Ministry of Finance

Posted On: 17 OCT 2018 8:02PM by PIB Delhi

In a first, Finance Commission today held a detailed meeting with the representatives of Tourism industry in Nainital considering the fact that tourism is one of the major pillars of the economy of Uttarakhand. Chairman Shri N.K. Singh said that Uttarakhand has a comparative advantage in tourism sector which many states do not have. It has highest rate of return on investment and multiplier effects for growth and employment. It would be a task for State govt to fine-tune it's resources towards this.

Yesterday, addressing a press conference in Dehradun, the Chairman said that Uttarakhand has immense economic potential and boundless opportunities despite environmental and geographical constrainsts. The state can become a hub for tourism, ecological services and a conservation model for the nation. Challenges faced by Uttarakhand are real and its needs legitimate. The Finance Commission is committed to support the state within the Constitutional framework to realise its huge untapped potential.

Referrring to the wide ranging discussions held with the state govt, he said that Commission will positively look into the request for revenue deficit grants to the state which it could not get during the previous commission. He appreciated the high GSDP growth rate and Per Capita Income of the state as compared to the national averages. However, issues like intra state disparity and need for improvement in some social indictors needs to be tackled innovatively through suitable policy measures. Chairman also noted that Uttarakhand is facing the challenge of low realisation of GST revenues. However, he said that final equilibrium point of GST is yet to arrive. The Commission has to assess the revenues and expenditures of both the centre and the states which is a challenging task.

Chief Minister Shri Trivendra Singh Rawat along with Finance Minister Shri Prakash Pant and other cabinet colleagues welcomed the Commission and underlined the fact that geography of Uttarakhand has a direct impact on creation and maintenance of infrastructure, provisioning of essential services, cost disabilities associated with the terrain and low revenue generation due to the scattered nature of habitation and low level of economic development.

He apprised the Commission that Uttarakhand has a robust secondary sector (49%) but weak primary and services sectors. The growth in secondary sector was primarily due to the special industrial package given to the state which ended in 2010, therefore, the industrialization will be low in the future. Thus the state is actively promoting horticulture and food processing in the primary sector and hydropower, tourism, wellness services in the service sector.

He highlighted two issues related to the high GSDP growth rate – narrow financial base and environmental constraints; which led to intrastate disparity. He mentioned that due to regulatory restrictions and ecosystem obligations, many hydro power projects could not be completed and infrastructure development is difficult. He stated that the state incurred a loss of about ₹ 2500 crores in 2015-16 due to discontinuance of central grants of the erstwhile Planning Commission. Other issues which were discussed during the presentation are :

1. Plea for ‘Green Bonus’ fund owing to the ecosystem services provided by the state.

2. CD Ratio should also be considered for devolution in addition to Per Capita Income.

3. Grant of ₹ 25655 crore for special problems and up-gradation of infrastructure.

4. Certain share of devolution should be earmarked for hilly states.

5. Out migration from remote and hilly areas due to difficulty in providing the quality public services.

6. Pilgrimage tourism and pressure of floating population

7. Limited availability of land creates difficulty in expanding the agriculture base.

Overwhelming consensus among states for devolution of funds to all the three levels of PRIs

15th Finance Commission which is on a 4 day visit to Himachal Pradesh also sought views of the representatives from various political parties, local bodies and trade and industry and tourism. In the meeting with representatives of Local Bodies some policy related issues like the modalities of fund transfer to the local bodies were the main focus area. Municipalities urged the commission to consider the flux of tourists and tough climatic conditions for grants and devolution of funds. Representatives also focused on the need for the funds to be given to the Zila Parishads and Panchayat Samitis which was given to Gram Panchayats only in 14th FC. Chairman observed that there is an overwhelming consensus among the states visited till now about the need of funds devolution to all the three levels of the third tier of government.

DSM/RM/AM

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Fiscal devolution adjustments to reflect terrain-driven cost disabilities and ecosystem service compensation are being evaluated. Fiscal devolution and targeted grant assistance are central: the Finance Commission will evaluate Uttarakhand's requests for revenue deficit grants and adjusted devolution within the Constitutional framework, in light of the state's terrain-driven cost disabilities, narrow financial base, transitional GST revenue realisation, and proposals for special problem grants, earmarked hilly-state shares, consideration of credit-deposit ratios alongside per-capita measures, and compensation for ecosystem services.