Lok Sabha Question No. 4928 (UNSTARRED), answered on 2017-03-31
Subject: Financial Help to States
Ministry: FINANCE
Asked by: SIRAJUDDIN AJMAL

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF EXPENDITURE PLAN FINANCE-I

## LOK SABHA UNSTARRED QUESTION NO. 4928

TO BE ANSWERED ON FRIDAY THE 31 st  MARCH 2017 / CHAITRA 10, 1939 (SAKA)

## Financial Help to States

4928. SHRI SIRAJUDDIN AJMAL:

Will the Minister of FINANCE be pleased to state:

- (a) Whether the State Government of Assam has recently requested the Union Government for immediate financial help as the State is under great financial stress; and
- (b) if so, the details thereof and the action taken by the Government thereon?

## ANSWER

## MINISTER OF STATE IN MINISTRY OF FINANCE (SHRI ARJUN RAM MEGHWAL)

(a)  &  (b) Yes,  Sir.  State  Government  of  Assam  has  recently  written  to  Central  Government raising the issues of reduction in devolution of Central taxes vis-à-vis 14th Finance Commission (FFC)  allocation,  unrealistic  estimation  of  Revenue  Deficit  Grants  by  FFC,  pending  release under Accelerated Irrigation Benefit Programme (AIBP), financial assistance for investment in Infrastructure  and  Service  Sector,  grant  for  completion  of  projects  under  Special  Plan Assistance  (SPA),  continuation  of  grant-loan  ratio  of  90:10  under  Externally  Aided  Projects (EAPs) and Royalty on Crude Oil.

The States' share in Central taxes releases/provided in the Union budget documents are on  the  basis  of  actual  collection/Budget  estimate  of  the  net  revenue  receipts  of  the  Central Government. Hence, there exists difference in the Finance Commission projections and actual release/budget estimate in a given financial year.

The FFC has taken a comprehensive approach to the assessment of expenditure needs of  the  States.  While  assessing  expenditure  needs,  FFC  has  taken  into  consideration  the difference among the States in fiscal capacity and expenditure need, including cost disabilities and  recommended  biggest  ever  increase  of  10%  in  the  share  of  States  in  net  proceed  of shareable pool of Union taxes, from 32% to 42%. FFC has also recommended Revenue Deficit (RD)  Grant  for  11  States (including  Assam  for  the  year 2015-16  and  2016-17).  The recommendations of FFC already have been accepted by the Union Government.

The substantial increase in tax devolution and grant-in-aid recommended by FFC is a major step in the process of transferring more resources to the States in the nature of untied funds so that States may make and implement schemes or programmes which are best suited to their local needs and requirements. The State may inter-se prioritise the projects (including those under SPA, AIBP-FMP and infrastructure/ service Sector) for the development of State.

It  has been decided to continue with the existing pattern of transfer for EAPs loans for North-Eastern and Himalayan States in the grant- loan ratio of 90:10, i.e. 90% of the loan is repaid  by  the  GOI,  and  only  10%  of  the  loan  repayment  liability  is  borne  by  the  State Governments. Further, an amount of Rs.945.90 crore has been released in the current financial year 2016-17 to the State of Assam for differential royalty on exploration of crude oil in the State during the period 2008-09 to 2013-14.

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