Recommendations of the 15th Finance Commission for 2020-21

Rohin Garg - February 3, 2020

The Finance Commission is a constitutional body formed by the President of India to give suggestions on centre-state financial relations. The 15^th Finance Commission is required to submit two reports. The first report will consist of recommendations for the financial year 2020-21. The final report with recommendations for the 2021-26 period will be submitted by October 30, 2020. In this post, we explain the key recommendations of the report.

What is the amount of tax devolution to the states, and how is it being calculated?

The Finance Commission uses certain criteria when deciding the devolution to states. For example, income distance criterion has been used by the 14^th and 15^th Finance Commissions. Under this criterion, states with lower per capita income would be given a higher share to maintain equity among states. Another example is Demographic Performance criterion which has been introduced by the 15^th Finance Commission. The Demographic Performance criterion is to reward efforts made by states in controlling their population.

The 15^th Finance Commission used the following criteria while determining the share of states: (i) 45% for the income distance, (ii) 15% for the population in 2011, (iii) 15% for the area, (iv) 10% for forest and ecology, (v) 12.5% for demographic performance, and (vi) 2.5% for tax effort. For 2020-21, the Commission has recommended a total devolution of Rs 8,55,176 crore to the states, which is 41% of the divisible pool of taxes. This is 1% lower than the percentage recommended by the 14^th Finance Commission.

Table 1 below compares the new criteria with the criteria recommended by the 14^th Finance Commission.

Table 1: Criteria for devolution (2020-21)

Criteria	14^thFC 2015-20	15^thFC 2020-21
Income Distance	50.0	45.0
Population 1971	17.5	-
Population 2011	10.0	15.0
Area	15.0	15.0
Forest Cover	7.5	-
Forest and Ecology	-	10.0
Demographic Performance	-	12.5
Tax Effort	-	2.5
Total	100	100

Sources: Report for the year 2020-21, 15^thFinance Commission; PRS.

Uttar Pradesh and Bihar have received the largest devolutions for 2020-21, receiving Rs 1,53,342 crore, and Rs 86,039 crore respectively. Karnataka and Kerala saw the largest decreases in the share of the divisible pool with a decrease of 0.49% and 0.25% respectively. Table 2 below displays the state-wise breakdown of the share in the divisible pool and the total devolution.

Table 3: Share of states in the centre’s taxes

State	14^th Finance Commission		15^th Finance Commission		Devolution for FY 2020-2021
State	Share out of 42%	Share in divisible pool	Share out of 41%	Share in divisible pool	(In Rs crore)
Andhra Pradesh	1.81	4.31	1.69	4.11	35,156
Arunachal Pradesh	0.58	1.38	0.72	1.76	15,051
Assam	1.39	3.31	1.28	3.13	26,776
Bihar	4.06	9.67	4.13	10.06	86,039
Chhattisgarh	1.29	3.07	1.4	3.42	29,230
Goa	0.16	0.38	0.16	0.39	3,301
Gujarat	1.3	3.1	1.39	3.4	29,059
Haryana	0.46	1.1	0.44	1.08	9,253
Himachal Pradesh	0.3	0.71	0.33	0.8	6,833
Jammu and Kashmir	0.78	1.86	-	-	-
Jharkhand	1.32	3.14	1.36	3.31	28,332
Karnataka	1.98	4.71	1.49	3.65	31,180
Kerala	1.05	2.5	0.8	1.94	16,616
Madhya Pradesh	3.17	7.55	3.23	7.89	67,439
Maharashtra	2.32	5.52	2.52	6.14	52,465
Manipur	0.26	0.62	0.29	0.72	6,140
Meghalaya	0.27	0.64	0.31	0.77	6,542
Mizoram	0.19	0.45	0.21	0.51	4,327
Nagaland	0.21	0.5	0.23	0.57	4,900
Odisha	1.95	4.64	1.9	4.63	39,586
Punjab	0.66	1.57	0.73	1.79	15,291
Rajasthan	2.31	5.5	2.45	5.98	51,131
Sikkim	0.15	0.36	0.16	0.39	3,318
Tamil Nadu	1.69	4.02	1.72	4.19	35,823
Telangana	1.02	2.43	0.87	2.13	18,241
Tripura	0.27	0.64	0.29	0.71	6,063
Uttar Pradesh	7.54	17.95	7.35	17.93	1,53,342
Uttarakhand	0.44	1.05	0.45	1.1	9,441
West Bengal	3.08	7.33	3.08	7.52	64,301
Total	42	100	41	100	8,55,176

Sources: Reports of 14^th and 15^th Finance Commission; PRS.

What are the various grants recommended by the 15^th Finance Commission?

The Terms of Reference of the Finance Commission require it to recommend grants-in-aid to the States. These grants include: (i) revenue deficit grants, (ii) grants to local bodies, and (iii) disaster management grants.

14 states are estimated to face a revenue deficit post-devolution. To make up for this deficit, the Commission has recommended revenue deficit grants worth Rs 74,341 crore to these 14 states. Additionally, three states (Karnataka, Mizoram, and Telangana) have received special grants worth Rs 6,674 crore. The special grants are being given to compensate for a decline in the sum of tax devolution and revenue deficit grants in 2020-21 as compared to 2019-20.

The Commission has recommended a total of Rs 90,000 crore for grants to the local bodies in 2020-21. This amounts to an increase over the Rs 87,352 crore allocated for 2019-20 for the same. The new allocation is 4.31% of the divisible pool. Of this sum, Rs 60,750 crore has been recommended for rural local bodies, and Rs 29,250 crore for urban local bodies. These grants will be made available to all three tiers of Panchayat- village, block, and district.

To promote local-level mitigation activities, the Commission has recommended the setting up of National and State Disaster Management Funds. Recommended grants for the State Disaster Risk Management Fund is Rs 28,983 crore, while the allocation for the National Disaster Risk Management Fund is Rs 12,390 crore.

Apart from these, guidelines for performance-based grants and sector-specific grants have been outlined. The Commission has recommended a grant of Rs 7,375 crore for nutrition in 2020-21. Sectors for which sector-specific grants will be provided in the final report include: (i) nutrition, (ii) health, (iii) pre-primary education, (iv) judiciary, and (v) railways.

For more details, please see our summary of the report.

States and State Legislatures

Uttarakhand Government’s response to the COVID-19 pandemic (March 2020 - April 15, 2020)

Prachi Kaur - April 16, 2020

With the spread of COVID-19, along with the central government, the state governments have also announced several policy decisions to contain and prevent the spread of the virus. In this blog post, we summarise some of the key measures taken by the Uttarakhand Government in this regard as of April 16, 2020.

As of April 15, 2020, 2,413 samples have been sent for testing in Uttarakhand. Of these, 37 have been found COVID-19 positive and the results of 354 samples are awaited. Of the 37 confirmed cases, 9 patients have been cured/discharged.[1]

Movement Restrictions

To contain the spread of COVID-19 in the state, the Government of Uttarakhand took the following measures for restricting the movement of people in the state.

On March 20, the Department of Health restricted the entry of all tourists (domestic and foreign) into the state.[2] The Department further issued orders for the closure of all educational institutions, gyms, swimming pools, museums, cultural and social centres, and theatres until March 31.[3]
On March 22, the state announced a complete lockdown till March 31.[4] Restrictions during the lockdown included: (i) prohibiting the gathering of more than five people at any public place, (ii) suspending all public transport including taxis and auto-rickshaws, and (iii) closure of all shops, commercial establishments, offices and factories. Establishments providing essential goods and services were excluded from the lockdown restrictions. These include: police, medical and health, print and electronic media, food, groceries, and their transportation, among others.⁴
On March 25, the central government announced on a 21-day country-wide lockdown till April 14.[5] On April 14, the lockdown was further extended till May 3, 2020.[6]
On April 15, the Ministry of Home Affairs issued guidelines on the measures to be taken by state governments until May 3.[7] As per these guidelines, select activities will be permitted from April 20 onwards, to mitigate hardship to the public due. These activities include health services, agriculture and related activities, certain financial sector activities, operation of Anganwadis, MNREGA works, and cargo movement, among others. Further, subject to certain conditions, commercial and private establishments, industrial establishments, government offices, and construction activities will also be permitted.⁷

Health Measures

Uttarakhand Epidemic Disease COVID-19 Regulations 2020

On March 15, 2020, the government notified the Uttarakhand Epidemic Disease COVID-19 Regulations, 2020 for the containment of COVID-19 in the state.[8] Key features of the regulations include the following:

All hospitals (government and private) must have dedicated flu corners for the screening of suspected COVID-19 cases.
The spread of any misinformation must be avoided. No person or organisation can use any print or electronic media for information regarding COVID-19 without prior permission of the state health department.

Guidelines for citizens, healthcare facilities and government departments

The state issued several guidelines and advisories on various subjects related to the containment of the virus.[9] These guidelines have been targeted towards citizens, healthcare facilities, as well as government departments. Some of these guidelines are given below:

For citizens: These include guidelines on the use of masks by the public, guidelines for home quarantine, and advisory to not consume tobacco to prevent the virus.⁸
For healthcare facilities: Guidelines for health care facilities include: sample collection, packaging and transport guidelines, infection prevention control for suspected cases, clinical management of COVID – 19, and discharge policy for COVID-19 patients, among others.⁸
For government: Guidelines for government departments include: guidelines for cluster containment, strategy, advisory on the use of hydroxychloroquine for high-risk population, and guidelines for quarantine facilities for COVID-19.⁸

Administrative Measures

On March 21, the state government cancelled all leaves for employees from the Department of Medical, Health and Family Welfare and ordered all the employees on leave to report back.[10] Further, on March 19, the state government announced that the administrative control of all properties and accommodations under the tourism department and other government enterprises will be given to the respective District Magistrates, temporarily.[11]

Education

On March 21, the state government postponed the correction of all state board examination booklets, which were to be corrected from April 1 to April 15, 2020.[12] The government also postponed exams for the Forest Research Institute, which were supposed to be conducted in March.[13]

For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.

[1] Dehradun Health Bulletin on Corona Virus Disease (COVID-19), Status as on April 15, 2020 Time: 05:30 PM, Uttarakhand State Control Room COVID -19, Health and Family Welfare, Uttarakhand, http://health.uk.gov.in/files/Corrected-15-04-2020-Health-Bulletin.pdf.

[2] Order No. 48/PS-Secy(H)/2020, Department of Medical, Health and Family Welfare, March 20, 2020, https://prsindia.org/files/covid19/notifications/427.UK_Advisory_for_Tourists_20_Mar.pdf.

[3] Advisory on social distancing measure in view of spread of COVID-19 disease, Government of Uttarakhand, https://prsindia.org/files/covid19/notifications/1835.UK_Social_Distancing_Advisory_Uttarakhand.pdf.

[4] Order No. UKHFWS/PS-MDNHM/2019-20/217, Department of Medical, Health and Family Welfare and Medical Education, March 22, 2020, https://prsindia.org/files/covid19/notifications/432.UK_Order_Lockdown_Mar_22.pdf.

[5] Order No. 1-29/2020-PP, National Disaster Management Authority, March 24, 2020, https://mha.gov.in/sites/default/files/ndma%20order%20copy.pdf.

[6] “PM addresses the nation for 4th time in 4 Weeks in India’s fight against COVID-19” Press Release, Prime Minister’s office, April 14, 2020, https://pib.gov.in/PressReleseDetail.aspx?PRID=1614255.

[7] Order No.40-3/2020-DM-I(A), Ministry of Home Affairs, April 15, 2020, https://www.mha.gov.in/sites/default/files/MHA%20order%20dt%2015.04.2020%2C%20with%20Revised%20Consolidated%20Guidelines_compressed%20%283%29.pdf.

[8] Notification No. 370/XXVIII(1)/2020-01(06)/2020, Department of Medical Health and Medical Education, March 15, 2020, http://health.uk.gov.in/files/The_Uttarakhand__Epidemic__Disease__COVID-19_Regulation_2020.pdf.

[9] Website of Department of Medical, Health and Family Welfare, Corona (COVID19) updates, Government of Uttarakhand, last visited on March 16, http://health.uk.gov.in/pages/display/140-novel-corona-virus-guidelines-and-advisory-.

[10] Order No. 1P/Ra0pu0/miscellaneous/1/2018, Department of Medical, Health and Family Welfare, March 19, 2020, https://prsindia.org/files/covid19/notifications/430.UK_DG-Order-Cancellalation_of_Leave_Health_Workers_21_Mar.pdf.

[11] Order No. 42/Secy Health/2020, Department of Medical, Health and Family Welfare, March 19, 2020, https://prsindia.org/files/covid19/notifications/1826.UK_Advisory_for_KMVN_and_GMVN_Mar19.pdf

[12] Advisory No. 123/XXIV-B-5/2020/03(01)/2020, Secretary Uttarakhand Government, March 21, 2020, https://prsindia.org/files/covid19/notifications/429.UK_Advisory_for_Board_Student_of_Uttarakhand_21_Mar.pdf.

[13] Advisory No. 122/XXIV-B-5/2020/03(01)/2020, Secretary Uttarakhand Government, March 21, 2020, https://prsindia.org/files/covid19/notifications/1828.UK_Advisory_for_Board_Student_of_FRI_Uttarakhand_Mar21.pdf.

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Recommendations of the 15th Finance Commission for 2020-21

Uttarakhand Government’s response to the COVID-19 pandemic (March 2020 - April 15, 2020)

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