a u s e( 3 ) .
r ov . 3 5 . (3) In this article.'prescribed'means,-
( i ) u n t i la F i n a n c e
C o m m i s s i oh n a sb e e n
CHAPTER VI constitured, prescribedby the presr-
SHARING UNION TAX REVENUDS
dentb;' ordcr,and
(ii) afiera FinanceCommissionhasbeen
6 . I . A r t i c l e2 8 0( 3) o f t h eC o n s r i r u t i orne q u i r e s
t h c F i n a n c cC o r n m i s s i otno n t a k er e c o m m e n d a - consl.ituted, prescribedby the prcsr-
tionsas to the distributionof thc net proceedsol dent bv order alter considerin-u thc
recommendationsof the Financc
sharcablc taxcsbetwecnUnionandtheStates. trnd
Commission".
thc allocationbetweenthe Statesof their shares
in suchprccecds.Formulationof principlesthat
The FinanceCommissionis now requiredt<l
s h o u l dg u i d ct h ea s s i g n m e norf s h a r et o t h eS t a t e s
recommendsuch percentageol' taxes or dutics
a n dt h cd e t e r m i n a t i oonf i n d i v i d u asl h a r eo l e a c h referred
to in the new article 270 that may bc
S t a t ec o n s t i t u t casc c n t r atla s ko f t h eC o m m i s s i o n , assignedto the States
and also recommendthe
mannerin which thesemay be distributedantong
6 . 2 .T h c C o n s r i t u r i o(nE i g h r i e t h
A m e n d m e n r ) the States.
Act. 20(X)has alteled rhe pattel-nof sharingof
Ccntraltaxcsbetweenthe Centl.eand thc States 6.3. This AmendmentAct is baseclon a rec,
in a fundarr.rental way. Prior to [his amendment. o m m e n d a t i oonl - t h eT c n t hF i n a n c eC o m m i s s i o n
'l-axes
on Incorneother than agricultureincome (TFC) which had recommendedan Alternativc
and Union duties of excise were sharedwith Schemeof Devolution(ASD) in its report sub_
Statesunderarticles210 and 272 respectively. mitted in November 1994. Under rhis scheme.
The EightiethAmendmenrAct hassubstituted a proceedsof all Centraltaxes,exceptsurchar_9es.
new article lbr article 210 and omitted the old would constitulea commonshareable pool fiom
article2T2. The ncw article270providesasunder: which a share was to be devolved to the States.
The TFC recommended29 per cent of the pro_
"210(l) All raxesand dutiesref-erred ceedsto be devolved to the Statesunder this
to in
Scherne. This percentage share includeo
the Union Lisr. except the duties and taxes
devolution o n a c c o u not l a d d i t i o n ael x c i s ed u t i e .
lef'errcdto in articles268 and 269, respec-
lcvied in lieu of salestax as well as the _qrant_in_
tively, surchargeon taxesand dutiesref'errecJ
lieu of the tax on railway passenger fares.
to in article21 1 andanycessleviedfbr specific
purposesunderany law made by parliament
6.4. In December1996. rhe Governmentol
shall be levied and collectedby the Govern- India had
broughtout a Discussionpaperon the
menlol'Indiaandshallbe distributedbetween A l t e r n a t i v eS c h e m eo f
D e v o l u t i o ns p e l l i n go u t
thc Union and the Slares in the manner theprosandconsof theproposed
scheme.On the
provided r n c l a u s e( 2 ) . b a s i so f a c o n s e n s ur se a c h e idn t h cT h i r d M e e t i n c
 JOURNALOF IND]ANSCHOOLOF'POLITICALECONOMY APRlL-JUNE 2OOO

'net proceeds'attributable
of theInter-StateCouncilheldon 17thJuly, 1997, taxesthe words
'taxespayablein
the Government of India acceptedthe scheme to Union Territoriesor to
with some modifications. A Constitution respectof Union cmoluments'have been
(Eighty-FifthAmendment)Bill, 1998was intro- omitted.
duced in the 12th Lok Sabha' The Bill was (f) The recommendation of theTcnth Financc
'gross
refenedto the StandingCommitteeof Parliament Commission regarding sharing of
on Finance.The StandingCommitteegave its proceeds'was alsonot acceptedin the new
'the share
report to the Parliament in the last week of AmendmentAct and the words
February1999.However,theBill lapsedwith the of netproceeds'was prcscrihedin order1o
dissolutionof the Lok Sabha.A modifiedversion maintaincclnsistency bctwecnarticles270'
of the Bill was introducedin the Lok Sabhaas 279 and 280.
'The Constitution(Eighty-Ninth Amendment)
Bill,2000' on March9,2000.The Bill waspassed 6.6. Articlc 269 has been recast by the
by Parliamentand receivedthe assentof the AmendmentAct. The new article includesonly
'Constitu-
Presidentof India on June9, 2000,as taxeson saleandpurchaseof goodsand taxeson
tion (EightiethAmendment)Act, 2000.' the consignmentol'goods. All other taxesthat
werelistedunderarticle269 prior to the amend-
6.5 The main changesbrought about by this menthavebeendeletedfrom this ar'licle.
amendmentare as follows:
(a) All Centraltaxesand duties,exceptthose t u tb v t h e
6 . 7 .I n v i e w o f t h e c h a n g c sb r o u g h o
ref'erredin articles268 and269respectively Constitution(80th Amcndmcnt) Act. 2000 the
and surchargesand cesses,areto be shared terms of ref'erenccwerc modified by the Presr-
betweenthe Centreandthe States. dentialOrderdatedI 9th June,2000andpara7 o1
(b) Only Statesin which thesetaxesandduties was deleted.l'his
'leviable in that year' areentitledto get the originaltermsof ref'erence
are pararequiredtheCommissionto suggestchanges
a sharein thesetaxesandduties.
'net proceeds'of these in the principlesgoverningthe distributionol'
(c) A percentageof
additionalexciseduties in lieu of salcstax on
taxesand dutiesas may be prescribedby
sugar,textilesand tobacco,and the grantin lieu
the Presidentby orderafterconsideringthe
of the tax underthe repealedRailway Passcnger
recommendationsof the Finance Com-
FaresTax Act, 1957.
missionis to be sharedbY States.
'net proceeds'of these
(d) The percentage of
6.8. The Commission is now required to
taxes and duties which is assignedto the
determine the shareof the net proceedsof Union
Statesin any financial year shall not form
Taxes and Dutieswhich may be assignedto the
part of the ConsolidatedFund of India.
States and the respectiveshareofeach State.The
(e) The artic]re270(2) which referredto taxes
share to be given to eachStateis only in respect
on income prior to the amendmentcon-
of taxes and duties which areleviablein thatStatc
tainedthe fbllowing Provision:
in the relevantyear.We havetherclbreobtained
'Suchpercentage as may be prescribed, of infbrmationfrom the Union FinanceMinistry
thenetproceedsin any financialyear ofany aboutthe taxesand dutieswhich are leviablein
thercare
suchtax, exceptin so far as thoseproceeds all theStatesof thecountryandwhether
Finance has
representproceedsattributableto Union exceptions.The Union Ministry of
Territoriesor to taxespayablein respectof informedus that at presentall taxes cxcept thc
Union emoluments,shall not form part of expendituretax and service tax are leviable in
the Consolidated Fund of India.' every Stateof thc country. Expenditure tax and
In the new article 270 which refers to all Servicetax are not leviableonly in the Stateof
 voL.t2 No.2 REPORTOF THE ELEVENTHFINANCECOMMISSIONF'OR2OOO-2005 283

Jammu& Kashmir.We havekeptthispositionin significant.This may have been largely due to

view while determiningthe inter-seshareof the fluctuationsin the ratesof growth of income tax
Statesin the distributionol'Centraltaxes. and Union exciseduties,which were the only
taxessharedwith the Statesbefore the Eightieth
Aggregate Share of States Amendment to the Constitution,apart from the
grantsgiven in lieu of passengertax, and the
6.9. We are required to determine,first, the
collectionsfrom additionalexciseduty in lieu of
aggregateshareof the Statesin all Union taxes
salestax on thesecommodities.
anddutiesunderarticle280(3Xa)of the Consti-
tution and para 3 of our termsof reference.The
detcrmination of the aggregate shareof Statesin 6 . 1 2 . I nt h e i rm e m o r a n d aS,t a t e sa r ei n u n i s o n
tlie nct proceedsof all Union taxesand duties. in asking fbr the changeoverto the alternative
olicn ret'erredto as the vertical devolution. scheme of devolution,and fbr giving up the
requlrcsa comprehensive view of (i) the expen- present systemof tax sharingof revenuesfiom
diture needsof the Centre; (ii) the aggregate specifiedtaxes,viz.,incometaxandUnionexcise
rcsourcesof the Centre; (iii) the aggregare duties.Many have,however,askedfor a higher
requiremcnts of Stateson revenueaccount,and sharein the pool of Centraltaxesas comparedto
(iv)the resources of Statesfrom own sources. We the 29 per cent sharethat was recommendedby
havealrcadydiscussedthe resourceand expen- theTenthFinanceCommission.They have
askcd
diturc positionof the Centrein ChapterIV, and 1brsharesthatrange
fiom 33 to 50 per centofthe
similarlythc requirements of theStatesin relation gross proceeds
of Central taxes.Some o1'the
to their own revenuesin ChapterV.
importantbenchmarkfigures in this rangeare 33
per cent [Bihar, Meghalaya,Mizoram, Tripur:,,
6 . 1 0 . I n c o n s i d e r i n gt h e i s s u e o f v e r t i c a l
divisionof the Centraltax revenues,it would be West Bengall,33.33per cent [Haryana,Punjab,
usetul to briefly review the changes in the Rajasthan.Sikkim. Tamil Nadul, 35 per cenr
aggregateshareof Statesin the net proceedsof [Goa, Madhya Pradesh.Orissa] 40 per cent
all Union taxesand duties,excludingsurcharge, [Karnataka,Kerala], and 50 per cenl [Andhra
cessesand the cost of collectionduring the last Pradesh, Assam,Maharashtra]. SomeStateshave
two decadcs.This has been worked out on the suggested that initially it may be a lower figure,
basisof shareof all Statesin the Union excise butthe shareshouldultimatelybe raisedto 50 per
duties and income tax recommendedby the cent. Most of them have askedfbr sharingthe
successlve FinanceCommissionsand converted 'gross'ratherthanthe 'net' proceeds.Most spe-
asa sharein all Union taxesandduties,including cial categoryStateshaveaskedfor an earmarking
thegrantin lieu oftax on railwaypassenger fares, of 30 per cent of the shareable pool of taxesfbr
andthe additionalexciseduty in lieu of salestax
distributionamong the specialcategoryStates
on textiles.sugarand tobacco(AnnexureVL I ).
only. A few States have indicated that the
aggregate percentage recommended by theTenth
6. I I . It rnaybc notedthattheshareof theStates
in the net proceedsof all Union taxesand duties Finance Commission be retained. but haveasked
includinggrantin lieu ofrailway passenger fbr exclusion of the 3 per cent share included in
fares
tax and additionalexciseduty on sugar,tobacco the figure of 29 per cent in respect of the sharing
andtextileshasfluctuatedbetween26.30percent of additionalexcisedutiesin lieu of salestax on
a n d 3 1 . 5 9p e r c e n t .E v e n d u r i n gt h e p e r i o do f specifiedcommodities.For thesecommodities,
devolutioncoveredby the sameFinanceCom- they want that the tax rentalarrangement should
mission,the yearto year fluctuationsin termsof be terminatedand the powerto levy salestax on
percentage ofall Uniontaxesanddutieshavebecn thesecommoditiesbe restoredto them.
 JOURNALOI.' INDIANSCHOOI,OF POL]I'ICALECONOMY APRII,.JUNF:10()0
281

6 . 1 3 .I n t h e i rm e m o r a n d u mt h, e C e n u ' agl o v - it shouldnot be resortedto as a l'evenucralslng

ernmcnt has urged that the Commissionmay measureto l'ill the budgetarygaps.lt shouldbe
providcfbr an assured minimumabsolutelevelof leviedfor a specificpurpose.for a linritedperiod'
vcrticaltax devolution,which rnaybe peggedat
6. I 5. In the light tll'our assessmcnt ol' Ccntral
29 pcr cent of the cunent level of Centraltaxes,
finances,as also the Statc
levcl'with a reduced t'inances, we have
c.g..linkedto the 1999-2000
recommended the share of States in inconre tax
perccntage (say 20 per cent) of vertical tax
andUnion exciseduties in our interim report. loI
dcvolutionfor incremental gross tax revenueof
making provisional arrangenlents for the year
theCentrcovcr the 1999-00 level.
2 0 0 0 - 0 1a s 8 0 a n d5 2 p e l c e n t .r ' c s p e c t i v e lTyh. i s
wasdonewith a view to ensurethatthe Statesdo
6.14. Statcshave raisedobjectionto the fie-
get about29 per cent of the grossrcvenuefrom
quent lcvy ttf surchargeon income tax' which
Union taxes,the additionalexciseduties and thc
assigns cxclusivelyto theCentrean amountof the liires.Wc
grantin lieu of tax on railwaypassenger
tax wliich otherwiscwould be shareableas it is
have completedour asscssmentlbr tlre cnttre
realiscdfrontthcsametax base.It hasbeenargued
period liom 2000-01to 2004-05ol'the Central
thatinstcadol'themeasurebeingusedl'ormeeting
resources and Statcflnances.Sincethe submis-
any cmergentrequirements of a specificnature,
sion of interim report,the neccssarY chln-scstn
thc surchargcis used as a normal source of providing for sharing tlf all
the Constitution
revenue.In the process,the Statesare made to duties havc been donc. On thc
Union taxesand
losc considcrablerevenuc which otherwise, o f o u r a n a l y s i a
s n d a s s e s s m c o
n l
t ' t h eC en-
basis
would havc beenavailableto them had the sur-
t r r ' ' si l n d S t a t e s ' b u d g e t a rf cv q u l r c t n c n t\s\ c l t r c
chargcbcenintegratedinto the incometax rates. ofthe view thatthe shareo1'thcStatcsbc fixed at
As a resultoi'frequentrepresentations fiom thc
28 per cent ol the net proceedsof all taxesand
States,thc surchargeon Incometax wus com- dutiesreferredto in the Union List. exccpt thc
pletely withdrawn fiom the financial year taxesand dutiesrel'erredto in articlcs26tJand
1994-95.However, it was reintroducedin thc 269, and the surcharges and cesses,fbr eachof'
budgetfor 1999-00andretainedin the budgetof the five yearsstartingfiom 2000-01and ending
2000-01with anenhancedratefor taxableincome in 2004-05.Our recommendations made {br thc
aboveRs 1.5lakh.Article 211 hasbeenretained sharingof incometax andUnion excisedutiesin
in its presentform, which meansthat Parliament the interim report would, consequently.stand
can now levy surchargeon all Union taxesand modified.
not merelyon incometax and thetaxesspecified
in article 269 as was the position betbre the 6 . 1 6 . T h e C o n s t i t u t i o n( E i g h t i e t h )A m e n d -
EightiethAmendmentto the Constitution.Sur- menthascomeinto force.A consequence ()1'this
chargelevied on any tax is not shareable, and changeis that the net proceeds of the additional
therelbre, tcl the extent that power to levy excisedutiesleviedunderthc AdditiontrlExcise
surcharge is uscdasa revenucraisingmeasure.it D u t i e s( G o o d so l ' s p e c i aIlm p o r t a n c cA) c t ' l 9 - 5 7 .
af'l'ectsthe States.We have ourselvesrecom- cannotbe passedon to theStatcsarsarlicle212 ol
mendedthe levy of surchargefor the purposeo1- theConstitutionhasbeendeleted.Thesearenow
n.reeting theexpenditure for providingreliefto the part of the tax revenuereceiptsol'the Central
alfbcted population at the occurrenceof a Governmentand are sharablewith the Statcs ln
calamity ol'rare severity. However,thcscocca- view of thesechanges, thereis a needI'ora review
sions are expected to be rare. We would like to of the earlier arrangement. Pending that, wc
state that whilc there is no harm in lcvying further recommend that I '5 per ccnt ol' all
surchargeon any specific tax tbr meeting an shareable Union taxesand dutiesbc allocatedto
unexpected and unforeseenitem of expenditure, the Statesscparately, thustotalling29.5 per cent
 voL.t2 No.2 REPORT OF THE ELEVENTH FINANCE COMMISSION FOR 2OOO-2005 285

of the netproceedsof all Union taxesandduties. incometax up to the SeventhFinanceCommis-

Inter-sedistributionamongthe Statesbe donein sion. In respectof Union exciseduties,the cri-
thesamemannerasthc distributionof 28 percenr teria, as these evolved over time. had placed
of netproceeds. We f urtherrecommend thatif any greaterand greateremphasison f'actorsrelating
Stateleviesandcollectssalestax on sugar,textile to economicbackwardness and fiscal weakness
and tobacco.it will not be entitledto any share of the States.However,populationcontinuedto
from this |.,5per cent. be the largestdeterminingfactor up ro the Sixth
Commission, althoughits weightwentdownfrom
Determining Inter se Shares of States 100 to 75 per cent. This weight was further
reducedto 25 per cent (a fall of 50 percentage
6.17. We now considerthe issueof inter se points from the precedingCommission)by the
distributionof theaggregate shareof Statesin the SeventhCommission.As alreadynoted.begin-
Centraltax revenues.Up to the SeventhFinance ning with the Eighth FinanceCommission.two
Commission,the tormulaeusedfor determining changes occuned.First.therewasa movetowards
the income tax shareswere clearly distinct from unifyingthe formulaelor theinter sedistribution
thosefor the Union exciseduties.Sincethen, a of both incometax and Union excisedutiesand,
processof convergence betweenthe two setsof secondly, a portionof theUnionexcisedutieswas
fbrrnulaeis distinctlynoticeable. kept asidefor distributionaccordingto 'assesscd
deficits'of Statesafterthe devolutionof CenrlaL
6.18. Population and collection/assessment taxes.The unified formulaeusedby the Eighth,
were the only two criteriausedfor determining Ninth andTenthCommissions aresivenin Table
lhe inter .re sharesof the Statesin the case of 6 .t .

Table 6.1. Inter se Sharing of Union Taxes: Eighth, Ninth and Tenth Finance Commissions

Criteria Appli-
Finance cable
Cornmission Popu- Dis- Inverseof Poveny Index of Area lndex Tax to
lation tance Income Ratio Backward of Infra- Effon
ness struclure
0) (2) (3) (4) (5) (6) (7) (8) (9) ( I0)

Eighth 25 50 25 - 9OVoof
Shareable
IT*
Ninth (l Repon) 25 50 r2.5 t2.5 - 40vc of UED
Ninth(tl Report) 25 50 t2.5 ris - 90Vcof
Shareable
IT*
29 94 40.t2 t4.97 t4.97 - 3'7.515Vo
of UED
Tenth 20 60 l0 I 0 0 V oo f
Shareable
lT and 407cof
UED

The remaining | 0 per cent was to be distributedaccordingto contributionin the caseof income tax. Similarly, the balanceof
the shareableamount in the caseof Union excisedutieswas to be distributedaccordingto assessed deficits.'
Source:Reportsof successiveFinanceCommissions.
 JOIJRNAL OF INDIAN SCHOOI- OF' POLITICAL ECONOMY APRIL.JUNE 2OOO

6. I 9. In theunifiedformulaof sharin-e of taxes the Finance Commissioncan only define the

recommendedby the Eighth. Ninth and Tenth fbrmula.but cannotdeterminethe actualshares
Commissions. two changesarenoticeable. From of States.Ideally,the incentiveshouldbe based
theshareable amountol tncometax, ten per cent on year to year perfbrmancc.But becauseol-
was set apart Ibr distributionon the basis o1' operationaldifficulties, and in the interestol'
assessment in eachStateby the EighthandNinth certaintyof the relativesharesof Statesin thc tax
Finance Commissions. The Tenth Finance devolution during the period of our recom-
Commission did not adopt any criterion of mendation.we do not consider it feasiblc or
asscssment for the purposeof distribution.No desirableto build any incentivesthatmay changc
such critcrion wasadoptedlbr thedistributionof from the quantumof devolutionlbr a Statclrom
Union exciseduties.The secondchangerelatcd ycar to year. However,we elreproviding sorne
to settingapartof a portionof the Union excisc dynamicincentivefbr betterfiscalpcrfbrmance
dutiesfor distributionto the Stateson thc basisof in our proposalfbr debtrclicf. We alsotrustthat
'assessed deficits'.This practicewas startedby the index of' fiscal disciplinethat wc arc sug-
the Eighth FinanceCommissionand was con- gestingfor the devolutionformulawill act as an
tinued by thc Ninth and the Tenth Financc induccment for Statcs to show better {'iscal
Commissions.The' sharc kept aside for this performancc.
purposcwasalsograduallyincreascd. It was5 per'
' n e t ' p r o c e e dos 1 ' U n i o nc x c i s ed u t i e s
c e n to l ' t h e 6.22.As alrcadynotcd.theplacticcol'keeping
rn thc caseof' Eighth and the first reportof thc a portionof shaleabletax rcvcnuesl}om Unron
N i n t hC o m m i s s i o nI t. w a sr a i s e dt o 7 . 4 2 5p e rc e n t e x c i s ed u t i e s c x c l u s i v c l yl i t r t h c p u r p o s eo l '
in the secondreport of the Ninth Commission, allocatingit amongthe Statcsaccordingto the
and subsequently to 7.-5per ccnt by the Tenth deficits.aftcr States' own
amount of assessed
Commission. revenuesand tax devolutionon all other counts
have been taken into account,was brought in
6.20.Two basicprinciplesfol determiningthe
vogueby the Eighth FinanceCommission,and
inter se sharesol'Statesare thoseof equity and
was continucdby thc Ninth and Tenth Finance
efliciency.The principleof horizontalequity is
Commissions. This in eff'ectimplieda conversiotl
guidedby the considerationthat, as a result of'
of a part of the shareof taxesinto -qrants-in-aid
revenue-sharing, theresourcedcficiencies across
It alsomaskstheextcntof delicitsof the recipient
States arising out of systemic and identifiable
States.In the interestof transparency. we have
l'actorsare evenedout. The principleof equity
decided to discontinue this practice.andhavenol
makesup fbr resourcedeficiencics.As such,it
keptanyportiono1'shareable taxcsscparately fbr
alsotendsto createa vestedinterestin continuing
distribution among the States with assessed dcl:
with the resourcedeficiency.To neutralizethis
adverseincentivc,it needslo be complcmented i c i t s .
'efficiency' i.e.,
b1,suitablecriteriafor rcwaLding ,
el'l'orts to improvethe resourcebasesanddeliver 6 . 2 3 . I n t h e c o n t e x to f s e l e c t i n ga p p r o p r i a t e
scrvicea s t m i n i m u m( e f f l c i en t ) c o s t s . criteria for detcrrniningthe inter se sharesof
States.we havealsoascertained the views of the
Statesas indicated
6 . 2 1 .O n e i s s u ei n d e s i g n i n gi n c e n t i v e - b a s e d to us in their Memoranda and
criteria is whetherthcy should be dynamically t h ed i s c u s s i o n s t h a w
t e h a d w i t h t h e m W
. h i l em ost
relatedto f utureachievements or relatedonly tcl States want continuation of the use ol'population
achievementsalready accomplished.Dynamic as a factor, the weightsthat they have recom-
incentivesareexpectedto modify current/future nrendedvary liom 20 to10 percent.A 20 pel ccnt
bchaviour.But in this case,since relcvantdata weight,for cxample,has beenrecommcndedby
becomeavailableonly with the passageo[ time, Andhra Pradesh, Bihar, Karnataka. Kcrala,
voL. 12NO 2 REPORT OF THE ELEVENTH FINANCE COMMISSION FOR 2OOO.2OO5

Ra.jasthan,and Tripura.Tamil Nadu has recom- social and physical infrastructure[Andhra Pra-
mendeda weight of 40 per cent for population deshl, Central investment [Tamil Nadu],
and 20 per cent for populationcontrol.Gujarat employmentrateIKerala],populationof SCs/STs
and Haryanahavesuggested a small weight for [MadhyaPradesh], proportionof peopleabove60
povertyratio Ishareof populationbelowpoverty yearsof age [Kerala],and densityof population
lincl. Many Stateshave also askedfor continu- IKerala].
'area'
ation of as a thctor with weightsranging
from 5 to 20 per cent. 6.27.Two corecriteriawhich havebeenused
by previousFinanceCommissionsfor providing
6.24.The useof progressive indiceslike dis- higherper capitadevolutionto lower per capita
tanceof per capitaincomefrom the highestper income Statesare distanceand inverse-income
capitaincomeor theinverseof percapitaincome, formulae. In the case of the Eighth Finance
or a compositeindexof backwardness, havealso Commission,thecombinedweightgivento these
been suggestedby some States.Among these, two criteria was 75 per cent. In the case of the
most Stateshave recommendedthe use of the NinthFinanceCommission,thecombinedweight
distancecriterionwith a weightrangingfrom 10 was 62.5 per cent for income tax and somewhat
to 60 per cent.The 60 per cent weight has been lowerfor Unionexciseduties.The TenthFinance
recommended by Bihar and Tripura.Orissahas Commissionhad decidedto use only one out ol-
recommendeda weight of 60 pcr cent for the the two formulae,namely,the distanceformula,
invcrsco1'percapitaincome.UttarPradesh wants discardingthe inverseincomeformula,and _eiv-
a w e i g h to f 5 0 p e rc e n tt o b e g i v e nt o a c o m p o s i t e ing it a weight of 60 percent.The reasongiven
i n d c xo f b a c k w a r d n e s s . wasthat,owing to theimplicit convexityin it, the
middle income Stateshave to bear a relatively
'Ihis
6.2-5.ScvcralStateshave askedfor the con- higher burdenof this adjustment. position
tinuanccof thc useof indexof infrastructure with holdstrueevennow, Many Stateshavef'avoured
weightsrangingfrom 5 to 40 pel cent.Stateslike this formula and therefbre.we have decidedto
Karnataka. Madhya Pradesh, Maharashtra, useit for inter-State distributiongivingit a weight
Orissa.Ra-jasthan and Tamil Nadu have recom- of 62.5per cent.This matcheswith the combined
mendedthe useof index of infrastructure. weight given by the Ninth FinanceCommission
to thetwo criteriain thisgroup,andit is still lower
6.26.Taxeffortor an indexof fiscaldiscipline than the weight given to the two criteria by the
hasalsobeenstronglyrecommended asa criterion Eighth FinanceCommission.This also recog-
in determiningthe inter se sharesof the States nisesthefactthatincomeandconsequently, fiscal
with weights ranging from 5 to 20 per cent. disparitieshaveincreased over time betweenthe
Gujarat. Haryana. Karnataka, Maharashtra, States.
Tamil Nadu haverecommended a weightfor tax
cffort as high as 20 per cent.Kerala.Punjaband 6.28. In the calculationof distances.earlier
Rajasthan haverecommended a weightof l0 per Commissionshad used comparableNet State
cent while Andhra Pradeshhasrecommended a DomesticProduct(NSDP)figures.However.we
weightof l-5percent.Otherfactorsmentionedby haveobtainedcomparableGrossStateDomestic
rndividualStatesrange from locationaldisad- Product(GSDP) figures from the Central Statis-
vantagcIKcralal,Statcspecificfactors[Tripura], tical Organisation (CSO),and haveusedthesein
collection or contribution to Central taxes our analysis.In thepresentstateofcollectionand
IMaharashtra, GujaratandHaryana],expenditure processingof incomerelateddata in the States,
on HumanResourceDevelopmentIAndhraPra- thisgivesa betterinter-state comparabilityof the
deshl, administrationexpenditure IKeralal,social StateDomesticProduct(SDP).which, in eff'ect.
servicesexpcnditure[Kerala], maintenanccof r e l l e c t st h c d o m e s t i c c o n o m i ca c t r v i t y .
 JOURNAL OF INDrAN SCHOOI, OF POI.I7'ICAL ECONOMY APRIL-.lUNI:2000

6.29. While computingdistance-based shares TenthFinanceCommission.Stateswhich havea

of States,the Ninth and Tenth Finance Com- largeareaandlow densityofpopulationcontinue
missionsfollowed the practiceof measuringthe to incur heavy expenditurefor providing basic
distanceof the per capitaincome of a Statefrom administrativeinfrastructure.The cost is very
that of the highestper capitaincome State.But high comparedto a Statewith an areaof similar
for this purpose.Goa, being a very small State, size but a high densityof population.We have.
was not considereda representative State,and therefbre,given a weight of 7.5 per cent to this
distances were measured from the per capita factor. The area-basedshareswere subject to a
income of Maharashtra.Maharashtraand Goa minimum of 2 per centand maximum of l0 per
were exogenouslygiven the samedistanceas for cent as speltout by the Tenth FinanceCommis-
Punjab.As a result, three States,vtz., Punjab, sion. We have continuedwith thesefloor and
Maharashtra,and Goa obtained the same dis- c e i l i n gl i m i t s .
tances,and consequentlythe same per capita
shares.This procedurehas some difficulties, 6.31.Tle indexof infrastructure as oneof the
particularly.if the distancebetweenthe repre- criteria for devolution has also been recom-
sentativehighestand the next highestincome mended by several States.We have, therefore,
Stateis too small.In the extreme,if the incomes retainedit as a criterion for determining the inter
of thesetwo Statesbecomeequal,the shareof the se shareof Statesand have increasedits weight
threehighestincome Stateswould becomezero. to 7.5 per cent. In our view, the availabilityof
Insteadof taking a singlehigh incomeStateasthe infiastructure plays a crucial role in attracting
'representative'highest income State, we have
investment.and Stateswhich are backwardwith
taken a three-Stateaverage of Punjab, Maha-
low index of infrastructureneed to be helped so
rashtraand Goa as the benchmarkfrom which
that theseare able to come up. The index has bee
distancesare measured.This is a weighted
conductedin the sameway aswasdoneby Tenth
averageof the per-capitaGSDPsof theseStates.
Finance Commission.The inter se sharesof
The distancesof theseStatesare worked out as a
States,usingthis criterion,havebeenworkedout
fraction of the distance of Haryana from the
in the samemanneras describedin para6.32.
representativebenchmark. These fractions are
obtained by taking the ratio of Haryana's per
6.32.Thebasicemphasisin our approach,as
capita GSDP to the per-capitaGSDP of these
highlighted in ChapterII, asalsoin our discussion
States.Theseproceduresaddressthe issuesthat
on restructuring of publicflnances,is to evolvea
havearisenearlier.viz..
suitablestructureof incentivesin all mcchanism
(i) ratherthanconsideringper capitaGSDPof of fiscal transfers.Our terms of ref'erencealso
'incentivesthatneec
a singleState,it takesthe averageofthe top make an explicit referenceto
threeStatesas representativeof the highest to be provided for better utilisation of tax and
income;and non-taxrevenues'.The Tenth FinanceCommis-
sion had made a beginnrngin this direction
(ii) the distances,and accordingly,the per utilising an index of tax effort madeby the.States.
capitasharesof Statesin the highestincome For this purposethey usedthe ratio ofper capita
group are not equal but successively own tax revenueof a Stateto its per capitaincome
decrease as per capitaincomeincreases. and weighted it by the inverse of per capita
income.This was done to ensurethat if a poorer
6.30. As already noted, many States have Stateexploited its tax baseas much as a richer
askedfor the continuationof area as a factor in State,it getsan additionalpositiveconsideration
determining the inter se share of States.This in the formulae.We considerthat while this may
factor was introduced for the first time by the be a relevantconsideration, the weight given to
 v o L .t 2 N O . 2 REPOR'T OI" TITI' EI,EVENT'II I'INANCE COMMlSSION FOR 2O0O-20A5 289

tax effort in this mannermay needto be reduced. Tablc 6.2. Criteria and Relative Weights for
Determining /nter se Shares of States
Severaleconomists,whom we met during our
visitsto States,hadindicated,basedon regression
Sr. Criterion R e l a t i v eW e i g h t
cxercises.that this shouldbe reducedto around No ( per cant)
0.30to 0.35.We haveconsideredthcseas a kind ( r ) (2) (3)
of henchmarkand decidedto reducethe rveight Population 100
of inverseof incornein thc tax-effortformula I n c o m e( D i s t a n c eN 4 e t h o d ) 625
Arca 7.5
fiom I to 0.5. Index of infrastructure 7.5
Tax effbrt 50
F i s c a lI ) i s c i p l i n e 1.5
6.33. We feel that. given the presentfiscal
situationof the Statesand the need lbr restruc- State-wise dataonthese criteria aregivenin Annexures VL2
t o\ 1 7 .
turing,as alsothe referencein our-foR fbr better
fiscalmanagement. furtherincentivesneedto be 6.35.It will be thusnotedthat thereare thres
main considerations in the selectionof criteria
providedfor fiscal discipline,and that this may
n a n r c l y(:i t r c s o u r cdc c f i e i e n c yt i: i t h i g h e rc o s r
be integratedin the principles of devolution. o f p r o v i d i n sg c r v i c e sa:n ai i l i r - i i s c adl i i c i p l i n e .
Accordingly,we are suggestingthe use of an
index of fiscal discipline.For working out this 6.36.In view of the ahoveconsiderations. we
index,we have adoptedthe improvementin the recommendthat each State be given a share as
ratioof own revenuereceiptsof a Stateto its total specifiedin Table 6.3 in the nei proceedsof all
shareableunion taxes and duties exceot the
revenueexpenditurerelatedto a similarratio for
e x p e n d i t u r tea x a n Cs e r v i c et l x . i n e u c ho l ' t h e
all Statesasa criterionfor measurement. The rati<r financialyearsfrom 2000-01to 2004-05.
so computedis usedto measuretheimprovement
in the index of fiscal disciplinein a reference Tablc 6.3: Inter se Shart ofStates
period in comparisonto a basepenod. For the
baseperiod, we have taken the averagcfor the Stares S h a r e( p e r c e n t )
(l) {2)
three-yearpcriod from 1990-91ro 1992-93.For
Andhra Pradesh ,1.701
thereferenceperiod,we havetakenthethreeyears ArunachalPradesh 0.244
from 1996-97to 1998-99.It may be notedrhat A s s a m .1.285
Ilihar i 4.591
such an improvementcan be broughtabout b1, G o a 0.206
higherown revenuesor lower revenueexpendi- Cujarat 2 . 8 2I
Haryana 0.9.14
ture or any combinationof the two. The com- Himachal Pradesh 0.681
parisonof the performanceof a Statewith the all J a m m u& K a s h m i r 1.290
Karnataka 4 930
Stateperformance,reflectsthe considerationthat Kerala 3.057
if the performanceof Statesis deterioratingin Madhya Pradesh li 838
Maharashtra 4.632
general,the Statethat accomplishes a relatively M a n i p u r 0 366
lower deteriorationis rewarded.Similarly,if all Meghalaya 0.342
Mizoram 0 .t 9 8
revenuebalanceprofilesareimproving,theState Nagaland 0.220
where improvement is relatively more than Orissa 5 056
Punjab t.t47
averageis also rewardedrelativelymore. The tax Rajasthan -s473
effortand the index of fiscaldiscipline,together, S i k k i m 0.I84
Tamil Nadu 5.385
aregiven a weightof 12.,5per cent. Tripura 0.487
Uttar Pradesh 19.798
West Bengal n l16
6.34.7o sumrnarise. the inter se sharesof the All States 100 000
Statesin tax devolution are determinedby the The total share of each State in the assessedCentral (ax
following criteriaand relativeweights. revenueson the abovebasisfor eachyear of 2000-05is siven
a t A n n e x u r eV I . 8 .
 JOLIRNAL OF INDIAN SCHOOL OF POI,]TICAL F:CONOMY APRIt.-JUNL 200()

6.37.Expendituretax and servicetax are not of Statesfor upgradationof standarcis in non-

prcsently lcviable in the Statc of Jammu & developmentaland social sectorsand scrvices,
Kasl.rmir. Sharein the netproceedsof thesc taxes particularlyof Stateswhich are backward in
is. thc-reforc. not assignableto this State.We generaladministration, with a view to modernise
rccommendthe shareol'cachof theremaining24 and rationalisethe administrativeset up in the
Statcsin thc net proceedsof cxpendituretax and interesto1 speed,efficiency and sound i'iscal
s c r v i c ct a xa si n d i c a t e idn T a b l e6 . 4 . I i i na n vy c a r . m a n a g c m e n t . '
thcsetaxesbecomeleviablcin theStateof Jammu
& Kashmir.the shareof eachStateincludingthal r o m m i s s i o ndsi d n o th a v ea n v
1 . 2 . T h ec a r l i e C
o l ' J a m m u& K a s h m i rr v o u l db e i n a c c o r d a n c especificrnandatc lbr makingearmarked provision
with thc percentagcs -uivcnin Table 6.3. throughspecialpurposegrants.Howeve't'. thisdid
not prcvent them fl'om allocatin-especil'ic
Table 6.4: Sh:rrc of Statcs othcr than .Iammu & Kash- amountsthrou-ghgrants-in-aicl lbr improvemcnt
nrir in thc FJxpcnditurt Tax and Service Tax 'fhus,
iind augmentationof serviccs. the First
Financc Comrnission providcd spccial grants litr
sl irtes S l r a r c( p e rc e n t )
itl ( l ) cxpanding prirlary education to States having
A n d h r aP r a d e s h 7 1J0l verv low school enrttlmentratio. Thc Second
A r u n a c h aP l radcsh 0.211 FinanceCommissioncxaminedccrtainspecific
Assanr 3 321J needsof eachStateand proviclcdspecial-qrants-
tsihar 1.1.78tt
Coa 0.209 in-aid to some of the Statesaccordingly.For
Gu.jarat 2858 instance.Andhra Pradeshand Karnatakawcrc
Harvana 0.9-56
H i r r r a c h aPl r a d c s h 0 692 provided grants fbr mcctin-gthe special needs
J a r n r l u& K a s h t n t l 0.(x)0 owingto the reor-ganisirtion of Statcs;Punjab. for
Karnltaka .1.994 p r o b l c m sa r i s i n go u t o l '
tackling t h e l i n g e r i n g
Kerala 3.097
M a d h y aP r a d e s h 8.95.1 partition; and Wcst Bengal. fitr mectingthe spe-
N'laharashtra .1693 cial needsemanatinglrom the influx of rcfugees
i\l llll tpr.il' 0 3 7I
iVlcghal aya 0.346 from the formcr EastPakistan.Having donc so.
N'lrzorarn 0 20l theCommissionincludedthesumsso dctermined
Nagaland 0.223 by it in thc total amountsindicatedfor grantsto
Olissa 5.122 'l'hird
PLrn.lah 1.162 those States under article 275(I). The
l { a 1a s t h a r r 5.544 FinanceCommissionJrrovidedspecialgfant fi)l'
Sikkrrn 0 Iu6
T a r n r lN a d u 5.45 i m p r o v e m c n to f r o a d c o n t m u n i c r t t i o tno t en
1"npura 0 491 S t a t e sk. c c p i n gi n v i c w t h e i r r c l a t i v cn c c d sa n d
Uttrr Pladcsh 20.057 rcsources. The FourthandFifthCommissions did
WcstBengal u.221
T o t a lA l l S t a t e s r00 (xx) not provide any specitic grants fbr the purptlses
of upgradationof any services,but did rnakc
provision1brhigherlevcl of expcnditurcin cer-
6 . 3 8 .I f i n a n yy e a rd u r i n g2 0 0 0 - 0 5a. l a x u n d c r
U n i o ni s n o t l e v i a b l ci n a S t a t c t. h c s h a r eo f t h a t taln areas.
Statcin thattax shouldbeputto zeroandthecntire
procceds should be distributcd among the 7 . 3 . I t i s o n l y t r - o mt h c S i x t h F i n a n c eC o m -
r c m a i n i n gS t a t e sh 1 , p r o p o r t i o n a t c lay d j u s t i n g m i s s i o no n w a r d st h a t t h c c l i s n a r i t i ei sn t h c p r o -
t h c i rs h a r c . r.rsionof aclnrinistrative anclsocialserr.'iccs wcrc
s o u g ht o b e c o r r e c t c d t h r o u g ht h c n t e c h a n tsmol
CHAP'I'I'R VII
UPGRADAI'ION ANI) upgradation grants. The Sixth Finance Commis-
SPECIAL PROBLENI GRANTS sionwasspecificallyrequiredto takeinto account
7 . l . P a r a g r a p5h( v ) o l ' t h c P l c s i d c n t i aOl r d c r therequirements of theStatcsthatwerebackward
in
r c t l u i l c su s t o t l t k ci n t oa e c t t u n t ' t hrcc q u i r c t t t c n t s standards ol' general administration lor
vot,.t2 No.2 REPORT OF 7'Hl: I':LEVENTH F INANCII COMMISSION FOR 2000-2005 )o I

upgrading the adrninistrationwith a view to deficit on revenueaccount.The sectorscovered

bringingthe sameto the levelsobtainingin the by it for thc'sesrantswerenon-developmental as
moreadvancedStatesover a periodof ten years w e l l a s d c v e l o p m e n t a( el d u c a t i o n )I t. a l s o p r o -
It identifiednine sectors- developmental as well vided specialproblcmgrantsto all the States.
asnon-dcvclopmental - andprovidedupgradation
grants to nineteenStatesthat were below the 7.5.We requested theStatesto sendtheirviews
all-Stateaveragein termsof per capitaexpendi- on this term of ref'erencc,identify the areas
ture in thosesectors.It made suitablefinancial requiringsupport,and give their proposals.In
provisionsfor suchStatesso as to bring them up responsc,States have presentedto us their
to theall-Stateaverageovera periodof five years demandsfor upgradationerndspecralproblem
c o v e r e db y i t s a w a r d . T h e S c v c n t h F i n a n c e grants totalling to a staggcfingfigure ol' Rs
Comrnissron was lequircdto assessthe nccdsol' I . 8 1. 0 1I c r o r c . S e c t o r - w i s ed e t a i l s o f ' t h e i r
Statcsthat wcrc backwardin generaladntinis- d e m a n d sm a y b e s e e ni n A n n e x u r cV I I . L W c
t.r'iitionfur upgradationo1' standardsin non- havc-taken noteof someof'thcsedcmandsin thc
dcvelopmentalsectors.It lilllowed a two-stcp a s s e s s m conft t h en c e d so l ' t h eS t a t e so n r c v e n u e
approach:first, it clmittcdliom thc purview of account.Wc are also aware that the plan pro-
thcscgrantssuchStatesthat werc assessed to bc gralnmesrvouldcoversonrcol'thedemandsmadc
in prc-dcvolution revenuesurplusand.thereafter, by the Statesfirr thesellrants.Of the remaining
it dctcrminedthe nccdsof thc remainingStatcsin itcms,r.vchavctricdto providefor asrnanysectors
the identil'iedsectorsbasingon the comparative a s w e c o u l c lk. c e p i n gi n v i c - wt h e r c s o u r c ec o n -
clatain physicaltermsrathcrthanon thcpercapita s { r a i n t sW . e h a v en o tc o n fi n c c tl h es c g r a n t st o t h c
e x p e n d i t u r cI.t c o n f i n e dt h e s eg r a n t st o n o n - items/sccl.ors soughtby the Statcsaloneandhave
clevelopmental sectorsand expectedthe States' i n c l u d e da r c a s t h a t w e c o n s i d e rc s s e n t i a l i l
denrandsrclatingto dcvclopmentalsectofsto bc s o c i a la n d e c o n o m i cd e v e l o p m e notf t h c S t a t e s
providedunderthe Plan Further.we have not linked thesc-srantsto thc
assessed deficitsof theStatesnor linritedit to the
7 . 4 . T h c E i g h t h F i n a n c eC o m m i s s i o nh a d deficitStatesalonc.The surplusSlatcshavealso
similartermsof ref'erence in respectof upgrada- beengiven thesegrantsas wc I'eelthat thercis a
tion as thoscfirr tl.reSeventh.and it fbllowedthe scope for l'urtherimprovcmentin these Statcs
'fhe
s a n r c r i t e r i at o d e t c r n r i nteh cc l i g i b i l i t yo f a S t a t e accordingto thcnormsdcvelopedbv us. basic
f i r rt h e s eg r a n t sF. o rt h ee l i g i b l eS t a t e si t. p r o v i d e d data uscd by us to deternrincthesenitrnts alc
glants lor two devclopnrentalsectors.namelv. i n d i c a t e d i n A n n e x u r eV I I . 2 .
educationand health.besidcsfor certain non-
developrnental sectors.In addition,it provided 7 . 6 .O n e o l ' o u r n r e n r b c r sS. h r i J . C J e t l i .d i d
grantsto some Statestowardsspccialproblems n o t a g r e ew i t h t h c a b o v ev i c w s .p a r t i c u l a r l tyh a r
too. The termsof referenceof the Ninth Finance o 1 ' a s s i s t a nt oc a e l l S t a t c si n c l u d i n -seu r p l u sS t a t e s .
Commissiondid not make any specil'icmention H e c o n s i d e r etdh i sa p p r o a c a h s i n c o n s i s t c nwti t h
ol'the upgradationor specialproblemgrants.In a r t i c l e2 7 - 5 o f t h eC o n s t i t u t i ounn d c rw h i c h .a sp c r
i t s f i r s t r e p o r t( 1 9 8 9 - 9 0 )h, o w e v e r i,t m a d ep r o - h i s i n t e r p r c t a t i o n su . c hc r a n t s - i n - a ihda v et o b c
visionfbr upgradation as well asspecialproblem given only to such Statcs as are in necd o1'
g r a n t sB . u t i n i t s s c c o n dr e p o r t( 1 9 9 0 - 9 5 )i .1d i d assistance. He telt thatsinceparagraph 5(v ) of thc
n o tm a k ea n ys u c hc x c l u s i v cp r o v i s i o nT. h cT c n t h Presidential Orderrcquiredusto takeintoaccount
FinanceCommissionwas spccificallyaskedto the requircmentsof Statcsfor upgradationol
consider the requirementsof the States lor standardsof non-dcvelclprnental and socialsec-
upgradationin non-developmental sectors.It torsandservices particularlyo1-States whichwerc
recommended upgradation grantsfor thoscStates b a c k w a r di n g c n e r aal d m i n i s t r a l i o n w,i t h a v i e w
that were assessed by it to be in pre-devolution to moderniseand rationalisethe adnrinistrativc
292 JOURNAL OF lNDIAN SCHOOI, OF POI,ITICAL ECONOMY APR]1,-JUNE2OOO

set up in the interesto1'speed,efficiency and survey o| lands. improvementof land records

soundfiscalmanagement, the approachadopted management. andcreationof infrastructurein the
by the Commissionandthe grantsrecommended newly createddistrictsand sub-districtunits.O1-
in thisChapterdo not alwaysmeasureup to these thcse,we haveidentifiedone item, namely.pro-
requirements. However,the Chairmanand other vision of intiastructurein the newly created
membersof theCommissionwereof theview that districts.for upgradationgrants.ThirteenStates
thesegrantsneednot be linked to the assessedhavecreatedncw districts,T2 in all. during the
deficitsol'the Statesas thesearelbr suchcapital periodI 995-00.SevenoftheseStateshavesought
investments that are not coveredunderthe plan grantsfor creationof inl'rastructure in the newly
either becausctheseare too small or are tradi- createddistricts.The ratio of the amountsoughl
tionallyclassil'icd undernon-plancapitaaccount
to thenumberof suchdistrictsvariestiom Rs6.74
for which adequateprovision is not available
crore(Mizoram)toRs 10-5.63 crore(Karnataka).
otherwise.
Someof thesedistrictshavebeenvery largeand
unwieldy and required bifurcation for better
7 .1. The sectors identified by us for the
grantsare as follows: adnrinistraticlnand fbr better interl'acebetween
upgradation
i. Districtadministration: the peopleand the admirristration. However.in
ii. Policeadministration; order to ensure that this does not act as an
i i i . P r i s o nas d m i n i s t r a t i o n : incentivcfor creationof new districtson con-
iv. Fire servrces; siderationotherthan that of administrativeeffl-
\ . J u d i c i a al d m i n i s t r a t i o n ; ciency,we haveprovidedonty 50 per centof the
v i . F i s c a la d m i n i s t r a t i o n : amountssoughtby the Statesand limited it to Rs
vii. Healthservices: l0 crore pcr district,subjectto the provisionol
v i i i . E l e m e n t a reyd u c a t i o n : ntatchinggrantby the respectiveStates.
ix. Computer,trainingfor schoolchildren;
x. Publiclibraries; Police Administration
xi. Heritageprotection;and
xii. Augmentation of traditional water 7.9. The proposalsreceivedfrom the States
sources. regardingupgradationof police administration
amountto Rs 30,041crore, which includeresi-
In addition, we have provided grantsfor cer- dentialbuildings,non-residential buildings(po-
tain specialproblemstoo, which are unique to lice stations,outposts,etc.),equipment,fbrensic
eachState.In all. we haveprovidedRs 4,972.63 sciencelaboratories,vehicles,communication.
crore towards upgradationand special problem
training, etc. The Ministry of Home Affarrs
grants, for which State-wiseand sector-wise
(MHA) hasalsosubmitteda memorandumto us
detailsaregivenin AnnexureVIL 3 andyear-wise
seekinggrantsfor thesepurposes.The Ministry
breakup, in AnnexureVII. 4. Our approachto
has also pleaded for creation of a corpus fbr
eachof thesesectorsis exnlainedin the followins
paragraphs: rcsearchand developmentand specialassistance
to the Statesaffectedby left-wing extremism.The
District Administration Bureau of Police Research& Developrnent
(BPR&D) has submitteda detailednore on rhe
7.8. The proposalsof the Statesfor upgrada- requirements of thepolicein eachState.After an
tion of the infrastructurcof district administration assessment of the needsand the availabilityo1'
include construction of residential and resources, we have made provisionof Rs 509
non-residential buildings,provisionof furniture, crore for meeting someof the essentialrequire-
equipmentand vehicles,training infrastructure, ments of the police,which arediscussedbelow:
VOL.12NO. 2 REPORTOt: THE ELEVEN'IHFINANCECOMMISSIONF'OR2OOO-2005

PoliceStation Buildings: Tablc 7,1: Etluipnrent for Statc

F'orensicSciencc Laboratorics

7.10.Most Stateshavc soughtgrantsfor con- Item Cost

SI.
structionof buildings l'or police stationsand No. t R si n
our.posts. The BPR&D has reportedthat out of l a k h sr
0) (2,) (3)
I 1 . 6 3 5p o l i c es t a t i o n si n t h ec o u n t r yo, n l y 8 , 8 3 9
I High perforrnanccthin layer chrornatog- l-5
are housedrn proper buildings.They have rec- raphy rnachine
omrnendedthat assistance bc given to thc States 2 U l t r r - v i o l e tv i s i b l es p c e t r o - p h u t o r n c l c r 5
lbr thcconstruction of buildingstbr theremaining l Cas-chrornatography head space 15
I Atornicabsorptionspectro-photorrretcr l0
p o l i c es t a r i o n as t a c o s to f R s l 2 l a k hp e r u n i t .I n 5 Portablevideo-spectralconlparator ll
rcspectol sonreStatcs,the ligures indicatcdby Total 53
thc-BPR&D on the rcquircmcnt<,rfbuildingslbr
police stationsappearto be too large.Also, the
Equipment and Weapons for the Police:
l'iguresreportedby themaremorethantwo years
old.duringwhich periodmanynewpolicestation 7.12. States.in their memorandato us, havc
buildingsmight havecome up. We have,there- madeout a strongcasefbr providing grant to the
Ibre. provided fbr the constructionof police policetbr procuringthe requiredequrpmentand
stationbuildingsto the extentof fifty per cento1 weapons.The MHA, in its presentation to us,has
the numbcrsindicatedby the BPR&D for each alsohighlightedthis issue.We had hada meeting
S t a t eb u t l i n r i t e dt o a m a x i m u mo l 1 0 0u n i t sf o r with the Direclor,IntelligenceBureauand some
a Statc. o1'theStateDGPs;they too Iaidemphasison this
aspcct.The BPR&D has submitteda comprc-
hensivelist of equipmentand weaponsrequircd
Forensic ScienceLaboratories :
to be plovided to the Statc polrce. Of the
equipmcntsuggested by it, wc haverdentiliedfl ve
7 . 1 1 .S o m c S t a t e s a . s also the MHA. have and plovided ibr the full requu'ement. viz". l{s
drawn our attentionto the emergcntneed 1'or 7 9 . 1 6c r o r e. t h e d e t a i l so f w h i c h a r c i n d i c a t e d
irr
strengthening the infiastruclureof lbrensicsci- Tablc 7.2. In addition, wc have provided Rs
cncelaboratorics (FSLs) in the States.including 152.51croretbr purchaseof'new weapons.
t h cm o b i l ef b r en s i cs c i c n c eu n i t s( M F U s ) .W e t o o
f-eelthat well equippcdFSLs are necessaryfor Facilities for Women Police Personnel:
scientificand cI'l'ective investigationof criminal
7 . 1 3 .I n t h e l a s tc o u p l eo f d e c a d e sm, o r ea n d
cases.The BPR&D has informedthat at present
morc women havebeenjoining the policc fbrce
4 I 5 policedistrictsin the countrydo not havethe
at all levcls. But adequatefacilities are not
MFUs.We havemadeprovisionfbr settingup the availablcin thepolicestations1brthem.We have
MFUs in all the districtswhere thesc are nol decidedto make provision lbr constructionof'
presentlyavailable,at a cost of Rs I 2 lakh each. restrooms-cum-toilets in the police stations1or
We havealsoprovidedfbr settingup a StateFSL women police personncl.The unit cost for the
a t G o a ( R s1 9 2l a k h ) .a n d R e g i o n a l F S Li nsO l i s s a constructionof a restroom-cum-toiletis csti-
(one.t.Punjab(one) and Uttar Pradcsh(two), at ntatedto be Rs 90,000.Wc have provided Rs
Rs 180lakh per unit, for which detailsare givcn 52.36 crore for this purposeand distributedit
i n A n n e x u r c- V I I . 5 . l n a d d i t i o n b . a s e do n t h e among the Statesin the raticlof the numberof
existingpolicestationin thc States.so asto covcr
recommendations of the BPR&D. wc havc pro-
fi1'typer ccnt of thc policestatlons.
videdequiprncntgrantof Rs 53 lakh to eachStatc
for upgradationof the cxisting State Forcnsic 7 . 1 4 .S t a t e - w i sseu m m a r yo f t h ep r o v i s i o nm a d c
Scicncel,aboratories,the details of which arc I b r u p g r a d a t i oonf p o l i c ea d m i n i s t r a t i oins i n d i -
g i v c nr n T a b l c7 . 1 . c a t e di n T a b l e7 . 2 .
 JOURNAL O[' INDIAN SCHOOL OF' POLN'ICAL ECONOMY APRII,,.JUNE2OOA

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\tot, l2 NO.2 RT:PORTOF 7'HEL,LEVENT'Ht;INANCE COMMISSlON I'OR 2LXN-2O.I5

Prisons Administration station.After meetingthat need.the nextprel'er-

enceshouldbe given to the towns with a pop-
7 . 1 5 .A l l t h c S l a t e se, x c c p tC o a , P u n j a ba n d ulationof 50.000or more,thatdo not havea I'ire
\\'est Bcn-sal.have sou-ghtupgradationgran1, station.
i l m o u n t i n tgo R s 3 , 7 0 2c r o r ei n a l l .t o i m p r o v ct h e
Administration
l a c i l i t i c sa n di n f r a s t r u c t u r e l a t i n gt o t h ep r i s o n s Judicial
a d m i n i s t r a t i oW n . e h a v ep r o v i d e da n a m o u n to t
7 . 1 7 .W e h a v c o b s e r v e dt h a t t h e r ci s a p e n -
Rs l16 crore firr upgradationo1' thc existing
dencyofabout two crorecasesin thc districtand
arrangcments l'or-sccurityin thc prisonsand for courtsin the States.This has bccn a
subordinate
vocationaltrainingand medicalfacilitiesfor the causeof conccrnand unlcssrenredialIneasurcs
i n m a t c s .S t a t e - u ' i s ea l l o c a t i o nm a d c b y u s i s aretaken,thependcncyis boundto incrcascevcry
hasedon thc authorisedaccot'nmodatittn in thc ycar.Many Stateshavegiven proposalstbr cre-
i \ i \ t r n ! l r i l s h u t u i r i n g a e c r t u i nm i n i t n u t t t ationof newcourts.TheMinistryof HonteAfl'airs
lnl()unt tcl the smallcrStatcs.Statesntay. il' the has also supportedearntarkingof funds lirr the
lunds pcrmit. alsclundertakeexpansittnof the creationof additionalcourts1or the disposalol
cxistingiails lrclrl out 01'thescglants after the long pendingcases.We are providinga grantof
requirements of security,vocationaltrainingand Rs 502.90crorefbr creiitionof additionalcourts
rncdicalfaciliticsfor tl.reexistingjails are met. s p e c iifc a l l y f b r t h c p u r p o s so l ' d i s p o s i n -ou{ ' t h e
ArunachalPradeshdoe-s not haveaiail so fbr and long-pendingcases.State-wiscdistributionhas
pendcncl'ol'cases
hasrequestedl'ol a grantto constructa new jail; beenclonckeepingin vicw the
and the avcrage ratc o1'dispositl ol casesin thcsc
wc havcprovidcdRs l0 crorefor this purpose.
coufts. We have wurkcd out the cost ol ltn
a d d i t i o n aclo u r ta sR s 2 9 l a k h .w h i c hi n c l u d c st h e
F'ire Services
s a l a r yo l a j u d g e , a p c s h k a r l s u p c r i n t e n d can t ,
stcnographer anda peon.firr livc ycals( @ Rs -1.8
7 . 1 6 .T w e n t y S t a t e si.. e . ,c x c l u d i n gG u j a r a t , l a k hp . a . ) ,b u i l d i n g( R s 3 . 4 l a k h )a n dc o m p u t e r s -
Maharashtra, Punjab,Tripura and West Bcngal, l i b r a r y ,c t c . ( R s 1 . 6 l a k h ) .T h i s w i l l o n a b l et h c
h a v c .i n a l l . u g h R
s o t s .8 1 0c r o r ef o r u p g r a d a t i o nStatesto createI ,734new additionalcourtsStatcs
ol' f ire services. Thc StandingFire Advisory mayconsiderre-ernployment ot'retired.iudges lil'
C o m m i t t c co l - t h eG o v c r n m e not f I n d i ah a ss c ta a l i m i t e cpl c r i o d ,f b r t h e d i s p o s aol l ' t h e p e n d i n g
nornrol'providinga flre stationfor every l0 sq. c a s e sO . n e o 1 ' o u rm e n r b e r sS. h l i . N . C l .J a i n .h a s
krns.in theurbaniireasand50 sq.kms.in therural suggested a schemein thisregard.which is placcd
arcas.The totalrequirement of fire stationsworks a t A p p e n d i xV I I . l . W e c x p e c tt h a t w i t h l h c s c
o u t a t 6 8 . l 8 t Jo n t h i s b a s i s .a g a i n s t h e p r c s e n t additionalcourtsand thc relbrrls in thc lawsand
availabilityol'lessthantwo thousand fire stations. procedure,it shouldbe possibleto substantially
pcndencyin thc
We obviously cannot provide for thc entire bring down, if not eliminate,
district and subordinate coul'ts over the next f ive
amountrequiredfor settingup all thefire stations
years.Wc havealso noticedthat almostten per
asperthesenorms.However,we havetakenthese
centof thepostsofjudicialolTicers remainvacant,
normsas thc basisand afterdeductingthe avail-
which adds to the backlog of cases. These
ability of this f acility in eachState.worked out vacanciesmay bc fillcd up soon.
thc ratio of shortlallcomparcdto the all-States
shortfalland then distributedthe amountof' Rs FiscalAdministration
2 0 1 c r o r e .a l l o c a t c db y u s , a m o n gt h e S t a t e sA.
m i n i m u r na m o u n th a sb e e np r o v i d c dt o s m a l l e r 7.18.For upgradationol' infl'astructure ol' thc
S t a ( c sI.n s c l e c t i n -teh e t o w n so r p r o v i d i n gt h i s v a r i o u sd e p a r t m e n ti sn v o l v e di n ( ' i s c aal d m i n i s -
I'acility,prcl'erenceshould be given 1o thosc t r a t i o n ,i n c l u d i n gt h e r c v c n u ce a r n i n gd e p a r t -
districtheadquarters which do no1havc any f irc ments and the Treasuries & Accounts
 JOURNAL OF INDl,IN SCHOOI, Of' POI,I7'ICAI.LCONOMY APRII"-JUNL 2OO()

departments, twr:ntyStates,i.e.,excludingGoa, Health Services

Gujarat.Mal.rarashtra. Punjaband West Bcngal.
havesoughtan irmountof Rs 2,087crore in all. 7.19.The proposals subnrittcdby theStatcslbr
Indeed. modernisationof these dcpartmcnts, upgradation of hpalthinfrastructure rclatelargely
e s p c c i u l l rh y w u y o l -e x t c n s r v c o m p u t e r i s a t i o nto constructiono1'buildingliu' thc hospitalsand
ol'theilofjerations, is essential. particulariyin the l'clrhealthcentresat various levels.rcsidential
contextol the proposedswitchover to the value quarters.equipment.vehicles,etc. We areol thc
addedtitx re-!:ime. Wc haveprovidedan anount view that the primary healthcare needso{' the
ol' Rs 200 crore fil' computerisationof thcsc p c o p l ew o u l db e m e t t o a c o n s i d e r a b e l ex t e n tb y
departments in all the 2.5Statesand distributedit the existing plan and non-plan programmes.
amongthc Statcsin thc ratioof their tax revenuc I{orvevcr.thesecondary needsin termsof medical
receiptsfbr 1997-98.Stateslike Maharashtra and d i a g n o s t ifci r c i l i t r c a
s r e l a c k i n gi n m o s td i s t r i c t s
Tamil Naduthathaverelativelylargctax revenue i n t h e c o u n t r y .T h e D i r e c t o rC e n c r a lo l ' H e a l t h
receipts,are given slightly lessthan the propor- Serviceshas sent to us thc broad cstirnatesfbr
tionateshare, kecpin-uin view thc cconomieso1 r e q u i r e n r e notf e q u i p n r c nat n d b u i l d i n g sf o r t h c
s c a l e . T h i s a r n o u n t s h o u l d b e u t i l i s e d 1 ' o r c o m m o n l yr e q u i r e dd i a g n o s t i ce q u i p m e n tW . c
procul'enrent of computers.installationol' hard- haveassessed the cost estimalcsl'or eachcentre
wareand sol'twareandrelatedtrainingactivities. a s f o l l o w s( T a b l e7 . 3 ) .

Table 7.3: l,quipmcnt firr Rcgional Diagnostic Ccntre

t R s i n l a k h s)
'fotal
SLNo Equiprnent C o s to f E q u i p r n e n t C o s to f t l u i l d i n g Cost
il) (2) (3) (.1) (5)

I E l e c t r o - C a r d r o g r a(rEnC G) M a c h i n c 0.4() I l0 I .:50

l T r e a dN { i l l : 1 . ()X 0 . 6 () -t 60
{ Electro-Enccphalograrn tEEC ) l\{odc 175 l15 5 (X)
\4 achinc
:+ X-ray Nlachrnc -r5.(x) . 5(.X ) 40.(x)
5 U l t r a s o u n dM a c h r n e E.IX) L.+0 9 .10
6 C o r r r p u t e r i s eTdo l n o g r a p h l(' C T ) S c t n 90.00 3.5() 93 .s0
IlI achinc
7 Cli nical Pathologyl-aborator_r' 50{)0 -i.()0 5:1.(X)
IJ ( ) p e r a t i o nT h c a t r e( M a j o r ) l 5() Il.-50 l.{.(x)
() Opelation Theatre( Mi nor) 0...]5 2.65 I (X)
I0 E q u i p n c n t & I t u i l d i n g sf b r M a t e r n a l& 60.00 I5.()0 75 (X)
C h i l d H c a l t hC a r e
-l-otal
l5J ,+7 1 ( X)

7 . 2 0 .W c h a v cp r o v i d e df b r e s t a b l i s h n t con t Fundslirr this sectot'are usuall)'providcdundcr

r c g i o n adl i a g n o s t rcce n t r e isn t h eS l a t e cs o m p u t c d the budgcthcads2,202 and4,21)2throughnon-
at onc centrefbr everyfour districts.T'hcnumber PlanandPlanschemcs. But thcscarenol adequatc
of suchcentl'es andthe amountprovidedlbr each fbr providingeducational in fiastruclure includin-e
Statcis indicatcdin Table 7..1.The StateGov- schoolbuildings,drinking watcr and toilet lhcr-
crnlncntsshouldprovidethe recurringcxpenses, lities.The cxtcrnallyaidedprojectscover only a
i n c l u d i n gs t a l . c o s t sa. n dr e c o v c r c a s o n a b lues c r l'cw Statesand that too, only somc districtsin
chafgesfbr thc purpose. theseStates.We are of the view that the cle-
m e n t a r ye d u c a t i osnc c t o ri.. e . C
. l a s sse l - 8 . s h o u l d
E l e m e n t a r lE d u c a t i o n havc thc utmost priority and, thcrelirre.needs
supportfor cclnstruction of the schoolbuildin-ss
1 . 2 1. A l l S t a t c s ,e x c e p t S i k k i m a n d W e s t and related infl-astructurc particularlvin rural
Bcngal,havc soughtupgradationgrantslirr the a r e a sA. c c ( ) r d i n g l yw, c h a v cp r o v i d e da n a m o u n t
c d u c a t i o ns c c t o ra. m o u n t i n st o R s 2 3 , 6 8 7c r o r e . o1'lts506crorefi)r thispurposc.This amounthas
 VOL.12NO.2 REPORTOT- 7-HE EI,EVENT'H I.-lNANCE CAMM$SION FOR 2OOO.2OO5 297

bcendistributedamongthe Stateson the basisof weight to each.Theseamountsare to be utilised

a compositcindex worked out by taking into first fbr construction of school buildings/class
accountthe numberof illiteratesin the agegroup roomswhere the schoolsare currently being run
J-14 ztsper the 199I Censusand the averageper in the open.After meetingthis basicrequirement,
capitacxpenditureo1'theStatesunderthe budget the remainingamountcan be utilisedfor provi-
head'2.202-General education'for threeyears- sion of toilet and drinkins water facilitiesin the
199-s-96,1996-97and 1997-98,giving equal e x i s t i n gs c h o o l s .

Table 7.4. Provision fbr setting up Regional Diagnostic Centres

(Rsin crore)
SI NI) Strte N u r n b c ro f R c g i o n a lD i a g n o s t i c Cost(@ Rs .3crore pcr centre)
Cenrresproposed
(l) (2) (3) (4)
I Andhra Pradesh () l8
l Arunachal Pradesh 3 9
3 Assarn 6 Itt
-t ll ihar l4 11

5 Goa I l
b Cujarar o llJ
Haryana 5 1.5
o HttuachalPradesh 3
Janinru& Kashrnir .+ l2
l0 Karnataka 7 2l
ll Kerala 3 9
ll Madhya Pradesh l5
l3 Maharashtra 9 27
t4 Manipur 2 6
15. Meghalaya 2 o
lo. Mizoram 2 o
l1 Nagaland 2 6
l8 Orissa 6 1r'
l9 Punlab 4 l2
l() llryasthan fi at

ll Sikkrrn I 3
tl futrrl Nadu 7 2l
ll Tripura l
l4 Uttar Pradcsh 2i 63
25 Wcst Bengal 4 t2
T o t a l- A l l S t a t e s t44 +):

Computer Training for School Children Rs 245.53crore fbr this purpose.Member Sec-
retary, Shri T.N. Srivastavahas suggestedan
7.22. We have taken note of the growing
outline on the manner of utilisation of these
importanceclf infbrmation technologyin the
grants.This is given in Appendix VII. 2. The
sLlciety.
Knowledgeof computerised soliwarefbr
word-processing, spreadsheet.internetand mul- detailedmodalitiesof construction,purchases.
timedia applications and programming are curricula,user charges,and operationof these
increasinglybccomingnecessary for mostjobs, Centresshouldbe worked our by the State-level
whether in the private or the public sector.
empoweredcommittee chaired by the Chief
Tlaining in the use of computerhardwareand
Secretary. The Committee may co-opt other
soliwareneedsto be impartedto childrenat the
schoollcvel itself.However,the facilitiesavail- expertsin thefield.We expcctthesearrangements
able lbr school children in this regard are to becomefunctionallatestby the 3 lst March,
extremelylimited.We have,therefbre,provided 2 0 0 1 .
 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY APRII.-JUNI:2000
298

Public Libraries augmentationof thetraditionalwatersourcesthat

have been the mainstayof water supply for the
'7 daily householdneedsofthe people,particularly
.23. Librarieshave played an importantrole
in the spreadof knowledgeandawarenessamong in the rural areas,besidesfbr the cattle. Most ol
personsof all ages. Consideringthe growing such water sourcesare revenuetanks/pondthat
literacyand generalawareness have gradually got silted up. These need to be
amongthe people,
particularlythe youth, in the urban aswell asrural
rejuvenated and augmentedin a systematlcway.
areas,it has become necessary to strengthenMany Stateshave soughtgrantsfor this purpclse.
and
upgrade the network of public librariesinWe are providingRs 500 croreto the States, on
the
country.We have,therelbre,providedan amount the basisof the extentol'their un-irrigatedgeo-
ol Rs I crorelbr the Statelevel public libraryin graphicalareas.
eachState.In addition,we haveprovidedamounts
SPECIAL PROBI,ITMS
computcdat Rs 20 lakh per districtfbr upgrada-
tion of public librariesin the mofusil and rural 1 .26. Thc specialproblens ol' variousStatcs
arcas.The Commissionfe'elsthat the Statcsmay for which we havedecidedto recommendgrants
createa corpus.investit and usethe returnsfrom areas fbllows:
it for thc purchase ofbooks andperiodicalsevery
( ) n
ycar a sustainabb l ea s i s . Andhra Pradesh

Heritage Protection 7.27.TheStatehassubmittedthattheactivities

of the extremistsin the Stateare spreadall tlver
1 .24.Duringour tour to the States,particularly the State - from the remotc naxalism-alfected
the field visits, we were struck by the decayand areasto severalurbanareas.It hassoughtRs lOo
degradationof a large number of historical
crore for strcngtheningthe infiastructurelor the
monumentsin variouspartsof the country.We
police for anti-extremistsoperations This
alsonoticedthata largearcheological materialis
includes upgradationof cquipment, vehicles,
lying in many a placeunprotected. Casesof theft
training,conrmunicationand improvcmentstct
anditlegalexportofsuchmaterialhaveoftcnbeen Wc haveprovidedRs
theexistingpolicestations.
reportedin the past.Thesemonumentsare gen-
60 crorefor this purpose.This is over and abovc
erally outside the folds of the Archeological of police
theprovisionmadeby us tirrupgradation
Surveyof India and are the responsibilityof the
administrationfor all Statesincluding Andhra
StateGovernments. Thereis a needto providefor
Pradesh.
protectionand housingof thesemonumentsand
materials.Some Stateshave sought for upgra-
Arunachal Pradesh
dationgrantsfor this purpose.We haveprovided
Rs 122 crore for restoration, protection and
7 .28.TheStatehasrequested for spccialgrants
preservation of historical monuments and
allocation, to construct the StateSecretariat and Legislative
museumsfbr all theStates.Inter-State
buildings. We are providing Rs 20
indicatedin Annexure- VII. 3, has beenmade Assembly
crore for this purpose. It has also sought grants
keepingin view the number of districtsin the
for establishing a telecommunication network
States.
betweenthe l3 districtsof the Statc,the State
New Delhr,
Augmentation of Traditional Water Sources capital and its liaison offices at
Calcutta,ShillongandCuwahati,at an cstimated
7.25. The recentdroughtin some Statesand costof Rs l0 crore.We haveprovidcdRs 5 crore
the severewatcr scarcity in many others,has for thispurpose,thebalanccto conlcasnlltching
drawnour attentionto theneedfor protectionand sharefrom theStatcGovernmcnt.In addition,thc
 voL. 12NO.2 REPORTOF THE ELEVENT'HFINANCECOMMISSIONFOR2OO()-2005 299

State has sought grants for undertakingsurvey constructed asthepalaceof YounusAdil Khan in
andsettlementoperationin the State;for this we the 1490sand hassincebeenconverredto house
haveprovidedRs 5 crore. the StateSecretariat. This old building requires
considerableimprovement and extension for
Assam
which they have sought assistance.We have
providedRs 3.50crorefor thispurpose.It hasalso
1 .29. The Tenth FinanceCommissi<tn (TFC)
soughtgrantsfor upgradationandmaintenanceof
hadprovidedthe Statean amountof Rs 60 crore
buildings,roads,watersupply,powersupplyand
Ior constructionof building for the StateSecre-
tariat.Thc Statehassoughtiurther grantsfrom us irrigation. We have examinedthe maintenance
to undertakcothercomponents of its StateCapital requirements elsewhere. However, we do
Project, viz.. basic infrastructuresuch as water appreciatethat tourismis an importanteconomic
supply. electricity,drainage,sewagedisposal, activity in the Stateandneedsgood infrastructure
roadsand parks,besidesfor completionof the support.Accordingly,we have provided by Rs
buildin-rrs fbr the State Secretariat,Legislative 6.50crore for upgradationof roadsin the tourism
Assembly.etc. Keepingin view the TFC grants circuitsof the State.
fbr sonre of these purposes,we have made a
plovisionof Rs 20 crorefor the remainingcom- Gujarat
ponentso1'theStateCapitalProject.The Statehas
also requestedfbr grantsfbr establishment of a 7 .32.The Statehassubmiuedthat its 512 km
regionalathleticscenrre,a regionalindoorgames
long international borderis extremelyvulnerable
centre,a regionaladventureacademyfbr moun-
to cross-borderinfiltration. arrns and drug
tainecringand adventuresportsand a regional
smugglingand subversiveactivities.The grants
academyfrtr watcr sports.For settingup these
lirur re-eionalcentres/academies, providedby the Governmentof India underthe
we have pro-
v i d e d ,i n a l l , a s u m o l ' R s l 0 c r o r e . BorderArea DevelopmentProgrammehavebeen
too meagre,totallingto aboutRs 8-9 crorefbr the
Bihar five year period 1993-98.It has soughtspecial
granlsto bolsterthe securityinfrastructurealong
7.30.The Statehas given requestfor special thebordereffectively.This includesprocurement
grant of Rs 50 crore for upgradationof water of a helicopterfor aerialpatrolling,watchtowers,
supplyand sewerage/drainage systemsof Patna residentialquartersfor the security stafT,patrol
and Ranchi cities. These cities are witnessrng vehicles,etc. We haveprovidedRs 50 crore fbr
considcrable pressureon the civic amenitiesthat the purpose.
wereconstructed long ago.Wc haveprovidedRs
50 crore for upgradationof the water supply and
Haryana
sewerage/drainage facilitiesof PatnaandRanchr
cities.The Statehasalsorequested lbr grantsfor
7.33. The National Capital Region (NCR)
constructionof buildings for 30 Government
AyurvedicCentresand6 Schoolsfor theDeafanc areas of the Stateare subjectto ever increasing
Dumb: we have providedRs 7.50 crore and Rs growth ofpopulationandtheconsequent pressure
2.50crorelbr thesepurposes,respectively. on the civic services.The Statehasrequested fbr
grantsfbr upgiadationof basiccivic servicesin
Goa theseareas.We have provided Rs 50 crore fbr
upgradation of civic infrastructure,
namely,solid
7.31.The Statehassubmittedthatthe existing waste management drainage/sewerage,water
building of the StateSecretariatwas originally supply and road systemsin the NCR areas.
300 JOIJRNALOF INDIANSCHOOLOF POLITICALECONOMY A P R ] L - J U N E2 U ( ) O

Himachal Pradesh would havealreadybeentied up and.therefore.

w e a r e n o t p r o v i d i n ga n y g r a n t .H o w e v e r .[ i r r
7 .34. The State has requested for a special revivalof the sick and defunctL.l. schemethat
grant of Rs 55 crore for upgradation of the are useful to the farming community. wc llrc
seweragesystems for the towns of Hamirpur, providingRs 55 crore.
Dharamsalaand Jwalamukhi.These towns are
visitedby touristsand pilgrimsin largenumbers Kerala
almostthroughouttheyearand,assuch,thebasic
civic infrastructure ofthesetownsdo needspecial 7.31. The economy of Kerala dependsto a
attention.Accordingly,we haveprovidedRs 30 considerableextent on its coastal belt. Thc
crore for upgradationof the sewerage/drainagecoastlineof the State,however, is lacing the
systemsin thesethreetowns.The Statehasalso problemof erosion.which needsto be checkcd
soughta grant of Rs 20 crore for constructionof urgentlyaswell ason a long-termbasis.The State
an inter-Statebus terminus(ISBT) at Tutikandi, has soughtfinancialassistance to construct86
Shimla. so as to regulate the traffic in the capital kms of new sea wall and to reform 3T kms of thc
town. In addition,it hassoughtRs 5.90crorefor existingseawalls.We areprovidingRs 50 crorc
improvementsto the Vidhan Sabhacomplexat for this purpose.
Shimla. which includes constructionof resi'
dentialandnon-residential buildings,installation Madhya Pradesh
of public addresssystem,closecircuit TV, and
otherequipmentincludingcomputers.We have 7.38. The Statehas sougl.rtspecialfinancial
provided an amountof Rs l0 crore for construc- assistance for developmentol infrastructut'e in
tion of ISBT at Tutikandi,ShimlaandRs 5 crore certain circuits of tourism including eco-tourlsm
for improvements to theVidhanSabhaComplex. We haveprovidedRs 45 crore for development
of tourism relatedinfrastructurein and around
Jammu & Kashmir Bhedaghat(Rs 15 cr-ore).Lamhetaghatnear
Jabalpur(Rs 2 crore),Mandln/Ramnagar (Rs 3
7.35. The Statehas represented that the vil- crore),KanhaNationalPark (Rs 5 crore).Pench
lageswithin the rangeof shellingfrom acrossthe NationalPark(Rs3 crore).Bandhavgarh National
border require constructlon of Park (Rs 5 crore),Maihar (Rs I crore), Chitrakoot
bunkers/underground sheltersfor the people,at (Rs 5 crore), Satna (Rs I crore), Katni (fbr
an estimatedcost of Rs 20,000per unit. We have measuresto amelioratetraffic problems) (Rs 2
provided Rs 30 crore for this purpose.The State crore),Bargi Dam (Rs I crore)andBarmanGhat
has also requestedfbr a special grant of Rs 1I (Rs 2 crore).No amountfrom this grant should
crore to complete the secondphaseof the Gul- be usedfor paymentof salaries.constructionrlf
marg - Gondola Cable Car Project (Kangdori to tourist bunglows or fbr purchaseoi' vehicles.
Apharwat,t. Keepingin view thetourismpotential exceptfbr gypsy type vehiclesfor viewing thc
ol'this project, we have provided the amount wildlife in Kanha NationalPark. The Statc has
soughtby the Statefor this purpose. alsorequested for assistance to establisha Statc
Museumat B hopal; we have providcd Rs I 0 crorc
Karnataka fbr the purpose. We have also provided Rs 5 crore
to constructa sportscomplexat Jabalpur.
7.36. The Statehas soughtspecialgrantsto
rejuvenate thesickanddefunctlift irrigation(L.1.) Maharashtra
schemes,and to expeditethe executionof the
ongoing/proposed new L.I. projects.For thelatter 7.39. The State has sought assistanceto
category of projects, the funding arrangements improvethe urbaninfiastructuresuch as roads,
vot.. t2 No.2 REPORT OF TI]E ELEVENTH FINANCE COMMISSION FOR 2OOO.2OO5

water supply. sewerage/drainage and transport crore for the infrastructurerequired to set up
systems.We agreethat the requirements of the tourist information centres at Guwahati. New
sn'rallandmediumtownsfor civic infrastructure.Delhi andCalcutta.
particularlythe sewerage/drainage
system,need
promptattention.Accordingly,we haveprovided Nagaland
Rs 60 crorefor upgradationofsewerage/drainage
syslcmsin the small and medium towns of the 7.43.Nagalandwassanctioned a StateCapital
State. Project, which included construction of State
Assembly Hall/Secretariat building, as a plan
Manipur programme about l0 years ago. However, the
Statehassubmittedthat the work was moving at
a very slow pacefor want of funds;as againstthe
7.40.The Statehas requested financialassis-
projectcostof Rs 65.55crore,only Rs 20.00crore
tance fbr restorationand developmentof the
havebeenspentso far. It hassoughtspecialgrant
historic Kangia Fort and for constructionof an
to completethe project soon. We have provided
additionalblockof theStateSecretariat. We have Rs 25 crore for the purpose
and expectthe State
providedRs 5 crorefcr eachof thesetwo projects.
to mobilisetheremainingfundsandcompletethe
It has also soughtassistance for upgradationof projectby 2002-03.The otherrequestsfor special
civic infiastructurein andaroundImphal,asa part problemgrantsmade by the Stateincludewild
of'theStateCapitalProject.viz..for watersupply, life protectionmeasuresin the IntankyNational
sewerage/drainage and traffic/transportation Parkandthe Rangapahar Wild Life Sancruary,for
systems,we have providedRs 10 crore lbr this which we haveprovidedRs 5 crore.
purpose.In addition, it has sought grants for
cxpansion/modernisation of the existing Sports Orissa
Complcx at KhumanLampak;fbr this, we have
providedRs 2 crore. 7.44. The major componentsof the requests
made by the State Covernmentfor these grants
Meghalaya relateto constructionof cyclonesheltersin the
coastalblocks and to undertakingrepair and
7.4l. The State has requestedfor grantsto restorationmeasuresfor the propertiesand utili-
developthe infrastructure fbr sevennew Com- ties damagedduring the super-cyclone of Octo-
munity DevelopmentBlocks and for forestcon- ber, 1999. We haveexamined these requirements
elsewhere.Keeping the other proposalsof the
scrvation/protection measures.We haveprovided
Statein view, we haveprovidedRs l5 crore for
Rs 20 crorc and Rs l0 crore for thesepurposes,
establishment of a communicationnetwork to
respectively. Theseamountsshouldbe usedfor
interlinktheblocks,grampanchayats andcyclone
capitalexpenditurealone.
relief centresthroughsatellite.with hub at Bhu-
baneshwar. We havealso providedRs l0 crore
N{izoram for restoration of the Nandan Kanan anc
Chandaka-Dampara eco-zoologicalcomplexand
1 .42. The State has requestedfor grants to Rs 5 crore for upgradationof the Plant Genetic
undcrtakethe New CapitalProjectat Khatlaand ResourceCentre, Bhubaneshwar.These were
lbrrcconstruction of theRaj Bhavancomplex.We devastated by therecentcycloneandwe hopethat
have provided Rs 40 crore and Rs 5 crore, thegrantthatwe areprovidingwouldhelprestore
respectively. ln addition,we haveprovidedRs 2 themto normalcy.The Statehasalsoemphasised
302 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY APRIL.JUNE 2OOO

the emergentneed of grants to undertakecon- improvementworks in the cities of Chennai,

works in
solidationmeasuresfor eco-restoration Madurai and Coimbatore.These fast growing
thcChilikaLake lagoon;we haveprovidedRs 30 citiesdo needspecialattentionfor relocationo1'
crore for the purpose. slumdwellers.Accordingly.we haveprovidedRs
49 crore for the purposc
Punjab
Tripura
7.45.The Statehasrequestedfor specialgrants
to undertakemeasuresto promotegirls' educa-
tion. This would include constructionof girls 1 .49.The Statchasemphasised the enrergent
hostels.schoolbuildingsand toilet and drinking needof grantlbr construction ol'aNew Assembly
watcr tacilities at the high school and higher HouseComplexandthe High Court building.fbr
sccondary schoollevels.We haveprovidedRs 30 which no other grantsarc availableas yet. We
crorelbr the purpose. havcprovidedRs I 2 croreandRs 8 crorefor these
purposes, respectivcly. It hasalsosoughtgrantlbr
Rajasthan expansion/modernisation of the I.C.M. Hospital
(capitalexpenditure ). for which we havcprovided
7.46.TheStatehasurgedlor specialgrantfor
Rs 10 crore.
slunr improvements,viz., tlrainagc/sewerage,
strcet lighting. water supply and community
centresin varioustownsiwe havcprovidedRs 40 Uttar Pradesh
crure l'or thc purpose.Among other requestsol
the State,we havc identil'iedthc oncsrelatingto 7.50. The Statehas requestedfor grants tbr
wonlcn'swelfare,fbr this grant. Theseare:con- improvement of inl'rastructure in a wide spectrunr
n l ' l 3 w o r k i n gw o m e n ' sh o s t e l (sR s4 . 1 6 of sectolsandservices.
s t r u c t i oo Most ol thescarccttvercd
crore),upgradation of inliastructure of theMahila e i t h e ri n o u r a s s e s s m e n o t1 ' t h eS t a t e ' sr e v e n u c
Sadans(Rs 0.75 crore), constructionof Nari needsor by way of planprogl'amrnes. Considering
Niketansat 5 Divisionalheadquarters (Rs I Ll4
theotherrequests of theStatefor specialproblem
.forc), tcn Short Stay Homes for the women in
grants,we havcprovidedRs 40 crore fbr upgla-
distrcss(Rs 2.60 crore),and RescueHomes fbr
dation of infiastructurefbr higher secondary
l u v e n i l ed e l i n q u e n gt i r l s a t 5 D i v i s i o n a lh c a d -
quarters(Rs I .35crore);all put togetherbeingRs schools in the rural areas. Rs I0 crore for
20 crore. development ol'theyatraroutesin theUttaranchal
regionand Rs I 0 crorefor rejuvenationol'lakes,
Sikkim other than the Nainital Lake. in the Kumaon
reglon.
7.41.The Statedoesnot havean airportas yet
andhusrcquestcdlirr grant(o conslructan airptlrt West Bengal
nearPakyong(EastDistrict).We haveprovided
Rs50 crorelbr thispurposeandhopethatthenew
7 . 5 1 .T h e S t a t ch a sd r a w no u r a t t c n t i o nt o t h e
airportwould becomefunctionalvery soon.
continuing problem of severe erosion of thc
Tamil Nadu Ganga-Padmariver system in the districts ol
Malda and Murshidabad,and has soughtgrants
7.48. The State has requested Ior grant to undertakethe requiredmeasures.Wc have
amounting to Rs 49 crore to undertake slum providedRs 60 crorefbr this purpose.
voL. t2 No : REPORT OF THE ELEVENTH FlNANCE COMMISSION FOR 2OOO-2005 30-1

FORSANCTION,
PROCEDURE RELEASES. the Statesto show greatercommitmentfor timely
ANDEVALUATION
MONITORING
and qualitative implementationof the projects
1.52..V,/e have looked into the procedurefor undertakenthroughthesegrants.Accordingly,we
sanctionof schemes, releaseof funds,monitoring proposethat the physicaland financialmonitor-
andevaluationof theprojectsunderthesegrants, ing of the projectsshouldbe done by the SLEC
asrecommended by earlierFinanceCommissions The Statesshouldsendquarterlyprogressreports
andas implementedin practice.Our analysisand to the Ministry of Finance(MoF) of the Gov-
recommendations in this regardare as follows: ernmentof India, to facilitate releaseof grants.
We have been informed by the MoF that no
Sanction and Releases evaluation of the schemesundertakenthrough
thesegrantswascarriedout during 1996-00.We
7.53.Thc existing procedure requires approval would suggestthe StateGovernmentsto under-
of the proposalsof the States by the Inter- takeevaluationthroughprofessional agenciesso
MinisterialEmpoweredCommittee(IMEC) and as to bring out the strengthsand weaknesses of
determinationof unit costs by the StateLevel the programmewhich may help in introducing
EmpoweredCommittee(SLEC). The IMEC is necessary improvements.
chaired by a senior officer of the Ministry of
CHAPTER X
Financeof the Governmentof India and the GRANTS-IN-AID TO THE STATES
SLEC. by the Chief Secretaryor an equivalent
seniorofficerof theStateGovernment. We would I 0. I . The termsof referencerequireusto make
like to give greaterresponsibility to theStatesfor recommendations, firstly,on theprincipleswhich
sanctiono1'the schemes within the guidelines should govern the grants-in-aidof the revenues
prescribedby us. Accordingly. we recommend of the States out ol' the ConsolidatedFund of
thatthe powerto sanctionindividualschemesas India, and secondly,the sums to be paid to the
well asto determinetheunit costsshouldvestwith Stateswhich are in needof assistance by way of
theSLEC.Thereis no needfor anycaseto be sent grants-in-aidof their revenues under article
to the Governmentof India for sanctionof a 215(l) ofthe Constitutionfor purposes otherthan
proiect.However.oncc a projecthasbeensanc- those specified in the provisos to clause ( I ) ofthat
tioncdby theSLEC.a copyof thesameindicating article. This articlc also provides that different
thetime schedulefor variousstagesof theproject sums may be fixed 1br different States afier
andlbr requirement of fundsshouldbe submitted determining their needs. The primary responsi-
to the Governmentof India.The Governmentof bility hasbeengiven to Parliamcntunderarticle
lndia shouldreleasefundsaccordingto the time 215(l) of the Constitutionto makeprovisionlbr
scheduleindicatedin the project.The unutilised grants-in-aid by law everyyear;however,till this
grantsfor aparticularyearmaybecarriedforward is donethe powers of Parliamentare exercisable
to the next year.However,the grantsthatremain by the Presidentsubjectto any provisionthat the
unutilisedas on 3l st March, 2005shalllapse. Parliament may makesubsequently. The Finance
Commissionhasto recommendthe principlesfor
Monitoring and Evaluation determiningthe needsof eachStatewhich may
be the basisfor giving grants-in-aid to the States.
7.54.The existin-e procedure envisa-9es mon-
itoringo1'theprojectsundertakenthroughthese 1 0 . 2 .S t a t e sh a v e g i v e n t h e i r v i e w s o n t h e
grantsto bc done by both, the SLEC as well as principlesthat shouldgovernthe grants-in-aid to
the IMEC. We havenotedthat the utilisationo1' the revenuesof the States.The relativelybetter
the grantsawardedby the Tenth FinanceCom- off Stateslike Karnataka,Tamil Nadu, Goa,
missionwasgenerallyvery poor,asthc detailsin Maharashtraand Gujarat have suggestedan
A n n e x u r e- V I I . 6 w o u l di n d i c a t eW. e w o u l dl i k e incentive-based grants-in-aidfbr better flscal
 JOURNAI. OF INDIAN SCHOOL OT'POLITICAL ECONOMY A P R I I .. I U N I . 2
- UN)

management.The less developedStates like theSecondandThird FinanceCommissionswcrc

Madhya Pradeshand Orissahave suggestedthat given the mandateto make recommendaticlns in
the grants-in-aidshould be given to meet the this regard.But since then, except the Ninth
deficitsin the plan and non-planrevenueexpen- FinanceCommission.no FinanceCommission
ditureandshouldnot be confinedonly to meeting assessed the revenuecomponent. of the plan or
deficit on non-plan revenue account. Uttar recommended anygrantsto providefor thedeficit
Pradeshhas further suggestedthat the Commis- on this account. In {act the Fourth Finance
sionshouldgive up gap-fillingapproachadopted Commissionobservedthat while it is within the
by previousCommissionsand ensurethat States p u r v i c wo 1 ' aF i n a n c eC o r n m i s s i o tno m a k c l e c -
haveadequate to investin various
revenuesurplg,s o m m c n d a t i o n st o c o v e r e x p e n d i t u r co n p l a n
developmcnt programmes.States have also rcvenue ilccount. it reliained I'rom doins so
lequestedlbr giving grants-in-aidfor the upgra- becausethe Planning Commission has becn
dationand modernisationof administrationand speciallyconstitutedlbr advising thc Govcrn-
Ibr meetingtheir specialproblems. ment of lndia and the StateGovernmentsin this
regard.It notcd that the importanccof planned
10.3.The principles for grants-in-aid to the economic devclopment is so grciit and its
rcvcnllesof the Stateshave evolved over the implementation so esscntialthat thcreshouldnot
c<.rursc ol last hall' a century through rccom- b c a n yd i v i s i o no f r e s p o n s i b i l i ti yn r e g a r dt o a n r -
r n e n d a t i o nosl 't h ev a r i o u sF i n a n c eC o m m i s s i o n s .element ol' plan expenditure.We have bcen
Whatcanrcto bc trccepted is thatthegrants-in-aid requiredto takc into consideration the plan and
rnaybe givcn to the Statesto coverthc assessednon-plan revenue expenditureol' the States
deficiton non-planrcvenueaccount,atier devo- keepingin view the needfbr generatingsurplus
lutionof taxcsandduties.Thedeficitsareworked for investmentand reducingdeficit.Intbrmation
out afterexcludingany unusualor non-recurrent on therevenuecomponentof theplanlbr thc-ycars
'fhc
item of rcvenueor expenditure;the idea is that 2000-0I and 2001-02is not availablc. prcp-
theexpenditure andrevenues of the States should aration lbr the Tenth Plan has not yct startcd.
hc cornparable so that no Stateis allowedto take W h i l e a s s e s s l ntgh e r e s o u r c eosl ' t h e S t a t c sa n d
a d v a n t a gocl t h e p r o v i s i o n o s 1 ' A r t i c l e2 7 5 ( l ) b y the Centre,we havetakcn this into accountand
inflatin-ethc expenditureor understatingthe have indicatedthe extent ol lunclsthat can bc
revcnues.Secondly,grants-in-aidmay be rec- transferred to the Statesas a percentagc of gloss
ornmendedfor the upgradationof the standards revcnuereceiptsof the Centrc.What rcrnainsas
o1'administrationof the States.The idea is to a residualalier the transl'errccommcndedby us
correct the disparities in the availability of for each State can be used by the Plannin-e
administrativeand social servicesbctweenthe Commissionto deternrine therevenuecomponent
devclopcdandthe lessdevclopcdStatesso thata of the plan of cachStatcal'termaking their own
citizen.irrcspectiveof the Stateboundarywhere assessment of the necds.We havc.thcrcfbrc.not
he livcs.is providedwith certainbasicrninimunr madc any rccommendation lirr any grantsto hc-
standardsof such services.And lastly, grants- givcn to Statesto meet the deficit on the plan
in-aid may bc recommendedby the Financc revcnueaccount.
Commissionto provide assistancc to a St.atcto
meet expenditureon account of any special 10.5.Wc havealrcadymadcan assessment ol'
problemspeculiarto that State. the revenuc receipts and non-plan rcvcnuc
cxpenditureof the Statesin an earlier Chaptcr
10.4.The FinanceCommissionshavegener- wheretheconcernsol'theStateshavebeentaken
ally reliainedfiom makinganyrecommendationsinto accountin thc asscssnrcnt ol l'cvcnuereccipts
lbr giving any grants-in-aid to coverthc revenue and non-planrcvenueexpcnditure.Thc norrns
componentof the plan expenditure.In thc past, laid down by us togetherwith thc principlcslirr
 t/()t,.12NO.2 RL P O Il7 O F TH L Ir LEv EN'lll [' I NA N Cl: COM M I SSI () N I. ( ) R 2(n0- 2005

sharin-q ol'Ccntraltaxcsrecontmendcd by us are t h e n b n - p l a nr e v e n u ec x p e n d i t u r sc h o u l cbl e d i s -

cxpecttrdto act as an inccntivefbr betterfiscal c o n t i n u e d . st hoa tt h ep l a ne v o l v c db y t h eP l a n n i n _ u
pcrlbrnrancc.Howcver, the position clnerging C o m m i s s i o nf o l e a c h o n e o l ' t h e s e S t a t e si s
altcrassesstlrcnto1'thcbudgctarypositionof'cach dircctcd towards dcvclopnrcnt espcciallv lilr
S t a t co n n o n - p l a nr c v e n u ea c c o u n lb c l i r r et h c devclopnre nl.ol lnfrash'ucture . fhis would create
d c v o l u t i o no l ' c c n t r atla x e sa n dg r a n t si s g i v e ni n t h eb a s ew . h i c h h a sb e e nl a c k i n gf i l r a n a c c e l e r -
T a b l c 1 0 .I . ated ccononricdevclopnrc.nt In ycxt'st() contc.
This also makes thc bud-uctary posirionol rhc
1 0 . 6 .S h a r eo f ' e a c h S t a t ci n t h e C c n t r a lt a x
Statcsrnore transpafcntancl hclps in fircusins
r c v e n u cas sr e c o m m e n d cbdy t h eu si s d c t a i l c di n
crpcndil.urein dcsirt:dareas.
ChapterVI. Thc positionthat emerscsal'terthe
c l c v o l u t i oonl ' C c n t r atla x r c v c n u e iss r n d i c a t c idn
1 0 . 9 .T h e d c p c n d c n c co l ' t h c S t a t c si n t h e
T a b l e 1 0 . 2b c l o w .
-erants-in-aid -setsrcducedby thc terminalvcar.
i.c., 200.1-05.As againstl'il'tccnStarcsgerring
1 0 . 7 .A f t e r t h e d e v o l u t i t r on l C ' c n t r atli l x r e v -
n o n - p l a nr c v c n u cd e l i c i tg r a n t si n t l t c f i r s t y e a r .
L - n u c ss. o m e S t a t e sw r l l s t i l l h a v c d c l ' i c i to n
i . c . ,2 ( X ) 0 -l0, o n l y n i n eS t a t c sw i l l b e c n t i t l c ctlt ,
n ( ) n - p l a nI c v c n u c i l c c o u n l . \ \ ' t r c c o n t r n e n d
t h e s e g r a n t s .T I t e s c a r c a l l S p c c i a l C a r e g u n
r l r a n i s - i n - a ti d
o h c g i v c n u n c l c r L r - t i c2l c7 , 5|() o l '
Statcs.Hi-uhcran',ounlol'-elantslirr rleetin.utlrc
t h c C o n s t i t u t i o nc.q u a lt o t h c a l l l o u n o t l d c fi c i t s
n o n - p l a nr e v c n u cd c f i c i t h a s h c c o n r cn e c c s s A r v
lusscsscd lirr cachycarduringthcpcriodl(XX)-0-5
'Ihc b c c a u soei ' l h ec i i s c o n t i n u a noclct h ca l l o c a t i o o n1'
anrounto1'thc grant iirr cach Statc.having
a p e r c e n t a g co l c x c i s c d u t y l i u ' m c c t i n . gt h c
n o n - p l a nc l c l i c i t si s i n c l i c a t e idn T a b l c - 1 0 . 3l i r r
cachol'thc5 ycarsstaftin-q lhtruthc linancialycar r c q u i r c m e notl ' t h ed c f ' i c iSt t a t c sa k r n ca sw a sd o n c
2 0 ( n - 0l . l r r t h c i n t c r i r r r c p o f t ,w c h a d r e c r t r r . rb- y E i g h t h .N i n t h a n d T c n t h F i n a n c cC o m n r i s -
r l c n d c dp r o v i s i o n a l l-yg f a n t s - i n - at o s i o n sT. h i sh a sn l a d ct h cl c v c n u eh u c l g c tosl ' s o m e
i db e s i v c nt o
t h cS t a t c si n t h cv c u r2 ( X X ) - 0aI t R s I | . ( X Xc)r o r c s o l ' t h cc h r o n i c a l lcyl c l i c i S t t a t c sr n o r ct r a n s p a r c n t ,
W c h a v cs i n c cc o r l p l c t c dt h cr c a s s c s s n r c( n ) lt' l l r e a n d t h c C e n t r a lu s - s i s t a nucl co r c( ) x p l i c i tW . c ha',,e
Statr:s'l'inanccson the basiso1'thc latcstdataon g i v c n t h c p o s i t i o n o l t h c n o n - p l a n rcvclluc
t h cS t a t c sb' u c l g c t a rpyo s i l . i o nO. n t h eh a s i so l ' t l . r c a c c o u n tes - n r c r g i na g
l ' t c r
t h c d c Y o i r - r t i (
0 )nlClcntral
-srnnts to lrc -tivcnto the Statcshavingdcficit on t a x c sa n d d u t i c s a t r d r c \ / c n u e d c l ' i c r t
s l ' a n t sr n
n o n - p l n 6[ c v c n u ca c c o u n h t a v c b c c nr c l : s s c s s c d T a h l c 1 0 . 4 .
a t R s 1 0 .l - 5 4c r < ; r ' c .
1 0 .1 0 .W c h a v ea l s om a d cr e c o n r n r c n d a t i o n s
1 0 . 8 .h w o u l d b c o b s e r v c dt h a t a s u b s l a n r i a l lor upgraclation o1'standardsol' adr.ninistlation
anrountlhrnr the grants-in-aidrecornnrcndcd bv a n d { b r s p c c i a pl r o h l c r n sa.n r l i r rl o c a lb o d i c sW . c
u s w i l l g o t o t h e s p e c i acl a t c g o r yS t a t c sI.n I a c t h a v c a l s o p r o v i d c d
s c p a r a t c llyi l r t h c contlibution
tluringtlrc lirurthand fiith 1,car.only thc sltccial o l ' t h cC c n t r a G l o v c r n n r c nt o t r ' " ' a l dt sh cC a l a r u i t v
c a t e s r ) rS v t a t c sw i l l g e t t h c _ g r a n t s - i n - at oi dm e e t I i c l i c l ' l u n dos l l l l 0S t a t c w s h i c hl v o ul d t r l s ou c c r u e
-fl-rc
t h cd el l c i t o n n o n - p l a n r c v c r l u ci t c c o u n tS. i n c cw e to thc Statcs lrs grants. l"rosrtron rrl total
a r ct a k i n gt h c c n L i r er e q u i r c m e notl ' t h c s cs p c c i a l tlanslcrsnraclcto cach SlltL-cluringthc period
catc-gory Statcson non-planrevcnucaccount.thc 2 ( X X ) - 0o5n t h e b a s i so l ' o u r r c c o n i l t r c n d a t i oinss
practiccol'divcrtin-ea part of plan _graltts to lltcct g i v e ni n T a b l c 1 0 . - 5 .
306 JOIJRNAL OF INDIAN SCHOOI, OF PQLITICAL ECONOMY APRIL-.IUNE 2OOO

Table 10,1.Pre-devolutionNon-PlanRevenueSurplus/Deficit:2000-05
(Rs rn lakh)

State 2000,0l 200r-02 2002-03 2003-04 2(n4-05 Total

t000-05
(2) (3) ('+) (5) (6) (7)
{l)

Andhla Pradeslr -69.246 3 7. 9 75 1 5 . 7 85 I . 9 3 . 741 r

3.80.08 5.78.182
-37.651 -40.051 -.r2.545 - 4 5 . lr3 -49.260 -1.14.61.1
A r u n a c h a lP r a d e s h -9.3r].643
ASSAM -| . 8 r i . 6 5 5 - I . 9 3 . 9 6r -t.8'1.'762 - 1.8.s.794 - 1.u2.47
|
,6.43.599 -6.73.518 ,7.1t.067 - 8 .l 0 . 1 0 5 -n.65.526 -37.6.r.9
r5
[:]rhar
(loa 'b. /-: I -2.556 - 1.,164 ,{.999 13.007 7.265
(iujarat 1.0:1.3,17 2.21.424 1 ?n {tf .1,+6.661 6 . 5 5r.l 8 16.98.077
Hlryana 38 . 7 7 0 88._149 l .15.961 :.02.873 2 . 9 8 . 7l1 7.5.1.664
- 1. , r l. 8 7 0 - 1..13.264 - I .,14.850 -1.12.172 - I.39.494 - 7 .r L 9 5 0
Hiniachal Pradesh - t 6 . 0 6 . 5l 7
-2.80.904 -3.05.390 - 3 .I 8 . 7 4 8 -3.39.648 - 3 . 6 1. 8 8|
Jlrnrnu& Kashmtr
K arlatak a 1 5 .12 2 1.0.1.13
l 1.03.058 l . I4 . 5 3 8 3 . 4 0 . 537 ? x'7 S11

Kerala -r,t6.lt5 - I . 0 2 . 0 3r -I .28,592 - 7I . 4 8 5 1,069 -4,37._r36

Nladhya Pradesh -:.66.55.1 ,).69.226 -2.2t.417 - I . 4 5 . 4t - r -i l . t 6 . 1 1 6
M ahaiashtra l. I8.301 4.50.976 6.06.538 9.56,082 l 3.81.9:6 3 6 r. 4 . 8 2 - ]
-58.570 -62.097 -65,835 -70.110 --_1. 12.216
iv{rrripur -2.ri5.940
- 52 . 3 0I -54.597 -57.759 -59.408 - 6I . r i 7 5
Meghalaya

-4:.982 -45.431 -48.034 -52.078 -53.609 - 2 . 4 11. , 1 0

Mizolam -4,16.4
-76.325 - 8I , 2 6 1 - t t 8l. 8 4 -92.264 -98.380 I5
Na-saland -4.38.000 -18.87.747
()frssa - 3 . 0 9I.7 6 -1 )t 1qR -3,99.459 -,1.18.814
-90.42n -'11.694 -54.098 -6.491 .s6.tt92 -1.6-5.ttl9
Purlab -1.00.92rJ - 1 8 . 1 0 . 7I6
Raiastllan - 3 . 9I . 3 9 7 -3.73.878 -3.92.470 -3.62.088

- 1 6 . 9I 8 -2tJ.670 -10.506 - , 3 : . rl l7 -3.1.790 -1.5-l.l0l

Si k k r n r -1.09.756
'l .99.80.1 - I ,31.806 -99.'t92 29.568 1.92.'778
' f r r p u rNitdu
Tamrl r -75.656 -79.995 tt5.ll.1 -rt9.35.1 -94.15,+ --+.24.6rJ1
i | .72.916 -l l . 7 5 . 9 9 1 I 1 . 73 . 9 . 1 l - 11..19.68-1 - |2.05.375 - 6 0 . 7 7 .I98
l J t t a rI ) r a d c s h -5.99.2.10 - 3 0 . 9 9 . 7I3
\\'cst []elgri -6.07.696 - 6 .1 . r . 9 3 0 -6..1ri.634 - 6 . 2 9 . 2l3

.lrJ.7
l..l tJ0 -.t7..11..1-s7 5 I .0.1.15-1 18.73.rt26 ,47.01.06? -l.,ll.l{5.9ti1
\l!.rcgatc'l)ettcit
A!-ire'gate Surpltrs 3.r'J6.540 9.02.955 ll.-ll.tl,12 20.4tt.,+35 . 1 . 1 . 1, 1| 5 5 7x.(X,.qlh

Table 10.2. Post Tax Dcvolution Non-Plan Rcvcnue Surplus/Deficit of thc Statcs
(R\ rn lillhr

State Itx)O-0I 200r -02 2(n2-0.3 2(n3-04 2(X)'l-05 Total

l(xx)-05
\r, (2) (l) (4) ( - 5) (6) t7)
Andhru Pradesh 3..17.070 5 . t1 . 33 0 6 . 0 1. 7 , 1 3 8 . 53 , n 7 5 I t.50.18e .1+.76..r07
'2'1.163 -2,+.611 - 1 4 . 6| l -1.1.| 96 ,11.857 .l.ll.lt0l
Aruntchal l)rldesh
A ssiln] | 1.068 1.1.076 53 . 6 6 e 95.Iil0 t.-16.075 I.97.561
llrhtr l.:15.569 l.;16.51I 3.01.813 , 1 . 4.1l 9 ; l 5.94..+79 17.1e.576
( ioa .+.1I 5 10.427 l 3.676 1 1 . 6 5r i .13.610 ti-1.7
ti6

(iu 1arat 2.56.IJ50 3 . 9 9 . 1I 7 .1.77,856 6.nfl.4lilJ 9 . 3 7 . 285 17.59.669

H arvana ti9.80l 1.47.u45 1.95.340 :.83.796 -1.93.124 I 1.09.901{
- 1.04.9.r7 l . 0 0 . 2l 8 -94.653 -83.923 -7t.lli5 ,.1.54.916
Hrrrirchal Pratlcsh - l r . l l . ll 9
-2.il.166 2.14,087 _1 )1 Qlq -2.29.064 -:.32.86-1
J r n r r n u& K a s h m l r
Kal nataka 2 . 9 1. 6 3 8 4 .I 4 . 9 4 5 ,1.6.s.388 6 . 3 7 l. 5 7 ri.l3.6.ll 26.1).110

Kcrala 28.946 90.654 96.082 t.90.573 3 . 0 6 . l82 7.13.067

Madhya Pradesh 1 tt t)o 3 . 21 . 4 4 0 3.80.313 5 . 3 6|.8 I 7 . . r r J l.05 I1.89.68_l
Maharashtra 4.68.707 7.42.908 9.46.967 I 3 . 53 . 15 6 I n . J 6l.9 | 5_ 1 . 5 7 . 9 1 9
-3 5 . 4 6 8 -35.503 - . 1 51. 9 8 -3.+.460 - 33 . 1 t 6 5 - I .74.-19.1
Mlnipur' - 2 1. 6 1 0 ,1.57.13IJ
- 3 3 . 8I 3 -31.0.11 ,_t2.6tl -30.0e0
It{eghalaya

-3?.27n -32.958 _ 31 . 4 8 2 - 1 5 .I 0 5 -.ll.807 - | . t r 7 . l60

M rloranr -16.?1i -1.51.61-l
-6.1..132 -67.396 - 7 1 . 05I -73..10.+
N r.calattd
()nsst -15.ri.l9 - 1.6,13 -t7.86ri l+.607 6 1. 6 7| l + . 9t 6
I)un1rb -18..11I 596 10.201 9I .Iil.r 1 . 7l . 6 0 l i l . 6 5 . l iI r i
- 9 5 . 51 6 ,18.9.12 9.76tt I.07.0u() 1.J6..149 L tl.xlq
I
I{ il iilst iur l

- I 6.97tr , 1 1. o ' l l , t 6_98-r - 16,6.1,1 - 16.ll{1.( .t1:t.05li

Srkkrtrr
9r.309 2.06.5ri3 ).96.279 4.91.191 7 . 3l . l 5 l I , St.6 . 7I a
farnii Nadu -.15.6-lrJ -l.ll..ll6
-49.-ll9 -49.301 - . 1 9 .35l -.17.605
l-rrpura
- l .01.674 7| .116 L I J1 . 0 7 ; l .1..r7.+l
rJ 7 . 7 . 1 . 6l - s t.1.71.136
Uttar l)radesh !< al I
West Ilcrrgrl -1.68.971 - 1 . 0r . 4 5 1 5l.llJ6 66..161 t. Il.+ll

r 0 .I 5 . . r 7 6 -7.20.1u9 -6.61.091 - 5.7.1..1e

I 5.61.6(r0 . 1 5r.5 . 9 0 7
Asgregltc I)clicit
I9 . 1 5 . 5 l 6 il .9t .lti8 . 1 0 . 5 01.7 9 6r.21.500 9l.li.l.l16 l..l6.tJl.6+9
Ag!relatt Surplus
 voL. t2 N0.2 RLPORTOF THEELEVENI'HFINANCECOMMISS|ON
ItOR2()00-2005 307

'fable
10,3. Non-Plan Revenue Grants: 2000-05
(Rsrn lakhr

5till! 2000-0l 100I -02 2002-03 2003-04 t004-0-s Total

i000-05
I (l) (3) (4) (5) {6) (71
.\runachll I)radcsh 24.163 24.6'11 24.6t2 24.t96 14.857 l .22.802
A sslnr I I .068 I t.06u
H r r n a c h a lP r a d e s h |,04.94'7 l .00.1l8 94.65.3 83.923 71.t85 .1.5,1.926
. l l r n r n u& K a s h n r i r l.l 1.166 2.24.08'7 1 rl qlq
2.29.061 l. -r1.863 Ir.2l.lt9
\{ rn rpur 35..168 15.503 1 5 .I 9 8 34.460 I3.865 t.71.494
\ 1 e gh a l a v a 3 3 . 8l l 33.042 3 2 . 6 23 30.090 2 1. 6 7 0 1.57.238
Itl rzoranr 32 . 2 7 8 1 29 5 8 3- 1 . 4 8 2 3 . st.0 5 ll.u07 I.67.630
N agaland 64.432 67.396 72.015 71.,104 16.177 1 . 53 . 6 2 . 1
Orissa -35.849 3.643 l7.rJ6lJ 67..r60
Punlah 18.,121 l8..l2l
R a 1a s t h a n 95.526 28.942 l.l;1..+6li
Srkkrm t6.910 t 1. 0 7 1 I6.983 I 6.644 I O._3ltlJ 8.1.058
Trrpura 49.329 .19.302 4 9 . 53 2 47.605 .15.64|i t . . l I . 4l 6
UttarPradesh 1.02.674 t.02.674
\!e'sr Berrgai I.68.972 t . 0 3 . 4 .|5 52.1
U6 3.14.609
l'ot al 1 0 I. 5 . - 1 7 6 7.20.289 6,63.091 5.74.491 5.62.660 r5.15.907

Tablc 10.{. Non-Plan Revenue Accounts of States after devolution of Taxes & Duties and Non-plan Deficit (;rants
(Rsin lakh)

Strtc 2000-01 2mr-0: 2002-03 2003-04 t004-05 Total

l(xx)-05
it) c) (3) (4) (5) (6) t7l

Andhra Pradesh ..r.47.070 5.21.3l0 6 . 0| . 7 4 1 r'{.5

3.u7"5 I I.50.}t9 l - 1 . 7 6t 0. 7
r \ r u n a c h a lP r a d c s h 0 0 () 0 r)
Assiull 0 |].076 53 . 6 6 e 9 5 . I t. 0t 1..16.075 r.01.t.630
1.45.56e l lA 5)l -+.:ll.l9.l 5 9.1.-179
Brhar 3 . 0 t . Ir lJ l7.19.5?6
Goa 4.415 10.4t7 13.676 11.65ri -13.610 ri.1.766

G uj a r a l 2.56.850 3.9t).21'7 4.17.856 6.rlu..{ul1 9.37.:58 I7.59.66e

Hr l v a n a 89.803 1..17.IJ45 1.95.140 1.8.1.796 1 . 9 1I.t 4 I t.09.901r
Hrrnlchal I)radcslr (, 0 t,
J r n r n r u& K a s l r n r i r () U {} 0
Karnatakl l.9l .638 4 .1 . 1 . 9 . 1 5 .+.65.I8u 6 . - r 71. 5 7 rJr.6-11 t6.11.770

Kerrla Ii.946 9 0 . 6 5+ 96.Ort2 I.90.573 3 . 0 6 . Il il 7. t 3 . 0 6 7

N 4 a d h v aP r a d t s h l. r r.229 ,1.:3."1.10 .r.80.323 5 . 3 6l.u t 7 . 3 t { . I5( } I I .119.6til
M ahlraslrtra .1.68.707 7.42.908 9.16.967 l 3 . 53 . 1 - s 6 | 8 . 4 bl.9 | . 53 . 5 7 . 9 t 9
\'l anrpur o 0 o U 00
Meehaiaya 0 0 0 ()o

Mizomm 0 0 o 0 () o
Nagaland 0 0 0 0 0 0
Orissa 0 o 0 14.607 6'7.6'7 | 81.t78
I)un.jab 0 596 3 0 . 2 0I 9 I .ti-34 | . 7r . 6 0 8 t . 9 + . 13 9
Ralastharr o 0 9.768 1.07.080 t.16.4.19 3.61.297

Si k k i r n o 0 0 0 0
Trrnrl Nadu 91.309 :.06.58.1 2.96.279 .+.9t.191 7.31.35.1 lrJ.t6.7t5
Tnpura 0 o 0 0 0 0
Uttar Pradesh 0 7| .716 | . 8 1. 0 7 r + 4.;17.438 7.74.652 t 4 . 7 . 1 .t9o
West Ilengal 0 o o 66..+61 t. |]."r]3 t.7t(.1{tt5
Total: All States 18.35..s36 1I . 9 1. l 8 t t . 1 0 . 5 01.7 9 6 - t . lI . 5 0 0 9 l . 1 J 4t 4. 6 1..16. r{1.64q
 .IOURNAL OF INDIAN SCHOOL Ol: P.OL|I'ICALt C'ONOMY APRII,-JUNE 2OO0

'I'ransfer
Table 10.5.Total to States:2000-05
(Rsin lakh)

Share in Grants-in-ard Total

Central Transftr
faxcs & Non-Pliur Upgradr' l-ocal Bodies R e l i el ' Total (Col.
I)utlcs Revenuc tion rnd Erpcn- ((i)1. I I + ui
l)eficrt Specral Panchayals Munici- dltutruc t(l
Problerns palitres C o l .7 t
(l) {3) (4) (5) (6) l7) (tti 19)
'76.024
Andhra Pradeslr ]t.91i.025 0 lrJ.52l 16.466 li:.01J0 :.03.093 ll.0l.lilr
A r u n a c h a ll ) r a d e s h 9r.nl: I.ll.80l 9.059 2.784 o6 .1.983 I.t9.696 l.I.5l5
Assarr ll._36.105 I 1.06r{ I t.25.1 )1]J5 t. 15.1 .+1.060 9 t . r 1 lIr l-r.2tt.086
fl ihar 5.1.93..190 0 , + 0t.6 0 78..s0.+ 9.190 5l.l.16 1.79.3m 56.71.790
Goa 1 1. 5 ) ) 0 t.718 921 .+5rl 515 1.61.1 r{2.156

(iularat I0.6I.-s9-3 0 I 1..16

5 -r:1.80.1 13.:-51 66.1188 l.lrJ.+lc) ll.(x).011
Hlrvalrit 3.55.1.+4 0 l.t.l65 t,1.709 3.664 13.695 6 5 1r 3 4.10.577
H r r r i a c h a Il ) r a d e s h 1.57.01.s - 1 . 5 . 1 . 926 9 lt6 6.56'7 -r89 IrJ.020 . { . 8 9 . 08I 7..16.0-13
J a n r l r r u& K a s h t n r r . 1 . t t - 5 . . 1 5I0! . 2 1 . 1l9 r2.781 1.111 l.566 tJ.-+6.1 lr.57.l7l 16.-1t.8ll
K a r n r ta k a 18.55.1;llt 0 ]l.151 - 3 9 . ,l1 1 I l.:lul 30.90_1 l .[.950 1 9 . 6 9 .91N

Kcrll a I L50..10,+ 0 l:.91'1 32.961 7.-52.5 l7.ft66 t i I . 1 6 8 l : . . 1L 6 7 1

M rdhl'a Pradr'sh .11.:5.ti9ti 0 :19.452 7| .541 15.601 .17.3.10 I.73.9.10 .1+.e9.ri1f
-t
Itl aharashlrr 17..1,r.105 0 1 1 .I 9 7 65.67l I .61.5 65.1-19 1.95.6-l+ l9.lu.7le
M a r ) pr u l i.17.731 1.74.494 5.85e 1.817 r1,10 I.189 I.it.1.859 t.t I ..5e 1
Nlcuhalaya t.:ri.70t r.57.2.18 5.719 1.561 )'70 I.6ll i . 6 7 . . i " r 0 1 . 9 6 i. - ,

Mrzonutt 7 . 1 . 5| 1 1.67.630 lJ.9u;l 786 3t1.1 t.232 t . 7 e( i l b 1.53.517

Nlgaland 81.790 .1.51.614 6.184 1.2ti7 t19 ull r . 6 t .I 8 6 -1.1.1.976
O r i s sa | 9.01.664 67.360 I r. 5 0 5 14.559 .1.996 -15.366 1.71.7E6 t0.75.+50
I ) u n jr b " 1 . 1 1 . 6 3 7 1 8 . 4 tI ll.ml 15.46.1 5.473 50.857 l.l t.lt6 5..1:.rJ5l
R a ja s rh l t t 10.59.58u 1.14:468 t9.9ll5 '19.095 9.9.11 It5.785 t.99.t75 1.1.58.86r

S rk k r n r 69.1:13 84.058 6.67ft 529 ll 1.861 9 + .t . 1 9 I.63..191

-l'rrnrl
Nadu 10.16..171 0 : 5 .| 8 6 4 6 . 6I l I9 . 3 3 7 41.5,16 l.ll.67l ll.60.l.l.r
'l-rr -l.16.l().1
p ur a i .l|.167 : . 4 1. . +t 6 6.0| rl 2.8,16 401 1.155 l.5l.t17
L i l t a rl ) r a d c s l r 7 . 1 . 5 01.5 6 1. 0 2 . 6 7 . 1 66.991 t.._1l.9ll t5.l6l 71.01.1 i.(x).771 7Ii.50.910
West lJcngrrl 30..s-1.u)9 1.24.609 2.r945 5't.'713 I9.7-19 I L900 J.6'/.916 r5.l1.9E5
Tolal All States 1 7 6 . . 1 1 . t i 0 11 5 . . r 5 . 9 0 7 1 . 9 7 . 1 6 1 t(.00.(xD 1.00.0(x) ri.l5.56e 5 r J . s l r . 7 l e- + . 1 - 1 . 9 0 . 5 . r 0
l)r A Ilrgclrr.Meirbcr.
r h c c r ) ( lo i l h c R e l r o f t .

s e r v ct h c o b j c c t i v e so l ' c l o s i n st h c v c r t i c a lg a p a n d
A Notc of Obscrvations by Dr. Amaresh Bagchi,
Membcr (l'ara 10.10) r e d u c i n g .i l ' n o t r e m o v i n . c .t h c h o r i z o n t a l d i s p a -
On the Nccd to Strcngthcn thc liqualising l{ole r i t i c s s i r n u l t a n c o u s l sy o t l r a ta l l S t a t c sc a n p r ( ) \ ' i d c
()f l'iscal'l'ranslcrs
h a s i cp u b l i c s c r v i c e st o t h c i l p c o p l c a t r c a s o n a b l \
l . A s n o t c da t t h c o u l s c ti n c h a p t c Ir I . t h c t w o comparable lcvels. It rnay bc possiblc to nreet thr'
basicob.jcctive s ol' l'iscaltransf'ers in a t'edcration vertical -sap without acldressing thc holizontal
al'c.onc,t()brid-ucthc vertical gap thatis cOutmon i m b a l a n c e sa d c q u a t c l y .a s l i ) r c x a l n p l c . w h e n t h c
in lcdcrationsand two. to redress thc horizontal v e r t i c a lg a p i s m e t b y s h a r i n gt h c c en t f a l r c v e n u e s
imbalancesthat also prevail in most I'cdclations o n l y o n t h c b a s i s o l r c a l i s a t i o n ( ) r c o l l c c t i o n .
r n v a r v i n gd c g r c c sT. h e i n s t r u l n c n tuss c dp r i n - H o w c v e r . s u c h i l s y s t c r l lw o u l d n o t h c l p t { )r e c i u e c
cipallrvlirr thcscpurposcsarc.sharingof' lbdcral t h c h o l i z o n t a l i m b r r l a n c c sr.a t h c r n r a y a c c c n t u a t c
-I'he
rcvcnucs and grants. transf'crol' Union t h c n r .H c n c c .t h c c n r p h a s i sh a sb c c n i n c s t a h l i s h c c l
g o Y c r n l n c nst r c v c n u c st h r o u - qrhc v c n u cs l r a l i n g l'cclcrati<lns likc Canada anclAustritliit to basc the
and grilntsin our systenrtrc also mcantto rncct t r a n s l e r so n I h e p r i n c i p l c o f ' c q u a l i s a t i o n .
tlic i r n h a l a n c cass w c l l a s t h c h o r i z o n t a l
",crticll 2 . E q u a l i s a t i t ) ni r t a l ' e d e r l t i o n i s d o n c p r i -
d i s p a r i t i cxsn r o n gt h c S t a t c sa r i s i n gl } o m v a r i a -
l i o n sr n t h c i rl c v c n u cb a s eA . s I ' a ra sp o s s i b l ct.h e n i a r i l y b y L ' q u a l i s i n gt h c r c V c n u ec a p a c i t yo l ' t h c
d c s i s no l ' f i s c a lt l a n s l ' c rssh o u l db c s u c ha s c a n S t a t c s .F o r t h i s p u r p o s c t h c r c v c n u c c a p a c i t i /o l .
 )tOL. l2 NO. t RLPOI(T OF THE EI.I:VENTH FINANCT: COMMISSION l-'()ll 200()-2005

each Statc is workcd out on a normativebasis 4. The reasonsfor this paradoxare three-fold
usinssonrcstandardstatisticaltechniquelike the One, the dominanceof tax devolution in the
'reprcsentativc
t a xs y s t e mm ' e t h o dS. tatew s h o s e packageof statutorytransf'ersand its downward
p e r e a p l t ar c v c n u ec a p a c i t ya s d e t e r m i n e d n o r - inflexibility;two. thelimitationsof thenormarivc
r e n c et o i t st a xb a s ei s d ef i c i e n t , approachadoptedby us in asscssing
l n a l i v c l vr v i t hr c l ' e thc Srates'
that is. bclow the average or the stipulated revenue cxpenditure; and three, the flow ol
standard.are givcn grantsto makc up 1br their Centralfundsthroughotherchannclsthalmay not
dcl'icicncrcs.Since the States rnay also facc neccssarily confbrmto the principleof equalisa-
\ a r r a t i o n si n u n i t c o s t o f p r o v i d i n g s e r v i c e s tion of revenuecapacity.Fclr valious reasons.
hccauscol-l'actolsIikc dernographic composition partly historical. the proportion of revcnues
ol terrainor any othcrlactol beyondtheircontrol, llowing to theStatesthroughtaxdel,olutionin thc
t h er e v c n u c q u a l i s a t i ognr a n t sa r cs u p p l e m e n t e dstatutorytranslershasbeenin thc ran-9col'80 t<r
r','ith-srants 90 percentandin recentycars.is hoveringaround
to takcaccounto1'thecostdisabilitics
9 0 p e r c e n t .T a x d e v o l u t i o nn o w r s b a s e do n a
as r'"cll.Thc approachadoptcdby this Commis-
l o r m u l ai n w h i c hc o l l e c t i o n o r r c a l i s a t i oins g i v e n
s r o na l s os e e k st o l ' o l l o wn o r m a t i v e p r i n c i p l easn d
no wei-ehtand the attempt of thc successivc
u hile rneetingthc verticalgapshastriedto bring
Finance Commissionshas bcen to make the
about sonre equality in the revcnue capacity devolutionIormula
more and morc progressivc
acrossthe Statesas well. However.for reasons and this Commissionalso has
tried to nrove
mentronedin chapterV, it hasnot beenpossible furtherin that directionwhilc keeprn_s the con-
lbr tlic Comnrissionto apply the normative sidcrationsof el'ficiencyalso in vicw. But there
p r r n c i p l ef u l l y . T h e i m p l i c a t i o ni s t h a t t h e l e v e l is a point beyondwhich pro-gressivity cannotbe
of serviceswhich the Statescan provideto their p u s h c dt h r o u g ht a x d e v o l u t i o nS. i n c ca l l S t a r c s
pcoplecurrentlyas ret'lectedin their per capita a r ee n t i t l e dt o a s h a r ei n C c n t l e ' st a x c s- a g a i n .
n o n - P l a nr c v e n u ee x p e n d i t u r e(sN P R E ) v a r i e s t h i si s t o b ec x p e c t c d g i v en t h ev e l ' t i c ai m l balancc
widely acrossStates. - w i t h t a x d e v o l u t i o ne. v c n i l ' r c l a t i v c l vs n r a l li r r
t h e i l c a s e ,S t a t c sw i t h r c l a t i v c l ys t r o n gr c v c n u c
3. Fnrm the assessment of the revenuesand basesarcable lo generatchandsonrc surplusesin
'fhe
expenditures and the Statesmade by the Com- their non-Planrcvcnuebudgct. burdcn rrl'
n r i s s i o ni t. i s n o t i c e dt h a ti n s e v e r aSl t a t e (sr n a i n l y r c v e n u ec a p a c i t y c c l u a l i s a t i o tnh c r e l i r r el-n l l s
in the krw incomc group) the per capitaNPRE h e a v i l yo n t h c g r a n t s - i n - a i d A.l t h o u g hr n d e r e r ' -
(excludingintcrestand pensions)is I'arbelowthe m i n i n gt h e r e q u i r e m e n tosl ' g r a n t s - i n - a iodl d i i -
nationalavcragc.For instance,in Bihal the pcr f'crentStatestherevcnucandcxpcnditureof'cach
capitaNPRE fbr the year 2000-0I works oul trr Statehasbeenasscsscd by theCornnrission on thc
lcssthan60 pcr centof the averageof the general b a s i so l ' s o m e n o r m a t i v p
e r i n c i p l c st.h e s t arling
pointlbr thc normal.ivc e xcrcisesremainslar-ucly
catcgoryStates.Similar is the casewith a few
the actualsof the past. Strictly speaking.the
other low income States.Even with the State's
normativeassessment shouldcorrectthesedel'i-
share in Central taxes recommendedby the
ciencies,but in order not to causeanv sevcre
C o m m i s s i o nt ,h c p e r c a p i t ar e v e n u ec a p a c i t yo f
disruption,strictnormscould not be imposcdin
Bihar rcmainsat well below thc group averagc 'Ihis
the base year estimatcsol' expenditurc.
for the year 2000-01.Paradoxically.Bihar does constitutesan irnpedirirent
to eclualisation. Thc
n o t g c t a n y n o n - P l a n r e v e n u ed e f i c i t g r a n t picture would have been dil'f'crcntit the fiscal
although its rcvenuecapacity even alier it is n e e d so l ' t h e S t a t e sc < l u l db e d c r e r n r i n eodn t h c
au-umented by sl.atulory transl'ers, thatis to sayits b a s i so f ' t h ca v c r a g ep e rc a p i t ae x p e n d i t u r1eo l a
f c v c n u ca v a i l a b i l i t yi n t h en o n - p l a na c c o u nfl a l l s s t a n d a r dl c v e l o l ' e x p c n d i t u r e )a. l l o w i n g l i r r
'l'his
significantlybelowthe averagc. is becausc, appropriate cost dil'l'erentials as well. rnultiplied
w i t ht a xd e v o l u t i o nt h , en o n - p l a n revenua c c c o u n t by thcrr population.and the gap bctwccn thc
o f t h e S t a t eg o e si n t o a s u r p l u s . requirenrents of revcnueto nrcct thc needsso
3t0 JOURNAL OF INDIAN SCHOOL OF' POI.ITICAL ECONOMY APRII--JUNL:z(XX)

determined andwhattheStatescouldbe expected intlexible. at least downward, and with tax

to raise as revenueby making averageeffort, devolutionconstituting90 per cent ol'the stat-
could be provided as grant. But as indicatec utorytransferstheroom for equalisation through
above.our transl'erscheme,despiteour effort to grants-in-aidto meet the non-Plan rcvenue
go by thc normativeprinciple,falls shortof such deficits has becomcquite nan-ow.In f'act,the
equalisation. normativeexercisesto determinethe non-Plan
revenuegaplosemuchof theirsi-enif icancewhen
5. Another l'actorthat hindersthe processof the shareol'grants-in-aid remainsso small.
equalisation is theflow offundsthroughchannels
s n o t u s e da s a c r i t e r i o n( c . g
w h e l ee q u a l i s a t i oi n 7 . I n t h i s s i t u a t i o ni,f e q u a l i s a t i ohna s t o b c
with assistancc lbr CentrallySponsored Schemes carriedto its logicalcnd,thelc is a needcithcr to
and lbr extcrnallyaidedproiects).Il' the cquali- reducethe shareol' tax dcvolutronin thc total
sationprinciple is to be implementedin a l'ull- statutorylransf'ersto allow n)ore r(x)l'nlor lhc
lledged manncr, the transf'ersfor purposesol' d e l ' i c i-tc r a n tosr t o s u p p l e m e nt ht cr c v e n u e dclicil
cqualisationwould have to be determinedas zt grantsthroughequalisation grilntsto narrow the
whole and not in thc lbrm of tax devolutionand gaps in the rcvenuecapacity ol' thc Statesin
'the genoralreventle
grantsalonc.This is what p r o v i d i n ga t l e a s ts o m co l ' t h e b a s i cp u b l i cs e r -
l'ccurrentgrants' in Australia scek to achieve v i c e sl i k e c l c m e n t a r ey d u c a t i o np.r i n r a r yh e a l t h .
These are supplcmentedby specilic purposc w a t e r s u p p layn ds a n i t a t i o nT.h eC o m m i s s i o hn a s
grantsand sonregranLsthrclughthe Statesto be madesomerecomnrendations tbr up-eradation ol'
passedon to the local governments.But the generaladministrationand social sectorsin the
genefalrecul'rentrevcnuegranl.sal'eglvcn on a States.But thcsetransfersareonlv nrarginaland
normartive assessment ol revenuccapacttyand do not go far to reducethc disparitiesin revenuc
expenditure needsbasedon the relativitiesofthe capacilicsof the Statesto thc extentnccessary to
Statesin thc matter.lt is relevantto notethat in cnable them to provide these servicesal an
Austlalia the genelal rcvenuerecurrentgrants averagelevcl. Given the reality,namely.that it
have conrc-to replace the tax reimbursetnentmay not be possiblelo lowcr thc pl'op<lrticln of tax
-qrants which wetc in vogue earlier to compensate dcvolution in the statutory tlansl'ers in thc near'
thc Statesftlr the losso1'taxpowersttt the t'ederal l'uture,I f'eelthat somecqualisationgrantsneed
governnrcnt. s e r r o u sc o n s i d e r a t i o inf ' t h c d i s p a l i t i e si n t h e
rcvcnuecapacityol'thc Statcsat'cto be rcduced
6 . I n o u r s y s t c m ,t a x d e v o l u t i < ) ni .,c . . t a x I f i t i s n o t p o s s i b l ct o I n e c tt h c g a p sl ' u l l yi n o n e
sharinghers conrcto occupya centralrolc in l'iscal o r t w o y e a r s ,t h c c q u a l i s a t i o ng l a n t s c a n b e
tlansl'ers.This is partly becauseof the general stagge rcd over a nunrbct'of vcars.l'his, I I'ccl,is
l c c l i n gt h a tt a xd e v c l l u t i ocno n s t i t u t eass o u r c eo t ncedcdso that the Ccntral transf'ers can play a
transl'ers which is guaranteed by thc Constitution m o r ep o s i t i v er o l e i n e q u a l i s i n tgh ec a p a c i t i eosl '
'Ihe
a n d s i n c ci t i s d i s p c n s e d b y t h e F i n a n c cC o n l - the Statesto providc thc basic services.
ntission,it hasthe merit of certaintyand impar- weakeningol'thcequalisation roleol thestatutory
tiality. In fact there is a persistentdemandtbr transl'ers shouldalso be kcpt in view bcfitrcany
raisingl-urtherthe proportionof Union taxesthat increascin the proportionol' Union taxesto bc
goes via tax dcvolutionto the States.With the passedto the Statesthrough tax devoluti<lnis
reccntamcndmentof thc Constitutionand pool- considered.
ing ol'all Ccntraltaxes lbr sharingwith thc States,
thc tl'action of the Centre's revenuesto be (A.Bagchil
devolveclto thc Stateshas now becomcalmtlst Member
 vot,.12No.2 RL,PORTOF'tHE ELEVI.:NI'H I;INANCE COMMISSION I:OR 2000-2005 3tl

Annexurc V.4. H,stimatedNct Return on lnvestments bv States in thr Power Sector* ( Para 5,3 I )
(Rsin lakh)

2U)0-01 200l -02 2(n2-03 2m3-0,1 2(X).1-05

(2) (3) (4) {5) {6)
,\ntlhra l)raticsh
l l e t u r n o r ro / s S t r t c l . o a l s I o S [ ] l l s I I . l 3I r3.325 r5..r40 17.53.1 19.621
l l c t u r n o n S t a t cl i q u r t v t o S l J l J s 1.6'10 3.630 .1.6I 9 5.609 6.599
Assrnl
R c t u r l , r n o l s S t a t el - o a n st o S [ : B s 3.540 7.Oti0 10.610 14.t60 l 7.7(X)
R e l u r no n S t a t cL , q u r t v1 0 S E B s c) 0 0
lJrhar
R e t u r no r r0 / s S t J t el - o r n s t 0 S H I I s 6.-182 t7 557 ItJ.697 21.8't2 I | .047
R e t u r no n S t a t eE q u r t yt o S [ B s )o4 2ti I 157 .+34 5r 0
( iujarat
Rcturn on o/s State l-oans to SEIJs 6,8112 l3,l9n I 9 . 9t - l l(r..130 ..D.946
Rclurr on Slrtc Lquity ro SIitss l.319 I.8.1I 2.:t-+.+ 1.r,r.16 1.3;18
l-{rrvlrlrrl"
l { t t u r n o n o / s S t r r l cl - o a n st o S L b s .16;l 159 |.055 I .3.19 l .645
llcturl or Strtc l:quityto Sl:lls 0 0 o
H r n r a c h all) r r i l c s h
Rctunr orr ols State Loans to S[:Bs 200 355 5l0 665 819
l i c t u r n o n S l a t c E q u r t vu r S t r B s t7 ll 29 36
Karnrtrkl,
R t t u r n u r o / s S t r l c [ - o a n st o S E t s s l0.9lJ3 I |.559 Il.|3.1 l).110 I1.186
Ileturn rrn State [r<1uityto SF-Bs& KPCI ).2t9 3 . 0 5I l.lJli3 4 . 7t 5 5.5-17
Kcrala
Ileturn orr ()/s Slatc l-oars to Sl-lJs 1.689 5.,162 7.1.1;l 9.007 t0.11e
R c t u r no n S t r l e I r q u i r ) .r o S E B s o
l\1rdhr1a l)rrtlcslr
I { c t u r no n o / s S t i r t cl - o a n st o S E B \ r.656 1.653 1,6.19 5.6.15 6.().1I
I l c l u r r ro n S t r t e [ : q u i t y t o S I i B s l0 20 t0 ,10 50
Nlahlrrshtra
19.6.{6 rJ 5)l
R c t u n ro n o / s S t a t cl - o a n st o S E B s 29,.+01 3.1.325 _r9.l0l
R e t u r no n S t a l eE q u i l y t 0 S E B S 2.951 .r.066 5.175 6.2tr.l 7.191
Nlcghahya -t90
RclurI ()n o/s State l-oans lo SI:Bs 263 52'1 r.053 l.ll()
R e l u r n0 n S t a t cf i q u i t y t o S E B s (J 0 0
llnssu
l { r r u r n o n o l s S t a t cl - o r n s 1 ( )P o w e r C o n r - 1.06.1 L68q l . . rt 0 t . 9r 5 .1.56()
llillc5
l l c r u r n o r r S t r t c [ - , q u l t \t ( ) I ) o s e r C o m p a n -
ICSlil)!l | .071 r.,+76 1.878 l.ls I l.brJl
Othrr Prolccts

l ) un ; a b
I { c t u r r r . , r r . r /S
r r r t c 1 , . ) J l st o S I I } s 7.501 l-.r.683 19.817 16.{x)fi l l . r5 l
R c t u r no n S t r t e l i q u i t v t o S [ : B s 3.23.1 .+..+.+7 5.660 6.tt7l E.()l()
Rujrstharr
R c t u r l , ' n . ' / s S t r t c l , , r a n st o S I B s 12.707 t2.101 tt.101 12.107 |).101
I { e t u r no n S t a t el : q u i t ; t o S I : l } s 1.549 .+.8rJ0 6.2t1 1 J . 837
Trrnrl Nndu
R i l U r i l r , I . r , . \ t . r t . l r r u l t st r r S l : B : r xqJ I )rt r.556 l.l{Jg -l.2tl
I l r t r r r r ro r r S t r t c l : q u r t y t o S E l l s .1.r9 60r 76lt 911 I .097
L ttlrr l)rrcltsir
I l r t u t t , . r r r , ' /Sr t . r t .[ . , ' r r r st o S l : [ J r l5.li0lr t] .929 70.05I 9l.l9q I .l.l.:ll()
R e t r i r no r r S t r t c [ : t l t r r t y li0 I i .l 0 l 1 . . +I 0 t.701 2.(x)l

\\ csrIJcIsal
R c t u r r t , ' rur/ s S t ; r l rL , , J r ) l: r ) S [ : 8 . 6.I6li I l.rJr{.1 I7.(rl3 lt.3+e 19.065
l ' l e t u r nL r nS t r t r I : q u i t y t o S l : B s 6 Ii51 9,123 I I .993 l.+.561 -32
*ThcRcturItsott|oansatIdtquit1'haveheencalculltcdlilr.thcitIr,tstmcntsnladeinSIJIls,pllrvcrctlnrprtttesaltd
ol thc Stat!'.
* * [ ; o r H a r y r n r . S t a t c( ] o v e r n n r c n t si n v e s t n t e nitn e q u i t y i r r t h r ' l o u r c o r r p a n i e se s t r h l i s h e di r r A u g u s t l 9 9 9 i s n r r ty c t r v a i l a h l e .
Note: In thi rclsscsinrentcxercisethe gross returns,ril lruns wcrc takcn at'97. and gross returns,,niquity were trkeir at 5.2. Irr thc last ycar
( r l t h c l b r c c r s ( p e r i o d .i . e . . 2 ( X ) 4 - 0 5I.i r t h e i n t e r v c n i n gy e a r st h c r c r u r n su c r c u i c i r , l i n { l v s t c n n c dr i p .H c r u 1 , r , ,t.h c s i r r r cp c r c c n t : r r c sa s
r d o p t r ' di n t h e S t r t e s r c a s s c s s l l l c ret x c r c i s c b , a v e b e i r i t a k e n .T h e r e L u r r rlsn v e b c c r r . i l i u l a t l i o r r t h c s r u t k o t I o u r r sr r l l i l ! r . s r n r ; r i l sr n
e u u i t va s o n I I s t l V I r r c hI 9 9 0 . a s r l d i c a t e dr n t h c l j i n a n c cA c c o u n t so f I 9 9 l i - 9 9 .
il2 .IOURNAL OI' INI)lAN SL'HOOL OF l"OLI-ICAL I'CONOh'lY APRIL-JUNI:2oU)

'lransport
A n n e x u r e \ r . 5 . E s t i m a t e d N e t R r t u r n o n t h c I n v c s t m c n t sl ) v S t a t e G o r r r n n r e n t i n t h c S e c t o r ( P a r a 5 . 3 1)
tRsrnlakht

1000-0I l ( x )1 , 0 2 2(Dl-03 lU)3-(),1 .l(x)4-0.5

(ll (l) (4) 15J (6)
Arrdl.rrrI)rrdcsh
l l c t u r r ro n c / s S l a t cl - o r r ) st o S R T ( ' 0 00i)
l l c r r r r no D S t r r t cl : q u i t l t o S l { ' f C t6l 361 160 55rJ 657
T0tirl Rctufll 261 16l +6() 55rJ 657

As srrr
Ilcluro(rl o/sStrtel-ornsto SRT(l 0 (, 0 0
l l e t u r no n S i r t c I : q u i t l t o S R T C .t)7 5ti8 7,+E 90lJ t.069
T0tul Return 1?1 5ltE 7.llJ 90lr I.069

B ilrrr
ftt
Rcturn on ols State l-orns to SI{TC i5 I0lr l6l )6i
'112
licturn orr Statc titluity to SRTC l,+9 l0+ 160 l6
T()trl Rclurn t0-1 ll +ll 5.10 6lq
(iularat
R e { r r r no t t t r l sS t r t c l , o a n st o S R T C () 0 o o 0
'If{octtrt lr r ror n S l r i c
Iilurlv to SRTC 659 901 r. li.l I ..10
I 1.6-19
Rclurr) 659 907 LI5.l L"10I t.6-19

I lrrrrrrclra Plr r d c s h
l { e t u n ro r r o / s S i a t cl . o r n s t o S l { ' f ( ' 0 {) t)
on Strtc Iiquity to SRT(' I ,+ 6 1
'Ifloetrrul r n .l 6
Return l

J a r l n r ua r r c K
i ashnir
l { c t u r no u o / s S t r t c I - o r r n st o S l { T [ ' :.1-1 lt{9 1l\ 911 r.ll2
R e l u r no r S t a t cl i q u r t v t o S I { ' f C l6l ll _l I l{.1 1+5 -]06
'fotrl 4It1 i.017 l.lll r.6lfi
Rcturrr 7ll

K.iril!tukr
l l . t r u r r r , r r0r / s S t r i t el . o i r n sl o S I { T ( ' l7 _19 -ll -l.l l)
I { c t u r r ri i r S r r t c l i q u r t l t o S I { T C 713 9lJ7 Ll5() 1.5t5 1.79.1
1 { ) t n lI { e t u n l 7-s5 L016 1.)9'1 i.56lr i.li.lq

Kctrlrt
l { e l u rn o n o / s S t a t cl , o r n s t o S l l - l ' C t5l 175 19.1 619 7.+o
I l e t u r r o r r S l x l c I t q u r t \ 1 ( )S I I T C lll t67 ll.r l5l{ l(u
T ( ) ( i l 1R c l u i l l t75 iJl 7l0 Ir77 l.o.+4
l\'laLlhryrPndcsh
l { c t r t n ro n o / s S t r t e [ - o u n st L rS R T C ] 130 I50 169 llig l(x)
I l c t u r r ro n S t r t c l : q u i t l l o S R T C ll5 ) 1| -l(Xr 5+l 677
TolirlRctuili 166 ,lt I 575 ?ll itus
l\'lrrharrsltl ra
I{ctunl r)r ors Stutc I-oans to SIiT( o 0 0 {l

l L e l r r r roi n S t a t cl : q u i t y t o S R ' I ( ' l5l +5() 5{7 ,J+l

Total l{cturn 157 .r5l Jil ) 5{? 6Ji

N'lerhrlava
RL:tirrroir o/s S(litc L()rns to SRT(' 0 l) ()
I i c ' t u n ro n S t r t c l : q u r l ! t o S I { f C ++ 6i 7ll 9:l lll
'[irtal .1.1 6l 7l 9+ ill
lletrrrr

N lr n i p u r
l l e l r r r no n o / s S l a t cl - o a r r st o S l l T ( '
lkrurn on Strtc Iiquitl to Sll'fC 66 rJ5 I ()-1 lll
Totnl llcturrt -.tx 6(r 65 I0l lll

unssa
R r t r r r i lo n o / s S t a t cL o r ! 1 st o S l { T ( ' 0 0 {)
qii 196 t9.l l9l l9( l
S t r t c l : q u r t yt o S I I T C |
'I[loc trrrlr n ro n 9E 196 t9J t9l +9()
I{cturn

l ) u r 1t a h
R et u n r o r r r r / sS t l r t cl . o a r r st o S I I T ( 91 111 257 I1? ll7
l { c l u r n o l l S t i r t cl r q u i t v t o S R T ( ' t?1 llLl 305 -170 .i35
fotal lleturn 211 1t7 561 101 lJ5l

l{r jasthr n
Ilr-rrrflror) o/s Statc Loatts to SRTC i)
R L ' t u r no n S t r t c l : q u i t y t o S R T C EI 162 r l1 .]]5 .+06
Total Rcturn ul 162 2.+l t25 +06
lCrutrl I
 VOL.]2 NO REPOR'I-OFTHE EI,EVENT'H f lNANCL: COMMISSION FOR 2OOO.2OO5
_il3

Annrxure Y .5. ( Condd- i

(Rs In lakh)

2U)0-0| 100I -02 2(X)2-0.1 2003-04 2UX-05

t2) (3) (,1) (5) (6)
Tamil Nadu
Return on o/s Statc Loans to SRTC 292 325 359
Return on SrareEquiry to SRTC
392 126
|,221 I.683 I tJ? 2,601 3.060
Total Return 1 . 5l 6 2.008 2 . 5 0I 2.991 3.486
Tripura
Rcturn on o/s Strte l-oans to SRTC 0 I I I I
R c t u r no n S t a t cE q u r t yt o S R T C 5l t02 l-53 204 i:):)
Total Rerurn -5I t03 t5.1 205 156
[-lttarPradcsh
Rcturn on o/s Statc l.oatrs to SRTC 32 59 87 I t.l t12
l { e r u n ro n S t a i c [ : q u r t yr o S I I T C t92 383 57-t 766 95E
lollrl Rclrrrrr r23 112 b6l It80 1.099
\\'cst llcngal
R c t u r nn n o / s S t r r e l - o a n st o S R T C t.009 945 2.8U5 -+.756
.1.u20
Rcturn on Strtc trquity to SII.TC )1 41 51 61
Total Rcturn 1.036 982 2.932 3.878 +.823
Ntttc: In lhc rclsstssment exerciselhc g.rossreturnson Ioans werc taken at g per cent and gross returns
on ccluity were taken at 5 per cent.
r r r t h e l a s t y e i i r o l t h e l o r e c r s t p e r i o di . c . . 2 ( D ' l - 0 5 . I n t h c i n t e r v e n i r g y e l r s t h c r e t u r n s w e r e - . s t c p p c t l u p t r o r n t h c r c t u r n s r e p o r t c d I n | 9 9 g - 9 9
to the dcsired rcturns ol 2(D'l-05. Here loo. the same pcrcentagcsu.sadopted in thc Strte's *u.."..nrent
cxrrclse. havc becn take'. .fhc
rcturnshl!c bccn ctlculatcd ol lhe stock of loans antl invcstme;ts in cquiry as on 3 I sr March | 999. as rrrdrcatccl
ln thr [:inilncc Accourrrs
ol l99ti-99

A n n e x u r e V ' 6 . M a i n t e n a n c eE x p e n d i t u r e P r o v i d e d f o r M a j o r a n d M c d i u m l r r i g a t i o n ( 2 7 0 1 | ( p a r a
5..1.1)
tRs rn lakht
Si r t cs 2UX)-()l 2(DI -01 2(n2,03 l(x)3-(x 2(X).+-05 Toral2ilX)-2(X)5
rl' (2) (3) (4) (-5i (6) (7\
Andhlr Prudcsh r 4 .I , l 5 I.1,937 | 5,'197 t6.697 I7.639 7 9 . 2l 5
ArunachalPrrdcsh 0 0 U (,
Assam tt68 9t2 95',1 |.00.5 I .0.5.5 4.798
liihar l9.233 20.t94 2t,201 22.261 l3.37rJ I .06.t7,1
C)oa Gl8 6tt0 7t1 750 181 3.580
G u.jarat I6.859 t7.102 ilJ.587 I 9 . 5l 6 10.492 9 3 .I 5 6
Harl ana 9.295 9 . 8l r { l0.38lJ I I .059 I t.6t15 52.1.+.+
l - l i n r a c h rP
l rrdcsh t31 l.l3 I50 t58 166 754
. l r n r r n u& K a s h r r r i r |.015 I .t0t1 1.t79 I .l-56 I.3t9 5.907
K r rnalakl, ri.l03 8.7'tI q l7q
9.809 | {1.165 -16.5 26
Kcrala 2.622 ?.190 1q1')
3 .l 6 l -1..1.+
I t.l.ti87
lVh,:lityaPrudcsli 2.O.171 21.396 22.466 23.58e 21.169 I . | 2.59t{
Nlaharashtrr rE.072 r8.975 19.92,1 20.920 I 1.966 99.tt57
N'lrnrpur 932 979 I.028 1.019 1.t33 5.152
l\1crhairy a 0 u 0 U
l\ | ll()frl)) 0 t/ 0 (l u
Nrgrlattd o t,
Orlsstl 1.501 7.Ii75 r1.330 8.776 9,+9.1 +I.9ttl
P i r rlri r b I].15,+ t2.191 Il..Itl I'1.l-5:+ r+.951 67.5.]J
llalrstirrn 13.;175 l:1.l.lli l4.tt56 l 5.599 16..r79 74..+.56
Sikkinr l, 0 0 U (, 0
Trnrrl Nadu 15.665 t6.,i-{8 l 1. 2 7| I t ( .1 3 4 19.04I It6.-5-59
Trrpura t2 l3 l4 l4 l5 6l{
Llttar Pradesh ;10.906 .12.951 .15.099 47.351 19.'121 1.16,031
West tsengai 8.928 9 . 3 75 9.843 10,335 10.852 ;19.334
A l l l n d i aT o t a l 2 . tt . 1 1 2 2,22,(x)8 2,33,539 2.45,631 ?.58.-5.59 I I . 7 0 . 9l 0
3t.1 JOURNAL OI; INDIAN SCHOOL OF POILITICALECONOMY APRII,-JUNE2O0O

Annexure V.7. Maintenance Expenditure Providcd for Minor Irrigaition (2702) (Para 5.44)
(Rs in lakht

States zun-Ol 2ff)l-02 2002-03 2fi)3-04 2U)4-05 Total2il)0-2tX)5

(l) (2i (l) (4) (5) (6) (7)

Andhra Pradesb 6.411 6,875 7.359 7.886 8.175 36.966

Arunachal Prrdesh 525 551 579 608 6311 t.90I
As sanr 3,068 3.222 3.383 3.552 l.'/29 r6.951
I] ihar rI {]f Il.164 r.822 1 . 1 .I53 r 5 . t3 9 69.t75
(loa 55ti 585 615 6'15 678 .l.0tir

1.286 7.650 8.033 8.43,1 It.856 :10.259

Gularat
3.68,1 3.913 1.102 ,+.35
l ,1.62
I 20.67|
Haryana
Himachrl Pradesb 2.662 2.195 ) qt5 3.081 I ?1S l:1.708
J a m m u& K a s h m i r 5.390 5.659 5.942 6.239 6 . 5 5l 23.781
Karnataka 5.8'11 6,r33 6.440 6.162 7.1fi) 32.276

3.681 3,871 4.061 ,1.268 .1.'+8 I 10.17I

Kerala '7.212
Madhya Pradesh 5.899 6,336 6,784 7 . 1 i I0 34.09t
Maharashtra | 1,221 I t,'782 12,372 t2,990 t3.610 62.(135
Manipur 2.17 259 212 286 ,ru) I.363
Meghalaya 5.+0 567 595 625 656 t,982

Mtzoram 48 5l 5-l 56 59 t6?

NagaJand 389 '108 .+lu +5() 112 l. il7
Onssr 3.189 3.t48 1 . 5t 6 1.691 1.876 I 7..(rl0
7.8.13 8,286 8.731 L l63 9 . 7t s -l].76]
Pur4ab '7.525
Ralasthan 7 . 16 6 1.9(\l 8.296 r J . I7l l9.59ri

Sikkrm ll0 ll6 t22 l213 I 3.1 609

Tanril Nadu 4.993 5 75{) 5,506 5,78 3 6.081 21.6t1
903 9.18 995 1.0"r5 .+.75
2
Tripura 860
Uttar Pradesh 60..187 64.234 68.M.1 12..182 11.113 L.ll.3lJ0
West Bengal 22.211 23,321 24.48'l 2 5 . 7t 2 26.99'7 1.22.728

All India Total 1.76.909 r.86.80.1 1.9'7.032 2.07.913 1.20.112 9 . 8 9 .I 6 I

(MH-3054) (Para 5';17)

Annexure V.8. Maintenancc Expenditure Provided for Roads & Bridges
(Rs in lakh)

States 2UX)-01 200I -02 2002-03 2fi)3-0.1 l(x)4-05 Total ZUI|2(X)5

{l) (2) (3) ('+) (5) (6) \1)

Andhra Pradesh 46,809 4 9 .l . l 9 51,607 5:1.I 87 56.897 1,5rJ.649

359 371 396 'l l6 .136 I .984
Arunachai Pradesh
Assam t 5 . 3 8l l6.r5I 1 6 . 985 I 7.806 18.696 8.1.992
Bihar 25,46'7 26,740 28.077 29,481 30.955 | ..10.710
Goa 2.020 z.l2l 2.22-7 ? l1g 2.456 ll.l6l

Gujarat 43.651 .15.833 48.125 5 0 . 5 3| 51.0-58 2.4t.t91

16,409 17.230 I8.091 18.996 19.946 90.6'72
Haryana
t-7,647 18,530 t9.156 20.+29 I I .+50 97.513
Himachal Pradesh
3.,141 3.613 3.794 l.9l{4 It{.109
J a m m u& K a s h m i r
2l,66tt 24.852 26.091 2'l.399 Itr.769 I .30.7112
Karnataka

22.100 23.205 2'+.366 25.584 26.86.1 1 . 1 2I l. 9

Kerala
Madhya Pradesh 48,796 5| 1 1 5 53.19-l 56.487 59.1 II 1.69.626
93.117 98.435 1,03,356 1.08.524 t .I t . 9 5 0 5.llJ.0i2
Nlaharashtra
242 266 280 l9.r t.3l+
Manipur .1.612
3.810 4.001 .+.20
I 4 . , 1I1 I I .055
Meghalaya

1.993 2.093 2.197 2.30'7 ).122 I 1. 0 1 2

Mlzoram
2.t24 2.230 2.1.11 2..158 1.581 I 1.73.1
Nagaland
13.284 I3.9,18 14.415 l-5.378 r 6 .l . l 7 71..t0I
Orissa
1 5I.5 8 1 5 . I96 1 6 . I7I t'7.511 Ir{.124 l J3 . 7 5 6
Punlab
23.731 21.923 26.t10 27.118 28.1J5l t . ll .r - s 9
Raiasthan

1,517 I .593 t.613 I.756 I .8'{4 8.-ttt,+

Sikkim .+.+.
36.333 3 8 .r 5 0 ,10.057 :12.060 I 6l 1.00.76.1
Tamil Nadu
1,043 I .096 i.150 1.208 1.168 5.766
Tripura .17.750 ).27.9).1
Uttar Pradesh .11.248 43,310 45.176 50.I .17
16.260 t7.013 t7.921 l8.823 19.76{ ti9.8.18
West Bengal

5 ,r 6 , 0 8I 5.41
.885 5.68.980 5.97.129 6.27.1()() 1 8 . 5t . 6 7 5
All States
 voL. t2 No.2 REPORTOF THE ELEVENTHFINANCECOMMISSION
FOR2OOO.2OO5 3t5

Annexure V'9. Maintcnance Expenditure provided tor Buildings (lvlH-20s9 & 2216) (para 5.50)
(Rs in lakhl
States ForecastPeriod Projections(5%..t Totrl
Provision
20,00-01 200l -02 2(n2-03 2003-04 20(x-05 tfix)-2u)-5
il) (2\ (3) (4) (-5) (6) (7)
Andhra Pradesh 9 . 3 7| 9.840 l 0,332 10,848 r|.391 -5I ,782
Arunachal Pradcsh 2.199 2.309 2,124 2.6'73 12.t49
Assam 5.986 6.286 6.600 6.930 7.276 3l.07ll
Bihar I 1.984 12.583 13.212 I3 , 8 7 3 l:1.566 to6,211
Goa r,866 I.959 2.057 2 . 16 0 2.268 10.3 l0
Gularal r8.636 r9,-568 )('t s41 2t.574 27.653 1.02.978
Haryana 4.086 4.290 4.504 4.',730 4.966 ?') {?(
Hrmachal Pradesh 4.829 5,070 5.321 -5.590 5.870 26.683
J a m m u& K a s h m i r 9,520 9.996 10,496 I I .021 I l .572 52.606
Karnataka t7,70'1 r8 . 5 9 3 tq 5?? 20.498 2l .523 q7.8.111

Kerala 5,188 5.448 5,720 6.006 6,306 28.669

Madhya Pradesh t0,577 I 1,105 I 1,66
t 12.244 I2 . 8 5 6 58.143
Maharashtra 52,487 5 5 .I l 2 57.867 60.761 63.199 2.90.016
Manipur 942 989 1.039 I ,091 1.t45 i.207
Meghalaya 1nr1 3,174 3.333 3,499 3.674 t6,70.1
Mizoram t.147 1.519 1.59.5 1.675 't.995
I .759
Nrgrland 4.915 \ ))l 5.485 5.759 6.0r17 27.489
0rissa t2.872 l 3 . 5l 5 l.t.l9l 14.901 | 5.6.16 7t.121
Punjab t2.919 l 3.565 1.1.2,11 l:1.956 t5.70.r 7 I .31t7
Ilalasthan 7.506 7.882 8.276 8.690 e.l2+ ,l I .478
Sikkrnr 885 929 915 t.024 I .075 1.886
T a n r r lN a d u
'frrpura t2.642 t3,271 13.938 14.635 t5..r66 6e.855
3.51.1 3.689 3.874 .+.067 4 . ) . 1| 19.415
Uttar Pradcsh ?4 615 25.867 21,160 28.518 19.9.1,1 r . 3 61. 24
Westtsengal 18..162 l 9.385 20.355 21.312 12.:Lll | . 0 2 . 05I
All States 2.56.259 : . 7t . t ' 7| 1..tt4.730 2.98.96'7 1 .t 3 . 9 51 1 4 . 2 7 . (I! t

Annexurt V. 10. Provision for Committed Liabilities for maintenanc€ ot Plan Scheme (Para 5.55)
(Rs in lakhi

Stares ProjectedCommitted I-iabilities

2U)2-03 2003-04 2UX-05

il) (2) (l) (4)
Andhra Pradcsh l .38.,103 I s) 1/.J 1.67.468
Bihar 66.2fi) 12.82{) 80.| 02
Goa 4.293 1.722 5 .1 9 5
Cu jarat 81.941 96.735 1.06,408
Haryanr 2 8 .I 9 6 3I. 0 1 5 34.1 l7

Karrrataka 99.454 t.09,400 I.20.340

Kcrala 1 J 5 |. 9
8 94.401 I.03.841
I\'ladhyaPradesh Il0.:r95 88.434 97.218
Maharashtra 1.3-5,9lt2 1.49,580 1.64.539
Orissa 61.94.1 70"3-lli 7 7. 3 7 2

Punlab 22.ti9
l 2 5 .l 8 0 27.69t(
Ralasthan .16.841 51 . 5 2 5 56.611
T a r n r lN r d u 95.U)8 l.$1.509 | . l:1.96()
Uttar Pradesh 1...13.U2(r I .,17.201i |.6t.929
\\ cst Bengal 67.962 74.75Ii Ir2.l34
All State 1,157.r55 t 2 . 7 2 . 8|7 l.+.(x,.
I 5u
316 JOTJRNALOF INDIAN SCHOOL OF POLITICAI, ECONOMY APRIL.JUNE 2OOO

AnnexurevI.3. Per Capita GSDP of StatesComparableEstimates:New Series(Para 6.34)

States Average
(l) (51

Andhra Pradesh 9,992.N r l ,316.00 1 2 . 7 9.10 0 r r.366.33

ArunachalPradesh 9.708.00 I I , 3 71 . 0 0 I 1.037.00 10.705..13
7,457.ffi 8,042.00 8.406.00 7 . 9 6 8 .33
Assam
Bihar 5.099.00 5.242.4J 6,145.00 5.-s28.67
Goa 2 r , 11 0 . 0 0 24,569.00 29.548.00 15.075.67

Cuiarat 14.560.00 I 6 .1 0 5 . 0 0 I8,330.00 1 6 . 3 l3. 6 7

Haryana 14,728.00 r6 . 3 4 7 . 0 0 r9 . 7 0 7 . 0 0 16.927.33
HirnachalPradesh I l . 0 1 80 0 l 1.693.00 t3.750.00 12.153.67
J a r n m u& K a s h m r r 8.820.00 1 0 ,l 3 9 . 0 0 I 1.063.00 t 0 . 0 0 73 3
Karnataka 10.890.00 12.244.00 I1.968.00 I2.-167.33

Kerala 10.874.00 13.203.00 1 51. 97.00 r3.09r.ll

MadhyaPradesh 8.383.00 9,602.00 r0.783.00 9..5ri9..1I
Maharashtra 161. 09.00 19,644.00 I
2 ..541 .00 19.098.0
Manlpur 7.8t7.m u,l18.00 1 0 . 3 6 .010 8.799.33
Meghalaya 9,055.00 10.145.00 1 0 . 1 7r . 0 0 9.813.67

Mlzoram 10.378.00 12.489.00 14.267.00 11.378.00

Nagaland r2.153,00 l 2 , 9 19 . 0 0 I3.716.00 t2.912.61
Onssa 7,340.00 8.246.00 8 .l 4 l . f i ) 7.909.U)
Punjab 16.620.00 1 81 . 77.00 10.908.00 t 8 . 5 6 83 1
Ralasthan 9,053.00 10.068 00 l:.0r0.00 10.377.00

Sikktm l 0 . t 3 30 0 I r,067.00 1 2 .I 2 8 . 0 0 I l.109.33

TarnilNadu I 2 ,l 7 l . 0 0 t3,679.00 15.929.00 13.92b_3-2
Tnpura 7.460.00 7.474.ffi 9.017.00 7 . 9 83 . 6 ?
UtrarPradesh 6,748.00 7,409.00 8.950.00 7.702.3-.r
WestBengal 8.922.U) 1 0 , 2 7.10 0 I r.320.00 l0.l7l.(x)

Source: Csrtrral Sldtirlicul OrNanisatiott, Govenrmenl d India

Annexure VI.5, Index of Social and AnnexureVI.6, Tax GSDPRatio (Para6,34)

Economic Infrastructure (Para 6.34) Average 1994/95to 1996197

States lndex States P e rc r n t

(2) (l) (2)
(l)

Andhra Pradcsh l03.30 Andhra Pradesh 5.,+5

Arunachal Prrdesh 69.11 Arunachal Pradesh 0.66
't'7.12 Assam .l.5lt
Assam
Bihar 81.33 Bihar 3.81
'/
Goa 200.57 Goa .11

Gujarar 124.31 Gu jarat 1.2\)

137.54 Harvana 6.12
Haryala
Himachal Pradesh 95.03 Hiniachal Pradesh .r.u:
J a m m u& K a s h m i r 7t.46 J a m m u& K a s h m i r l.l0
Karnataka 104.88 Karnataka t{.-+l

Kerala 1't6.79
78.68 Kerala 8.33
Madhva Pradesh .+.9r1
Madhya Pradesh
Maharashtra I 12.80 Mahaiashtra 6.55
Manipur 75.39 Manipur r .16
Meghalaya 75.49 Meghalaya . 1 .l - 1

Mizoram 82.1 3 Mizoram 0.56

Nagaland 76.14 Nagaland Ll0
Orissa 8l .00 Orissa + .l 6
Puniab t87.57 Punjab 6.52
Rajasthan 75.86 Rajasthan ) . - 1- 1

Sikkim 108.99 Sikkim -1.:19

Tamil Nadu 1 4 9r.0 Tamil Nadu 8.47
Tripura 74.87 Tripura 1.94
1 0 r2 3 Utthr Pradesh -1.66
Uttar Prad€sh
West Bcngal r I 1.25 West Bengal 5.,19

Source;I CA. Aarut, K.L. Krishrtttund Uma Dutttr Rotchrrudhn' Source(BasicDrta). Fitrunte Attttuttts ttl Skile gttt'erruil(ttts(r'urttuJ
1 1999),Meusuring Intet Stdte DilJerentiuls in ItlrostruLture. iJJileJ).
voL.t2 No.2 REPORTOF THE ELEVENTHFINANCE COMMISSIONFOR 2OOO.2OO5 3t7

Annexure V1.7. Index of Fiscal Self Reliance (Para 6.34)

State OwnRev/Rev Expenditure Relative to All States Improve

ment
Average Average Average Average index
t990t9t- t996/97- L990t9t- 1996t97-
92/93 98t99 92t93 98t99
(l) (2) (3) (4) (5) (6)

Andhra Pradesh 0.5965 0.561r 1.0620 t.0344 9't.10

Arunachal Pradesh 0. l 628 0.0926 0.2899 o.t707 58.8u
Assam 0.3784 0.3t42 0.6738 0.5793 85.97
Bihar 0.3429 0.3537 0.610-5 0.652r 106.82
(ioa 0 5250 0.670l 0.9347 1.2354 132.18
Gularat 0.8297 0.7850 t.4712 t.4472 97.9'7
Haryana 0.7951 0.7385 |.4t62 I . 3 6l 5 96.t1
Himachal Pradesh 0.2580 o.2491 0.4593 0.4603 100.21
J a m m u& K a s h m i r 0.1621 0.t299 0.2885 0.2395 81.01
Karnataka 0.7273 0.7418 1.2950 t.3616 105.61
Kerala 0 . 5 7t 0 0.6u2 L0166 l .I r 3 8 109.56
Madhya Pradesh 0.60r1 0.5546 1.0703 1.0224 95.53
Maharashtra 0.8359 0.8013 r.4882 |.4172 99.26
Mrnrpur 0.0855 0.0862 0 .I 5 2 3 0.1589 t(X.37
Meghaiaya 0 . r6 8 3 0.t739 0.2996 0.3206 107.01
M izoram 0.0740 0.0625 0.1317 0.l15l 87.39
Nagaland 0.0851 0.0500 0 .l 5 l 5 0.0922 60.82
Orissa 0.3808 0.3418 0.6780 0.6302 92.95
Punjab 0.6712 0.6'141 I.2004 1.2427 103.52
Rajasthan 0.5600 0 . 5I l 5 0.9970 0 9430 94.58
Sikkrm o.2023 0.I 395 0 . 3 6 0r 0.25't3 7 1. 1 4
Tamil Nadu 0 . 6 3 8| 0.6469 I .l 3 6 l 1.1925 I04.96
Tripura 0.0813 0.0966 0.144'1 0.1?lil 123.08
Uttar Pradesh 0.3985 0 . 3 7 8I 0.7096 0.6970 98.22
WestIlengal 0.4997 0.4211 0,8897 0 . 7 8l 8 tt7.tt8
Total n Il Strtes 0 . 5 671 0.-542:+ Lfi)00 I.0000 l(X).0c)

Annexure VI.8. States'Share in Central Tax Revenuesas Per Assessment(Para 6.36)

t R s i n c r o r et
Strtcs 2m0-01 2(X)I -02 2(n2-03 2U)3-04 2004-05 2{XX)-05
(l) (2) (3) (:+) (5) (o) (7)
Andhra Pradesh 4 . 16 3 4.854 5.660 6,602 7.702 28.980
Arunachal Pradesh t32 I54 t79 209 )14 9.1ri
A ss a m t.776 2.010 2.1t4 2.tt6 3.285 12..162
Eihar 7.892 9.200 t0.729 12.5l4 14.6(x) 54.91.s
Goa lll t30 t5l t77 206 175
Guj rrat 1.525 r.77n 2,073 2,418 ) xrl 10.616
Harvana 510 )9J 694 809 9,14 3.552
Hidachal Pradesh 369 430 502 585 683 2.570
Jrmmu & Kashmir 697 813 948 t.106 1.290 4.8-55
Karnataka 2.665 3.r07 3.623 1.226 4 . 9 3r 18.552
Kc rrla 1.653 I o)? 2.247 2.621 3.057 l 1..504
Madhya Pradesh 4.178 5,570 6.495 1,576 8.839 1 17 5 q
Maharashtra 2.504 ) qlq 3.404 3 . 9 7| 4,633 t'l,431
Manrpur t98 231 269 314 366 1.377
Meghalava I ti5 216 251 293 142 t.287
Mizoram 107 t25 i46 170 198 145
ll9 '220
Nrgaland 189 t62 I89 828
(Jrissr 2;t33 3 . 18 7 3.716 4.334 5.057 t9.027
Pun.jab 620 723 843 983 1. 1 4 7 4 . 3l 6
Riqasthan 2.959 3.119 1.022 4.692 5.471 20.596

Sikkim 99 116 135 158 184 692

Tamil Nadu 2 . 9 1I 1..r94 3.958 4 , 6l 6 5.386 20.265
Tripura 263 307 158 117 487 I.833
Uttar Pradcsh 10.703 t2.411 14.-550 t 6 , 9 7| I 9.800 14.502
West Ilengal .1,387 5.115 5.964 6.957 8.117 30,540
Totul ot All States 54.059 63.026 73.493 85.724 l.m.0l3 1 . 7 6 .13t l
 JOI.]IINAL OF INDIAN SCHOOL OF POLITICAL ECONOMY APR]L-JUNE 2OOO

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