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Supreme Court expressed concern about states approaching court over fund disbursal by Centre | Current Affairs | Vision IAS
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Supreme Court expressed concern about states approaching court over fund disbursal by Centre

Posted 16 Apr 2024

2 min read

  • Recently, Karnataka approached SC to seek relief against Centre in matters related to release of financial assistance from National Disaster Response Fund (NDRF) for drought management.  
    • Earlier, Tamilnadu also approached SC for non-disbursal of funds by centre under NDRF to deal with calamities of cyclone Michaung and unprecedented floods.

 

  • Status of State Finance
    • States finance only 58 % of their revenue expenditure from their revenue sources.
    • Debt-GDP ratio of states stands at 27.5 % (March 2023). 

 

  • Reasons for State's dependency on Centre
    • GST compensation for states ended in June 2022, and revenue collected under SGST is lower than revenue from taxes subsumed under GST.
    • Increased use of cesses and surcharge by Centre which are not shared with states.
    • Strained on states finances due to measures like farm loan waivers etc.

 

  • Measures taken to improve State Finance
    • Scheme for Special Assistance to States for Capital Expenditure provides 50-year interest-free loans to States.
    • 15th Finance Commission recommended performance-based additional borrowing space of 0.50% of State GDP to States in power sector. 

 

  • Way Forward 
    • Foster business-friendly tax administration, to strengthen states revenue collection. 
    • Revise user charges on electricity, water, and other public services, etc. to increase non-tax revenue.

 

Constitutional Provisions related to States’ finances

  • Article 275: Parliament may by law provide to certain states, grants-in-aid charged on Consolidated Fund of India.
  • Article 282: Enables Union (and states) to make discretionary grants, for any ‘public purpose'.
  • Article 293:  Confers power on States to borrow money within limits prescribed by State legislature.

 

 

  • Tags :
  • State Finance
  • Constitutional Provisions for State Finance
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