“The finance commissions use appropriate criteria to assess true needs of states. Population proxies very well for the needs of the people in quantitative sense. Another criterion, the income distance, which captures very well relative poverty of people in the states, is used to assess qualitative needs,” Jaitley wrote on Facebook.
“These two parameters allocate more resources to the populous and poorer states, which need additional funds for providing education, health and other services to the people, which resources of these poorer states may otherwise not allow,” he added.
Senior finance ministry officials said the southern states had written separately to officials in the North Block, seeking a change in the terms of reference, specifically on going back to the 1971 census. The FM’s statement could be taken as a response to the southern states’ query, officials said, adding the terms of reference would not be amended.
Jaitley said the 14th Finance Commission, mandated to use the 1971 census, had rightly used the 2011 Census data, giving it a 10 per cent weightage, to make a realistic assessment of the needs of the states.
The FM, discharged from a hospital after dialysis, also pointed out the finance commission should determine if states should be rewarded for “efforts and progress made in moving towards the replacement rate of population growth”.
“The terms of reference recognise the efforts of all the states that have done well in population control. ...(it) would allow the 15th Finance Commission to propose a specific incentive Scheme to reward the states that have achieved replacement level of population growth, and also, if ...(it) wishes to do so, to assign appropriate weight to the progress made in population control while allocating resources,” he said.