Hyderabad: On Tuesday, the Telangana Government urged the 16th Finance Commission to raise the share of states in Central taxes from the current 41% to 50%. The request was made in light of the rising cesses and surcharges that are not distributed to states, resulting in a reduced share of the total gross tax revenue.

Deputy Chief Minister Bhatti Vikramarka, addressing the Finance Commission Chairman Arvind Panagariya and members, highlighted the need for states to have greater autonomy to tailor Centrally-Sponsored Schemes (CSS) to their unique development needs.

“We propose increasing the share of states in Central taxes to 50%. Over time, the rise in cesses and surcharges that states do not receive has diminished their share of total tax revenue,” Bhatti Vikramarka said.

He argued that raising the vertical devolution would provide states with the necessary fiscal space to enhance welfare programs, bridge infrastructure gaps, and focus on local development. Bhatti emphasized that this request is not only for Telangana but for all states, aiming to foster a more cooperative federal structure that benefits the entire nation.

Additionally, Bhatti called for a reconsideration of using per capita income as the primary criterion for horizontal devolution. He suggested that the formula be adjusted to include at least 50% weightage on Gross State Domestic Product (GSDP). “A greater emphasis on GSDP would encourage states to implement reforms that boost productivity, attract investment, and create jobs, which would ultimately benefit the national economy and reduce regional disparities,” he said.

Bhatti also addressed concerns about certain expenditures, such as Rythu Bharosa, farm loan waivers, and food subsidies, which are often criticized as “freebies.” He urged the Finance Commission to view these programs as essential investments in public welfare.

He pointed out that a significant portion of the state’s resources is currently allocated to debt servicing. The state government has requested the Finance Commission’s support in either restructuring this debt or providing additional assistance to free up resources for further development.

The 16th Finance Commission, chaired by Arvind Panagariya, conducted meetings with various political parties, local body representatives, and industry chambers in Telangana as part of its visit.

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