The government on Wednesday extended the 15th Finance Commission’s term by a month till November 30, and mandated the panel to suggest ways for allocation of non-lapsable funds for defence and internal security.
The government on November 27, 2017, notified the 15th Finance Commission, headed by N K Singh, to suggest, among other things, the formula for devolution of funds to states by the Centre for five years commencing April 1, 2020.
The meeting of the Cabinet, chaired by Prime Minister Narendra Modi on Wednesday approved the changes to the Terms of Reference (ToR) of the 15th Finance Commission to address “serious concerns” regarding the allocation of adequate, secure and non-lapsable funds for defence and internal security of India.
“Under the ToR of the Commission, it is proposed to ensure an assured allocation of resources towards defence and internal security imperatives.
“The amendment provides that 15th Finance Commission shall also examine whether a separate mechanism for funding of defence and internal security ought to be set up and if so how such a mechanism could be operationalised,” an official statement said.
Also the Cabinet approved the extension of the term of the Commission up to November 30, 2019.
“It will enable the Commission to examine various comparable estimates for financial projections in view of reforms and the new realities to finalise its recommendations for the period 2020-2025,” the statement added.
It further said that the ToR of the Commission takes into account the fiscal /budgetary reforms.
The commission was constituted in the backdrop of various major fiscal /budgetary reforms introduced by the government in the past 4 years, like closure of the Planning Commission and its replacement by NITl Aayog, removal of distinction between Non-Plan and Plan expenditure, advancing the budget calendar by one month and passing of the full budget before commencement of the new financial year, introduction of Goods and Services Tax (GST) from July 2017 and new FRBM architecture with debt and fiscal deficit path, it said.
The commission, which has been mandated to use 2011 census data, rather than the one of 1971 for resource allocation, was to submit its report by October 30, 2019, for 5 years – between 2020-2025.