“Penalising states for failing to stabilise population, by the Finance Commission awards has not worked. New ways have to be devised.” Critically examine the statement.

Finance Commission (Art.280) after dividing the shareable pool of taxes and duties between the centre and the states, allots to the states their respective shares based on certain criteria. One of the criteria is population. President of India mandates to the Commission about which census figure is to be taken.

President recommended in the Terms of Reference (TOR) for the Commission that it should consider the Census 2011 figure instead of the 1971 Census.

The 14th FC also divided the population criteria into 1971 and 2011. The 15th FC in its interim report in 2019 divided between 2011 and also demographic performance.

Southern states have protested. They fear it would lead to a significant loss in tax pool share. Moreover, they see it as a punishment for enforcing the National Population Policy effectively. Kerala became the first state to oppose this change.

However, one school argues that the 1971 census is unrealistic as the population has enormously grown in some states and it has to be addressed. According to the, FC is not the appropriate channel for affecting demographic goals.

The formula adopted by the 15th FC in its interim report is the right one as it is realistic in taking 2011 census and also aspirational in allotting some resources based on performance in population control.