Securing the revenue share

Srinagar, Mar 24: The elected government must represent the Sixteenth Finance Commission (SFC), to include J&K in its revenue sharing award which will be effective from April 1, 2026, to 31st March 2031. Indeed, efforts should be made to pass a unanimous resolution in the Legislative Assembly to this effect.

Being a Union Territory (UT), the SFC is not required to assess the needs and requirements of the J&K as its constitutional mandate is specified only for the states. UTs are considered to be a part of the Union Government.

However, J&K, which is in a unique situation, has a compelling case. First, restoration of statehood is widely expected to happen during the operative award period of the SFC which runs from fiscal year 2026 to 2030. As such, it is important that J&K be considered as a part of the states in the SFC recommendations on revenue sharing, expected at the end of the year.

Second, the J&K Reorganisation Act 2019 by which J&K was converted into a UT, provided for including J&K in the terms of reference of the 15th Finance Commission for the purpose of an award. It was in effect stipulated that J&K’s status should remain at par with that of other states. However, SFC chose instead to earmark 1 percent of the net proceeds or the divisible pool for J&K and Ladakh assign it to the Union, who in turn transferred it to the respective UTs. As a result, the divisible pool for all the states was reduced from 42 to 41 percent.

Third, J&K can contend that it has suffered a revenue loss. From being awarded a share of 1.854 percent of the divisible pool by the Fourteenth Commission from 2015-16 till 2019-20, which would amount to Rs 47,458 crores in the current year, it has come down to Rs 40,721 on a comparable basis. A loss of Rs 6737 crore.

While the Constitution does not enjoin upon the commission to examine the UT’s needs and demands, it doesn’t prohibit them from doing so either. It is silent, at best, which can be interpreted as being non-constraining given the commitment of the Centre in the Parliament.

The SFC is about to conclude its official visits to all the states. So, this is the right time to invite them to make an official visit to J&K. It is a practice followed by all Finance Commissions to visit all the states and meet officials as well as other stakeholders and hear their views on specific issues pertaining to the financial requirements of the states.