14th Finance Commission recommendations: Nine states to lose

While the Narendra Modi government may be gloating over the 14th Finance Commission's recommendation increasing the share of states in Central taxes to 42 per cent from the current 32 per cent, but the share of nine states has decreased.

(1) Andhra Pradesh (including Telanagan)

(2) Assam

(3) Bihar

(4) Himachal Pradesh

(5) Odisha

(6) Rajasthan

(7) Tamil Nadu

(8) Uttar Pradesh

(9) Uttarakhand

in fact stand to lose in the Commission's recommendations.

Non-BJP-ruled states like Telangana, Assam, Himachal Pradesh, Odisha, Tamil Nadu and Uttarakhand, or Bihar, which is going to polls later in 2015/2016, will protest the decrease in their share and try to derive political mileage out of it.

The Commission added a new criterion of forest cover for devolution of Central taxes which has gone against the nine states. The Commission said that, it believes that a large forest cover provides huge ecological benefits, but there is also an opportunity cost in terms of area not available for other economic activities and this also serves as an important indicator of fiscal disability.

The panel has assigned 7.5 per cent weight to forest cover for inter-se determination of the shares of taxes to the states, while population carries 17.5 per cent weight, demographic change 10, income distance 50 and area 15 per cent weight.

With the addition of the new criterion, Uttar Pradesh is the biggest loser followed by Bihar. Uttar Pradesh's per-se share has reduced from 19.677 per cent in 13th Finance Commission to 17.959 per cent now, while Bihar's has come down from 10.917 per cent to 9.665 per cent.