The Telegraph
Since 1st March, 1999
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Task cut out for new Finance Commission

New Delhi, Oct. 28: The Cabinet has approved the terms of reference of the Twelfth Finance Commission, which will come up with recommendations on equitable distribution of tax revenues between the Centre and the states during 2005-10.

The commission will be asked to furnish its report by the end of July 2004. This will facilitate the government’s decision on the recommendations, which can be given effect in the budget for 2005-06, finance secretary S. Narayan said.

The chairman of the Twelfth Finance Commission would be announced shortly, Narayan told reporters after the Cabinet meeting here. The final terms of reference will be notified after Presidential approval.

Narayan said the considerations to be taken into account while making recommendations include assessment of the resources of the Centre and the states for five years from April 2005. This will be on the basis of level of taxation and non-tax revenues possible in 2003-04.

Fiscal reforms facility, debt position of states, calamity relief fund and the national calamity contingency fund are some of the other issues that have been proposed for study by the new finance commission.

“Compared with the terms of reference of the Eleventh Commission, those of the Twelfth Finance Commission lays emphasis on certain efficiency factors such as adjustment for user charges, relinquishing non-priority enterprises through privatisation or disinvestment and resource mobilisation in order to improve tax-GDP ratio,” Narayan said.

The Cabinet also proposed that the Twelfth Finance Commission, apart from the terms of reference specifically laid down in the Constitution, would review the state of finances of the Centre and the states.

The finance secretary said the commission might later suggest ways and means by which governments can restructure public finances, restore budgetary balance, reduce fiscal deficit and generate surplus for capital investment. He added the commission would also suggest ways to achieve macro-economic stability and achieve the goal of debt reduction with equitable growth.

The Cabinet has also given approval for joining the W. P. 29 (World Forum for Harmonisation of Vehicle Regulations) as an observer initially and a permanent member subsequently. With this move, design specifications of vehicles need not be changed to meet country specific design regulations. Attainment of international harmonisation of standards, would reduce burdens on users, vehicle makers and approval authorities throughout the world, an official spokesperson said here today.

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