Govt accepts 13th Finance Commission proposals

The government said on Thursday it has accepted recommendations of the 13th Finance Commission, which called for greater share of states in central tax proceeds, despite strains on its finances.

"The government of India, despite the strains, has accepted recommendations of the Finance Commission," Finance Minister Pranab Mukherjee told reporters in New Delhi.

The commission in its report, tabled in Parliament, recommended increase in share of states to 32 per cent of central tax proceeds from the current 30.5 per cent.

Mukherjee said Rs 3.19 lakh crore (Rs 3.19 trillion) will be additional grant payment to states during the five-year period 2010-11 to 2014-15.

Besides, the commission, headed by former finance secretary Vijay Kelkar, also recommended that states and local bodies be given shares in central tax proceeds, the burden of which will be Rs 87,000 crore (Rs 870 billion), he said.

The commission also prescribed some other grants for elementary education, state-specific needs etc, besides Rs 30,000-50,000 crore (Rs 300-500 billion) as part of compensation to states for proposed goods and services tax roll out.

The government finances are under pressure with fiscal deficit of the centre rising to 6.2 per cent of the gross domestic product during 2008-09 after stimulus measures were announced in the wake of global economic crisis.

For 2009-10, the fiscal deficit is projected at 6.8 per cent of gross domestic product.