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15th Finance Commission set to visit J&K, Ladakh

Within days of the Centre notifying the J&K Reorganisation Act, 2019, the 15th Finance Commission is preparing to visit Jammu & Kashmir and Ladakh to decide on the financial grants and devolution for the new Union Territories.

The commission is also closely examining the possibility of creating a separate non-lapsable defence fund and has sought a discussion with the defence ministry on the issue.

“We will definitely be visiting J&K,” 15th Finance Commission chairman NK Singh said. “It’s the commission’s intention to visit both J&K and Leh and Ladakh. In fact, even before the decision (to bifurcate the state) was taken, the FC was preparing for the same,” he told ET.

This will be a unique case where the commission will directly decide on fund devolution to any Union Territory. Usually, it is the home ministry that grants funds to UTs. However, Clause 83 of the J&K Reorganisation Act says the President will make a reference to the commission to make appropriate grants to the successor UTs.

While the Presidential reference is yet to be made — in fact, it may come only after October 31 when the Act comes into effect — the finance commission is set to begin its homework in the new UTs as it needs to submit its report by November 30.

“We will await the Presidential communication and examine it carefully when it comes, before making our recommendations,” Singh said.

While he conceded that it was difficult to consider special grants for any sector and state, given the mediumterm revenue numbers, he sought to make a distinction between necessary grant allocations and “luxuries”.

An increased defence spend and a non-lapsable defence fund were probably an imperative need of the hour, Singh said. “Today’s challenges are very different from the time when the Constitution was written. Who could have foreseen then how the situation in Pakistan would turn out, and what China would become? We have become a far more inter-dependent country and security challenges are far bigger, defence needs much more,” he said.

“Further, if India wants to have credibility as a responsible economic power, we need to certainly shore up our defences. Reason being, a foreign investor is faced with serious concerns on geo-political risks before committing to long-term equity investment in any country, so stability is key.”

Singh, however, clarified the commission was yet to take a final view on the proposed defence fund. “The decision whether the funds are lapsable or not is entirely a government decision. We have been tasked to look into it to make a recommendation and we will. While we will address each term of reference before us, that does not mean they will be necessarily agreed to. Some papers have been prepared to assess what are the options and appropriate mechanisms for such a fund. We have recently asked the defence ministry to meet us on the issue as well.”

Source: Economic Times