ARTICLE | 15th Finance Commission
XV FC: Recommendations For Cities
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or the next five years, the road map for devolution of funds to the states as recommended by the 15th Finance Commission (XV FC) is ready. The XVFC has met in the last few years and the previous year was the year of COVID pandemic and as a natural corollary-lessons to be learnt. Much has been written on this aspect; I, instead, would like to focus on the recommendations of the XV FC and the urban. The urban which is nearly 34 per cent of the population and contributes 67 per cent of the GDP. It was expected that witnessing ghastly scenes of the inequity led to reverse migration of the workers in the cities during the lockdown; greater emphasis on the FC recommendations would directly affect this aspect. However, this aspect remained unnoticed by the commission. Let us see what is there for the urban. But before going into that, it is essential to note that the two quotes made by the commission at the beginning of the main report are contradictory to each other. The first one is Mahatma Gandhi’s quote, where it states that “the future depends on what we do in the present”. The focus
is on planning and why present is more important. The second one is from the Roman philosopher Marcus Aurelius: “Never let the future disturb you. You will meet it, if you have to, with the same weapons of reason which today arm you against the present.” Apparently, the XV FC report is also quite contradictory to the quotes. Whereas the running commentary it mentions the unusual times and the challenges posed by Covid; however, in the effective part, it recommends the reverse instead of ameliorating the concerns. Let us see how it figures in the urban recommendations. Though the total outlay for the urban is more than the XIV FC, however, in actual terms, it is a status quo. The XIV commission’s total outlay was `87,144 crore, and 15 per cent of this was not released. Hence the actual amount spend was `74,529 crore. The total outlay for the urban local bodies for 2021-26 is `1,21, 055 crore. However, 2021 is lesser than 2020; it is a shortfall from `25,098 crore to `22,114 crore. This is 11.71 per cent of the total grants in five years. The criteria for grants to local bodies are distributed amongst states based on population and area, with 90 per cent
and 10 per cent weightage, respectively. There are two conditions for availing of these grants: firstly, the local bodies will have to publish provisional and audited accounts and secondly, fixation of minimum floor rates of property taxes by states and improvement in the collection of property taxes. Grants will not be released to local bodies after March 2024 if the State does not constitute a State Finance Commission and act upon its recommendations. The XV FC has categorically stated that “we recommend the provision of a one-year window for notifying the floor rates of property tax; this will trigger in two stages from 2022-23. In the first stage, States are expected to notify the floor rates and operationalise the arrangements in 2021-22. The condition of notifying the floor rates of property tax will apply for eligibility of grants from 2022-23. Once the floor is notified, the condition of growth in property tax collection being at least as much as the simple average growth rate of the State’s own GSDP in the most recent five years will be measured and taken into account from 2023-24 onwards.” Another fund called the challenge fund is opened up for million-plus cities; this will be linked to these cities’ performance in improving air quality, and meeting service level benchmarks urban drinking water supply, sanitation, and solid waste management. The total fund under this head is `26,057 crores for five years.
XV FC and devolution of funds
The XV FC missed the core element in the devolution of funds. As pointed out in the beginning, addressing equity and transforming the large informal sector to almost 93 per cent in the cities is an important challenge. Here are a few missed points: Firstly, the devolution of a mere 11 per cent is too meagre to meet
40 April 2021 | www.urbanupdate.in
