Claiming that the Terms of Reference of the 15th Finance Commission for devolution of funds to states do not conform to the sprit and principles of federalism as enshrined in the Constitution, a demand for reframing those Terms of Reference have been made by three non-BJP ruled southern states.

The demand was put forward following a first of its kind meeting of the finance ministers of south Indian states in in Thiruvananthapuram. The states allegedly face severe reduction in their share of Central transfers due to the new Terms of Reference (ToR). The states agreed that the issue was clearly against the interest of all of the southern states that have progressed steadily.

There would be loss of revenues for the states that were doing well in various social indices including population because of the ToR, said the representatives from the states of Kerala, Karnataka, Andhra Pradesh in addition to the Congress-ruled Union Territory of Puducherry. All the states opposed the ToR. The meeting was however skipped by AIADMK-ruled Tamil Nadu and TRS-ruled Telangana.

One of the major bones of contention in the proposed ToR is the method that is used to calculate the population where the 2011 census is proposed to be used instead of the customary 1971 census for the division of allocation of central funds. The previous Finance Commissions used the 1971 census.

The difference in population between some of the Northern states and the Southern states according to the 1971 census is much lower than the 2011 census because of population explosion in some Northern states. Central funds are distributed keeping in mind the relative population in states.

It has been claimed by some of the southern states that they have been able to control population over the decades since 1971 while the Northern states have not been able to do so. This has enhanced the quality of life in the South – in major parameters such as health, education and life expectancy. Southern states claim that now if the 2011 census population data is used, they will stand to lose out on central funds despite the good work that they have done over the decades.

The ‘conspicuous bias’ in-built in the ToR of the new commission resulted in unprecedented heated debates following the appointment of the Commission, said Kerala chief minister Pinarayi Vijayan.

He said that the Finance Commission could be potentially restricted from fulfilling its constitutional duties because of the ToR framed by the Central Government.

“Therefore, it is only proper for all of us to appeal to the Union Government to reframe the terms of reference of the 15th Finance Commission,” Vijayan added.

Financial autonomy of the states has been eroded by the introduction of the GST, Vijayan said.

“We are all aware that the terms of reference of the 15th FinanceCommission has created apprehension about principles of fairness and equity in the distribution of national resources for development,” the CPI-M veteran said.

He further claimed that the ToR had unprecedently directed the Commission to evaluate making a proposal for performance-based incentives over and above of those dealing with fiscal responsibility, population and devolution to local bodies.

“This reflects the viewpoint and ideological inclinations of the Centralgovernment and are attempts to micro-manage the fiscal domain of states’,” he said.

The better performing states would be adversely affected by the ToR and hence it was “seriously flawed”, said senior Congress leader P Chidambaram in a tweet supporting the stand of the southern states. On an earlier occasion, he had commented that the BJP led central government had “lit a fire” and such a fire needs to be immediately put out before the southern “flames scorch the federation”.

(Adapted from