Haryana presents strong case for enhanced revenue share before 16th Finance Commission - Dr. Arvind Panagariya
Haryana backs higher share of state in divisible pool, Proposes major changes to devolution formula
5 Dariya News
Chandigarh 28-Apr-2025
Chairman of the 16th Finance Commission, Dr. Arvind Panagariya today held detailed discussions with the Chief Minister of Haryana, Sh. Nayab Singh Saini and senior state officials during the Commission’s consultation visit to Chandigarh. Following the meeting, Dr. Panagariya addressed a press conference, appreciating Haryana's comprehensive and well-articulated presentation regarding its financial needs and revenue devolution demands.
While addressing the media persons, Dr. Arvind Panagariya said that Haryana Government made a detailed presentation, with the Chief Secretary-cum-Finance Secretary, supported by other senior officials, outlining the state's economic progress since its formation and highlighting key social and financial indicators. A major emphasis of the presentation was Haryana’s long-standing concern that it has received less than its due share in the devolution of central tax revenues over the years.
Haryana has made a strong case, Dr. Panagariya remarked, adding that the State of Haryana has presented its arguments very well. Dr. Panagariya explained that the Finance Commission’s primary role is to recommend the division of the Union’s tax revenues between the Centre and the states (vertical devolution), and further among the states (horizontal devolution), besides grants for local bodies and disaster relief.
In its recommendations to the Commission, Haryana broadly aligned with the demand of most other states to increase the states' share in the divisible pool from the current 41% to 50%. However, on horizontal devolution, Haryana proposed significant changes compared to past formulas.
He informed that key recommendations made by Haryana include reducing the weightage of population from 15% to 7.5% and retaining the area weightage at 15%. The state has proposed reducing the weightage assigned to forest and ecology from 10% to 5%. Haryana has also suggested decreasing the income distance weightage from 45% to 15%, that as the state with the highest per capita income among large states, the existing formula disadvantages it.
Further, Haryana has recommended substantially increasing the weightage for tax and fiscal effort from 2.5% to 35%, recognizing its strong performance in tax revenue generation. The weightage for demographic performance has been proposed to be reduced from 12.5% to 7.5%. In addition, Haryana has suggested introducing a new criterion—revenue loss due to the introduction of GST—with a proposed weightage of 15% to compensate for the financial impact following GST implementation.
He said that in addition to the formal presentation, Chief Minister Sh. Nayab Singh Saini made further suggestions. He proposed considering the contribution of states to the National Capital Region (NCR) and the participation of state citizens in the armed forces as additional criteria for devolution. The Chief Minister said that Haryana, being a significant part of the NCR and a major contributor to the nation's defense forces, should be duly recognized.
Dr. Panagariya outlined that the Commission has been extensively consulting stakeholders across the country. Haryana is the 24th state visited, with the consultations scheduled to conclude by early June 2025. The Commission’s final report is to be submitted by October 31, 2025. In response to a question regarding Haryana’s loss following the introduction of GST, the Chairman said that several other states had also raised this concern and requested the Commission to develop criteria to classify states based on their contribution to GST.
Haryana highlighted issues related to tax management and fiscal efforts, both of which are interconnected. He said that the 16th Finance Commission is working under different circumstances compared to the previous one. The 15th Finance Commission operated during the COVID-19 pandemic, whereas now, under the vision of Prime Minister Sh Narendra Modi for India to become a developed country by 2047, the approach has shifted.
In this context, the Commission is carefully considering all such suggestions, and any decisions will be made with the consensus of all Commission members, he added. When asked about considering the Chief Minster’s suggestion about Haryana’s contribution to the armed forces while determining the allocation of central funds to states, the Chairman responded that the Commission remains open to all suggestions and welcomes any constructive inputs.
The Chairman said that suggestions received from states and other stakeholders, including public submissions via the Commission's website, are being carefully considered to ensure a fair and balanced devolution framework.
Members 16th Finance Commission Mrs. Annie George Mathew, Dr. Manoj Panda and Dr. Soumya Kanti Ghosh, Haryana Chief Secretary Sh. Anurag Rastogi, Commissioner and Secretary Information Public Relations and Languages Department, Dr Amit Agrawal and Director General, Information Public Relations and Languages Department Sh. K.M. Pandurang were also present on this occasion.