Top Debtor States Seek More From Finance Commission

Greater fiscal relief, revamped criteria for tax revenue sharing, special funds among demands

- Rhik Kundu & Vijay C. Roy

India's three most-indebted large states—Punjab, West Bengal, and Himachal Pradesh—have asked the 16th Finance Commission for greater fiscal relief, revamped criteria for central tax revenue division and special funds to balance growth with structural vulnerabilities, according to two officials from the West Bengal and Himachal governments and a document given to the finance commission by the Punjab government.

The 16th Finance Commission, chaired by economist Arvind Panagariya, is reviewing submissions from states and central departments as it prepares recommendations for 2026-31. The commission is set to submit its report on 31 October.

The 15th commission's criteria for sharing central tax revenues with states relied on parameters such as population, geographical area, forest cover and ecology, per capita GDP disparities, tax and fiscal efforts, and demographic performance. Under this, states get 41% of the divisible pool of central taxes, lower than the 14th Finance Commission's 42%, to account for the creation of the Union territories Jammu & Kashmir and Ladakh.