Assam's Revenue Woes: CM Sarma Calls for Reform at 16th Finance Commission Meet

In a significant press conference held on September 26, Arvind Panagariya, the Chairman of the 16th Finance Commission (FC), disclosed that Assam Chief Minister Himanta Biswa Sarma has expressed serious concerns regarding the steady decline in tax devolution to the state.

During his meeting with Sarma, members of the Assam cabinet, and senior government officials earlier that day, Panagariya reported that Sarma is seeking immediate measures to address this troubling trend.

"The Chief Minister articulated that since the 13th Finance Commission, Assam has faced a continuous reduction in its share of tax devolution. He emphasized that this decline is intricately linked to lower tax rates on petroleum products and liquor in neighbouring states," Panagariya stated.

Sarma highlighted that the lower tax rates in these states are compensated by the Finance Commission, which ultimately results in a revenue loss for Assam.

In response to these challenges, the Assam government has proposed implementing different criteria for tax devolution that account for the unique economic conditions of each state.

The previous 15th Finance Commission had allocated 15 percent of the states' shares to Assam; however, the state is now advocating for a reduction of this share to 10 percent to better reflect its financial realities. Panagariya noted that the 16th Finance Commission recognizes the "merit" in Assam’s recommendations, indicating that the state’s proposals regarding fiscal matters are being carefully considered.

The Finance Commission, established by the Constitution, is responsible for making recommendations on the distribution of tax revenues between the central government and the states, as well as among individual states. The 16th FC arrived in Assam on September 26 for a four-day visit aimed at gaining a comprehensive understanding of the state's financial situation and exploring potential solutions.

Earlier on Wednesday, CM Sarma chaired a meeting with the leadership of the All Assam Students Union (AASU) to discuss the recommendations of the Justice (Retd) Biplab Sarma Committee.

This committee focuses on the implementation of Clause 6 of the Assam Accord, which mandates the protection, preservation, and promotion of the cultural, social, and linguistic identity of the Assamese people through appropriate constitutional, legislative, and administrative safeguards.

Also Read: CM, AASU Discuss Assam Accord Implementation; Clarify 'Assamese' Definition