As against share of 6.16% of total tax devolution during 13th Finance Commission award, North Eastern States now get 7.94% of total tax devolution under 14th Finance Commission (FFC) award

Apart from estimated share in Central Taxes of ₹ 3,13,375 crore during 14^th Finance Commission (FFC) award period, FFC also recommends grant-in-aid of ₹ 63,206 crore for North Eastern States.

Share of central taxes have increased by 251%, grant-in-aid by about 44% and in overall there is an increase of 183% in untied resources transferred to eight NE States under the recommendations of FC.

During 2015-16, ₹ 32,657 crore (i.e.79%) as devolution of taxes, and ₹ 11,433 crore (i.e.89%) as FFC grants have been released to the 8 North Esatern States.

For speedy development of North-eastern States, a ₹ 740 crore is budgeted this year for schemes approved by North Eastern Council (NEC).

For Revenue deficit grants, ₹ 51,137 crore has been recommended to 6 North Eastern States assessed to be in deficit post devolution of central taxes, for local bodies ₹ 8,866 crore and Central share to SDRF ₹ 3,202 crore.

North Eastern and hill States have several unique features that have a bearing on their fiscal resources and expenditure needs and on federal fiscal relations. Taking into account the disabilities arising from constraints unique to each State like low level of economic activity and the consequential low revenue capacity in terms of low tax base, low per capita income; the disability arising from large forest cover and hilly terrain; remoteness and having international borders; infrastructure deficit etc. 14^th Finance Commission (FFC) has arrived at expenditure requirements.

In fact, apart from estimated share in Central Taxes of ₹ 3,13,375 crore during FFC award period, it has recommended grant-in-aid of ₹ 63,206 crore for NE States. For Revenue deficit grants, ₹ 51,137 crore has been recommended to 6 States assessed to be in deficit post devolution of central taxes, for local bodies ₹ 8,866 crore and Central share to SDRF ₹ 3,202 crore. As against share of 6.16% of total tax devolution during 13^th FC award, NE States now get 7.94% of total tax devolution under FFC award. There is greater predictability and certainty now in the quantum of funds flowing to the States apart from the overall increase in untied funds.

The transfer of Statutory Resources or untied fund flow to NE States in aggregate have gone up to Rs.54,385 crore in 2015-16, from ₹ 30,072 crore in 2014-15, indicating an increase of 81%. The details are shown in the table below:

So far an amount of ₹ 32,657 crore (i.e.79%) as devolution of taxes, and ₹ 11,433 crore (i.e.89%) as FFC grants have been released to these 8 North Eastern States. The States will get 3 more installments of ‘tax devolution’ during the month of March 2016 and balance of grant-in-aid recommended by FFC.

As recommended by the Committee under the Chief Minister, Madhya Pradesh (MP), sharing pattern of CSS for North Eastern States and other Himalayan States has been retained at 90:10 for core schemes and 80:20 for other schemes even though FFC has not made any distinction between special and general category states. For the North Eastern States, an amount of ₹ 18,640 crore (65%) has been released against ₹ 28,546 crore allocation from various line Ministries Budget under CSS/CASP.

The special support provided to the North Eastern States for socio-economic, security related expenditure and infrastructural gap funding under NEC, NLCPR and funding provided to Sixth Schedule areas is unique. The North Eastern Council (NEC) gets direct funding from the Union Government. ₹ 740 crore is provided for schemes of NEC during 2015-16.

Further, Government of India has provided ₹ 1,000 crore as one time assistance for areas covered under Sixth Schedule in Assam, Meghalaya, Mizoram and Tripura.

As such, continued special focus, particularly in terms of social and economic infrastructure with Inter-State significance is being given by the Union Government to this region.