The 15th Finance Commission on Friday ruled out injustice to any state in the allocation from the divisible pool of central revenue and asserted that the north-south debate sought to be raised in the matter is unfounded.
The commission's stand was stated in a meeting of its Chairman N.K Singh and members with Vice President M. Venkaiah Naidu in New Delhi, informed sources said.
The meeting came a day after the Pudducherry Chief Minister, who also holds the finance portfolio, and the Finance Ministers of Andhra Pradesh, Delhi, Kerala, West Bengal and Punjab met President Ram Nath Kovind and demanded amendments to the Terms of Reference of the 15th Finance Commission.
The sources said Naidu told the panel members that as Chairman of the Council of States (Rajya Sabha), he thought it would be appropriate to talk to them about the principles followed by various commissions in the recent past and their thinking in the current context.
He brought to their notice the reports about reservations held by some states on certain aspects of the Terms of Reference of the commission and some even suggesting a north-south perspective.
N K Singh informed Naidu that their approach in determining the allocation of revenue between the Centre and the states and among the states would be broadly guided by parameters such as ensuring macro-economic stability, rewarding states for past performances, incentivising future performance, specific needs of states and the Centre, and right of citizens for equal entitlements.
The commission head explained that the Terms of Reference were only a broad guidance and the commission was at liberty in finalising the specific criteria and weightage for each of the parameters, after holding discussions with the states.
Elaborating, he said the 14th Finance Commission was asked to go by the 1971 Population Census but it took into consideration the 2011 Census, thereby rewarding those who did well in population control.
He said the Terms of Reference suggested a broad set of nine indicators, including "efforts and progress made in moving towards replacement rate of population growth" to reward performing states.
The sources said Naidu suggested to the commission to further the cause of economic unity and include performance, reforms, specific needs of the states and the Centre and the problems of farm sector within the ambit of the Terms of Reference.
Naidu stressed that the commission should do the needful to make agriculture sustainable through appropriate recommendations and providing resources for necessary infrastructure.
The commission is to submit its report on determining the transfer of revenue and allocation of grants-in-aid to the states by April 1, 2019. Its recommendations will be applicable for 2021-22 to 2022-27.
The Finance Ministers submitted a memorandum to the President on Thursday, saying that the Terms of Reference violate the federal principle, erode the autonomy of states and bring significant financial hardship.
The southern states had earlier protested that they would lose out because of the commission's decision to use the 2011 population census instead of 1971 as a basis for devolution of taxes from the central government to the states, as they had successfully controlled their populations.