Centre To Set Up 16th Finance Commission By November End: Finance Secretary

New Delhi, Aug 21 (KNN) The 16th Finance Commission is expected to be formed by year end, to initiate the layout of centre-state financial relations for coming five years, finance secretary T V Somanathan told PTI.

In its advanced stages, Somanathan said that Terms of Reference (ToR) for the commission is being finalised.

One of the main task of the Finance Commission is to suggest the ratio in which the tax will be divided between the Centre and states for five years, starting from April 1,2026.

The previous Finance Commission which operated under the leadership of N K Singh gave its report on November 9, 2020.The report was applicable for five fiscals, From FY 21-22 to FY 25-26.

The 15th Finance Commission had kept the tax devolution ratio at 42 per cent at the same level suggested by the 14th Commission. 

The central government had accepted the report of the commission, and accordingly, the states were provided with 42 per cent of the divisible tax pool of the Centre during the period 2021-22 to 2025-26.

Inclusion of the fiscal deficit, debt path for the Union and states, and additional borrowing room to states based on performance in power sector reforms were a few recommendations made by the 15th finance commission. 

As per the glide path for fiscal consolidation, the government aims to bring down the fiscal deficit to 4.5 per cent of gross domestic product (GDP) by the 2025-26 fiscal. 

For the current fiscal, the deficit is projected at 5.9 per cent of GDP, lower than 6.4 per cent in the last fiscal ended March 31, 2023. 

He also said the government will stick to the fiscal deficit target of 5.9 per cent of the GDP as robust tax, non-tax collections will help meet the spending requirement and make up for any shortfall in disinvestment proceeds. Although there would be a shortfall with respect to disinvestment, he said, this shortfall would be met by non-tax revenue mobilisation. 

"Disinvestment target is unlikely to be met. However, I would say in aggregate the collective amount between disinvestment and non-tax revenue is likely to be very close to the budget," he said.

The total of disinvestment receipts, plus non-tax receipts are likely to be very close to the Budget Estimates, he said. 

He added that we expect to adhere to our fiscal deficit target this year none of the events so far have caused anything for us to deviate from it.

The government has already got a higher dividend from the Reserve Bank of India and expects higher dividends from public sector banks and other PSUs than estimated in the Budget. 

The Reserve Bank of India in May approved a Rs 87,416-crore dividend payout to the central government for 2022-23, nearly triple of what it paid in the preceding year. The government was expecting Rs 48,000 crore from the RBI, public sector banks and financial institutions in the current fiscal. 

The dividend payout by the RBI was Rs 30,307 crore for the accounting year 2021-22. With public sector banks posting record profits of over Rs 1 lakh crore in fiscal 2022-23, the government's earnings from them are likely to be higher.  (KNN Bureau)