Even as the Odisha Government on Monday submitted a memorandum to the 14th Finance Commission seeking an estimated Rs4.60 lakh crore for the five-year period from 2015 to 2020, Chief Minister Naveen Patnaik said the State needs large investments to strengthen critical infrastructures for its socioeconomic development as socioeconomic indicators, though improving over the years, remain below the national average despite the State consistently growing above the national average over last five to ten years.
Addressing the 14th Finance Commission team headed by its chairman Dr YV Reddy which is on a two-day visit here, Patnaik said there has been a significant improvement in the finances of the State over the last decade, but the revenue raising process is plagued by several constraints. He pleaded for a rational and liberal fiscal transfer to the State to help accelerate its development process.
Referring to his Government’s enhanced budgetary support to agriculture and allied sectors for raising the income level of the people dependent on these sectors, Patnaik said his Government intends making massive investments to bridge the gap in availability of physical infrastructures. Capital investment to the extent of Rs38,925 crore has been proposed in this regard including Rs5,000 crore in PPP projects.
The Chief Minister advocated a suitable fiscal transfer formula that would enable the State to receive its rightful share as the aggregate transfer of resources (shared tax and grants taken together) recommended by successive Finance Commissions had been far below expectations.
Patnaik demanded an increase of the existing level of tax devolution to the States from 32 per cent of the tax receipts of the Centre to 50 per cent, saying the bulk of the expenditure responsibility is that of the States and the buoyant sources of revenue are with the Centre.
Citing a study commissioned by the 13th Finance Commission that well-designed fiscal transfers from high income to low income regions of the country have net positive welfare implications for all regions, Patnaik urged the commission to design a formula or principle for determination of inter-se share of Central taxes primarily on the principles of equity.
He also urged the commission that the acute gap in service delivery due to resource constraints in important areas as identified by the State Governments should be taken into account while recommending the grants while at the same time the conditions attached to the grants should be kept to the minimum lest they become constraints in availing the grants for the specific purposes. Patnaik suggested that the commission review the current arrangements for provision of grants for disaster relief citing Odisha’s high vulnerability to multiple disasters.
While floods and droughts are recurring phenomena, severe cyclones cause widespread damages and devastation, he added.
He said that while his Government is in favour of implementation of Goods & Services Tax (GST), this should uphold and safeguard the State’s fiscal autonomy as well as honour the standing constitutional arrangement for compensating the States for losses on account of implementation of the GST.