While economic efficiency is the main criterion in deciding the assignment of taxes to the different levels of government or vertical balance, equity is the main consideration while deciding the sharing pattern among the different states. The EFC report has recently come in for flak primarily from a number of richer states mainly because their relative shares in the shareable tax kitty have come down. This has happened because the EFC has altered the weights given to different criteria in the devolution formula used to determine the inter-se pattern of distribution of resources between states. The EFC has used six criteria population, income, area, availability of infrastructure, tax effort and fiscal discipline. At the same time, the weightage given to each of these criteria has also been altered.
Richer states are, therefore, up in arms.
The group of eight chief ministers lead by the Andhra Pradesh Chief Minister Mr Chandrababu Naidu has called for the creation of a Special Fund by the Centre to compensate them for the adverse impact of the EFC report. All rights reserved.