Telangana urges 16th Finance Commission to increase states' share in Central taxes to 50%

Hyderabad: The Telangana Government on Tuesday requested the 16th Finance Commission to increase the share of states in Central taxes from the existing 41 per cent to 50 per cent as over the years cesses and surcharges that are not shared with states have increased.

Deputy Chief Minister in-charge of Finance Bhatti Vikramarka in his speech at the meeting with Finance Commission Chairman Arvind Panagariya and members also urged the finance panel to ensure that states are given the necessary autonomy to tailor CSS (centrally-sponsored scheme) programmes to their specific development needs.

"In addition, we propose increasing the share of states in Central taxes from 41 per cent to 50 per cent. Over the years, cesses and surcharges that are not shared with states have increased, leaving states with a smaller share of total gross tax revenue," he said.

Increasing the vertical devolution will give states the fiscal space they need to strengthen welfare programmes, address infrastructure gaps and prioritise local development, he further said.

He, however, said it is not just a demand for Telangana but for all states, ensuring a more cooperative federal structure that will benefit the nation as a whole.

Bhatti further said the state government urges the Finance Commission to reconsider the use of per capita income distance as the primary indicator in determining horizontal devolution as measuring prosperity and well-being solely by per capita income would deny Telangana the resources needed to address the inequities that exist within the state.

The state government is suggesting that the formula for horizontal devolution be modified to add at least a 50 per cent weightage to GSDP (gross state domestic production) contribution.

"A greater weight on GSDP would incentivise states to adopt reforms that improve productivity, attract investment and create jobs, ultimately contributing to the national economy. This approach would not only make states more competitive but also help reduce regional disparities, encouraging more balanced growth across the country," he opined.

Pointing out that certain expenditures for schemes such as Rythu Bharosa, farm loan waivers and food subsidies are often mislabelled as "freebies," he urged the Commission to recognise these programmes as necessary investments in the welfare of our people.

He mentioned that a large part of the state's resources is now being diverted toward debt servicing and hence requested the Finance Commission's support in either restructuring this debt or providing additional assistance to help free up resources for further development.

The 16th Finance Commission, led by its chairman Arvind Panagariya, held meetings with several political parties, representatives of local bodies and industry chambers here on Monday as part of its visit to Telangana.