lannin in ndia 5.33
(i) States now get 42 per cent share in the pool Commission by the Parliament limited its
of taxes of the Centre (recommendation functions to the extent of finding out revenue gap
of the Fourteenth Finance Commission of the states, besides recommending for the ‘grant-
accepted). in-aids to the states from the Centre. The finance
(ii) States are getting liberal funding (loan plus commission cannot determine the capital-related
grants) from the Centre to implement the issues of the states (though the Constitution does
State Plans. not classify between the capital or revenue related
(iii) One of the aims behind implementing roles of the commission while determining the
the proposed GST is to the enhance the Centre’s assistance to the states).
internal financial capacity of the states In the meantime, to promote the process of
as the new tax will increase the gross tax planning, an extra-constitutional body, i.e., the
collections of the states. Planning Commission was set up even before
(iv) States are now free to go for higher market the First Finance Commission was set up. The
borrowings without any permission from Planning Commission played a very vital role in
the Centre (but such a move has to come the process of determining Central assistance to
from the Centre). The UDAY (Ujwal the states as all development plans, programmes
Discom Assurance Yojana), launched in and projects are within its purview. All grants
2015–16 is one of such approvals of the or loans given by the Centre to the states for
Central government under which states
developmental works are practically dependent
are allowed to issue ‘UDAY Bonds’ up to
on the recommendations of the Planning
75 per cent of the dues of the electricity
Commission. And that is why the role of the
distribution companies (Discom) of the
Planning Commission was said to ‘confine’96
states (by mid-2016, the total discom
the role of the Finance Commission, i.e., a non-
debt in the country amounted to Rs. 4.3
lakh crore). constitutional body eclipsing a constitutional
body. P.J. Rajamannar who headed the Finance
thE pLAnnInG coMMISSIon & thE Commission (1966–69) suggested to clearly
define the relative scope and functions of the two
FInAncE coMMISSIon
commissions by amending the Constitution, and
Federal political systems provide independent the Planning Commission was advised to be made
financial control to the central as well as the a statutory body independent of the government.
state governments so that they are able to But no such follow ups came from the successive
perform their exclusive functions.94 For the same governments at the Centre. But one thing was
objective, the Constitution of India has made important, most of the finance commissions
elaborate provisions,95 i.e., setting up of a Finance devoluted some extra shares in the central taxes
Commission to recommend to the President (i.e., the income tax and the central excise) and
certain measures relating to the distribution grants-in-aid.
of financial resources between the Union and
Since the decade of the 1990s, certain events
the states. But the powers given to the Finance
made the Central Government change its mindset
94. As K.C. Wheare writes about the classical federal regarding the role of the states in the process of
constitutions in Federal Government (New Delhi: Oxford
University Press, 1956), p. 97. 96. Ministry of Finance, Report of the Fourth Finance
95. Articles 270, 273, 275 and 280 of the Constitution of India. Commission, p. 88.