The Hindu Business Line : Additional terms of reference for 13th Finance Commission

New Delhi, July 31 In a serious bid to make the fiscal deficit target realistic and transparent, the Centre has mandated the 13th Finance Commission to come up with a revised roadmap on fiscal adjustment through 2010-15 after reflecting the Government’s off-budget liabilities on oil, food and fertiliser bonds in the mainstream fiscal accounting.

The 13th Finance Commission’s revised roadmap should help maintain the gains of fiscal consolidation through 2010 to 2015, the additional term of reference approved by the Union Cabinet has said.

The latest move was also in keeping with the Finance Minister, Mr P. Chidambaram’s announcement in his Budget speech of 2008-09, where he stated that the 13th Finance Commission would be requested to revisit the roadmap for fiscal adjustment and suggest a revised roadmap.

Currently, the bonds issued by the Government towards oil, food and fertiliser subsidies are kept off-budget and not counted towards the Centre’s fiscal and revenue deficit. In Budget 2008-09 speech, Mr Chidambaram had admitted that fiscal and revenue deficits were understated to the extent that liabilities arising from these bonds were off-budget.

He had then said that there was a need to bring these liabilities into fiscal accounting and had as a first step shown these liabilities clearly in ‘budget at a glance’

The Information & Broadcasting Minister, Mr Priyaranjan Dasmunshi, briefed reporters today on the additional term of reference for the 13th Finance Commission.

The additional term of reference reads as follows: “Having regard to the need to bring the liabilities of the Central Government on account of oil, food and fertiliser bonds into fiscal accounting, and the impact of various other obligations of the Central Government on the deficit targets, the Commission may review the road map for fiscal adjustment and suggest a suitably revised roadmap with a view to maintaining the gains of fiscal consolidation through 2010 to 2015”.

The 13th Finance Commission is expected to submit its report to the Government by October 2009. Its recommendations on devolution of Central taxes to the States would relate to the five-year period 2010-15.

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