3 poll-bound states to get a higher share in taxes, Bengal to see a dip, Pg8

Key Highlights:

• The 16th Finance Commission (FC) recommended changes in the share of Union taxes for states, impacting Assam, Kerala, Tamil Nadu, and West Bengal, all headed for elections.
• Kerala's share increases to 2.382%, gaining an additional Rs 6,975 crore, while Assam gets Rs 1,984 crore more with a share of 3.258%.
• Tamil Nadu's share marginally rises to 4.097%, resulting in an additional Rs 275 crore, but West Bengal's share decreases to 7.215%, losing Rs 4,700 crore.
• The 16th FC suggests Rs 7.91 lakh crore in grants for local bodies over five years, divided between rural (Rs 4.35 lakh crore) and urban (Rs 3.56 lakh crore) areas.

Detailed Insights:

• The 16th FC's recommendations, accepted by the Centre, significantly alter the divisible pool shares compared to the 15th FC period (2021-26).
• These changes carry political weight as Assam is BJP-ruled, Puducherry is part of a BJP-led coalition, while Kerala, Tamil Nadu, and West Bengal are governed by opposition parties.
• The commission has allocated funds based on these recommendations for the next financial year, influencing resource distribution among states.
• The 16th FC also proposed a total corpus of Rs 2,04,401 crore for the State Disaster Response Fund (SDRF) and the State Disaster Mitigation Fund (SDMF) for the period 2026-27 to 2030-31.
• The commission flagged West Bengal's 'Lakshmir Bhandar' scheme, emphasizing the rising burden of subsidies and recommending sunset clauses for non-merit goods and unconditional transfers.
• These four states and Puducherry hold significant political importance, influencing elections for the Lok Sabha, Rajya Sabha, Legislative Assemblies, and the upcoming Presidential elections.

Key Concepts Involved:

• Divisible Pool: The portion of Union taxes and duties that is distributed among states as per the recommendations of the Finance Commission.
• Finance Commission: A constitutional body that determines the financial relations between the Centre and the states, including the distribution of tax revenues.
• State Disaster Response Fund (SDRF): The primary fund available with State Governments for providing immediate relief to the victims of notified disasters.