COMMENTARY

Economic & Political Weekly EPW december 21, 2013 vol xlviiI no 51
19
Gender Issues for the Fourteenth
Finance Commission
Dakshita Das
The views expressed here are personal.
Dakshita Das (dakshita.das@gmail.com) is a
civil servant.
In conrmation of its gender-based
commitment, the government
should not consider revenues
arising out of alcoholic beverages
as part of the overall gross state
domestic product of any state; this
will automatically have an impact
on the revenue earning capacity
of a state and may end up in
altering the pattern of resources
that will accrue to it from the
Fourteenth Finance Commission
award. The FFC should also
build gender sensitivity into
the analysis of local issues
and recommend grants which
can further the goal of gender
resource budgeting.
W
ith its report due late next year
which will determine centre-
state scal relationships for the
period 2015-20 the Fourteenth Finance
Commission (FFC) has its work mapped
out. Such are the recommendations of
the nance commissions (FCs) that gen-
erally most of them are accepted by the
union government. Hence, any develop-
ment agenda that needs to be pushed
should be brought out at this stage for
incorporation in the recommendations
of the FFC.
One such agenda relates to gender
issues. Over the last decade, through the
medium of the union and state budgets,
the principle of viewing government
programmes and policies from a gender
lens has been well entrenched. Most
budgets reect a gender budget statement
which also indicates certain programmes
and policies for women. Government de-
partments have constituted gender bud-
geting cells to run through programmes
from a gender lens prior to their formali-
sation and some new schemes have suc-
cessfully incorporated within them a
gender component, the Mahatma Gandhi
National Rural Employment Guarantee
Act (MGNREGA) being a case in point. In
fact, since its very recent introduction
into the Indian public nance system,
gender budgeting can be said to have
been institutionalised, albeit there are
improvements that can be built into it.
The impact analysis of gender budget-
ing is however yet to be studied in ne
detail. Therefore, with the FFC, a new
thrust can be given by establishing linkages
within the devolution pattern and also the
factors that can determine the same.
FCs share resources between the centre
and the states through recommending a
share in the union tax revenues and by
grants-in-aid to states. The Thirteenth
Finance Commission (TFC) envisaged a
transfer of Rs 3,18,581 crore to various
states over its award period as grants-in-aid
and a devolution of 32% as share of the
states from the shareable pool of resources.
Combined, both form a signi cant chunk
of the budgetary revenues for any state.
For 2013-14, for instance, the Haryana
government received close to 15% of its
resources through the FC mode.
Sharing of Union Tax Revenues
Governed by Article 280(3) of the Consti-
tution, the share of union tax revenue
becomes the most important task of any
FC as the share of the states from this
pool is the main source of transfer of
resources from the centre to it. Being an
untied source of revenue, it becomes a
clear stream of funding for the states. In
the Twelfth Finance Commission, tax
devolution accounted for 81.1% of the
total transfers, slightly lower than the
86.5% of the previous commission. In
working out the criteria to determine the
state-wise share, the FCs use various
methodologies along with consulting the
states and the Ministry of Finance at the
centre. They also consider other factors,
i e, economic and scal.
Accordingly, the TFC assigned the fol-
lowing weights for tax devolution:
The criterion varies from commission
to commission but population and area
along with scal discipline/tax effort are
more or less a constant for recent FCs. In
determining the scal criteria, the indi-
vidual states gross state domestic product
(GSDP) is taken into account. Even for
determining the scal discipline criteria,
the TFC relied upon the states capacity
to generate resources and manage their
nances properly. Tax effort, which was
an important weightage for the Twelfth
FC has been merged in the ongoing FC
under scal discipline.
State Excise on Liquor
The issue that arises here is: what exactly
contributes to the GSDP and becomes an
important constituent of the revenue
generating capacity of any state? The FC
seeks responses to questionnaires from
Criteria and Weights for Tax Devolution (in %)
Criteria Weight
Population 25.0
Area 10.0
Fiscal capacity distance 47.5
Fiscal discipline 17.5
COMMENTARY
december 21, 2013 vol xlviiI no 51 EPW Economic & Political Weekly
20
various stakeholders including states. A
perusal of the information so sought for
the deliberations of the current commis-
sion indicates that under the category
revenue receipts, the information sought
is of state excise inclusive of state excise
on country liquor and state excise on
foreign liquor. Therefore, a constituent of
the state revenues is excise duty on liquor.
How important or how signicant that
element is in the overall resources of the
state can be illustrated by going through
some of the state budgets. For instance,
sale of liquor in the state-run Tamil Nadu
State Marketing Corporation (TASMAC)
outlets was a major source of income for
the Tamil Nadu government with a
whopping Rs 21,680.67 crore earned as
total revenue during 2012-13. This was a
19.91% growth from the previous year.
The sum included an excise revenue
of Rs 12,125.31 crore and sales tax of
Rs 9,555.36 crore. The budget estimates
for Haryana indicate a jump of over 30%
over the last scal under the category of
excise collection for the state from country
spirits, foreign liquors and spirits, etc.
These examples are merely illustrative.
The main purpose of taxation is to
generate government revenue. Since
alcohol is a lucrative revenue source,
increased sales are seen by policymakers
as a means to boost the government
coffers. On the ip side, can governments
also use taxes on beverage alcohol for
several other purpose, i e, an attempt to
reduce abuse and harm by making alcohol
less accessible? So far as abuse of alcohol
is concerned, there is evidence that tax-
ation does not effectively target those
with a drinking problem. People will drink
notwithstanding the cost they have to
pay. Regardless of this, as ICAP reports
indicate, increase of public access to
alcohol in a bid to garner higher revenues
may end up encouraging risks of enhanced
partaking with socio- economic conse-
quences. A report by the United Nations
(UN) women (http://www.unwomen-
southasia.org/assets/Violence-Property-
Rights2.pdf) has also conrmed that in-
crease in alcohol consumption has been
indirectly encouraged by the state with
a major stake in its revenues through its
excise policy and licensing of an increasing
number of retail shops.
In the Indian context, despite us hav-
ing a constitutional commitment to pro-
hibition in Article 47 of the Directive
Principles of State Policy, the alcohol in-
dustry churns out huge revenues for the
state. A report entitled Country Prole
on Alcohol in India by Shekhar Saxena
available at APAPAonline.org makes for
interesting reading in this context. It is
argued that apart from tax payments
the l iquor industry also indirectly con-
tributes to revenues through the mode
of advertising, event sponsorships, trav-
el, tourism and sports. The alcohol in-
dustry is lucrative enough to generate a
signicant parallel economy with con-
tenders willing to dole out huge sums as
protection money, etc, to capture liquor-
vending contracts. They no doubt become,
powerful persons with the situation being
used by such power brokers to churn
policy to their advantage with disastrous
social consequences for families and
household incomes.
There are enough number of instances
as also case studies conducted wherein
Indian women have voiced a strong
c orrelation between alcoholism and
violence. The existence of a vast network
of licensed liquor shops has become a
continually growing problem. In the UN
report, women of Haryana openly com-
plain about how their men spend their
income on alcohol and ruin their health.
They consider the spread of liquor and
intoxicants as the cause of tension in
homes leading to shortage of money
for family expenses, frequent quarrels,
and forcible extraction of money from
women and violence. Liquor is clearly
behind the deteriorating quality of a
womans life and cuts across region, caste
and class lines. In fact, the greater the
poverty, the worse is its impact on women
and children.
Therefore, in conrmation of its
gender-based commitment, the govern-
ment should not consider revenues arising
out of alcoholic beverages as part of the
overall GSDP of any state; this will auto-
matically have an impact on the reve-
nue-earning capacity of a state and may
end up altering the pattern of resources
that will accrue to it from the FFC award.
Grants to States
The Terms of Reference (ToR) require
the FC to make recommendations on the
principles that should govern the grants-
in-aid to the states out of the Consolidat-
ed Fund of India. Grants-in-aid are an
important component of FC transfers.
The size of the grants has varied from
7.7% of total transfers under FC-VII to
26.1% of total transfers under FC-VI.
Grants recommended by FC-XII amounted
to 18.9% of total transfers. The TFC
recommendations covered several cate-
gories of grants-in-aid amounting in the
aggregate to Rs 3,18,581 crore which
constitutes 18.03% of total transfers.
Grants of the TFC cover a gamut of sectors
including education, environment, infant
mortality, etc. During the visits of the
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COMMENTARY
Economic & Political Weekly EPW december 21, 2013 vol xlviiI no 51
21
TFC to the states as well as in their re-
spective memoranda, state governments
highlighted the need for grants to ad-
dress specic issues and l ocal problems.
Some of the central ministries too had in
their communications to the FC drawn
attention to issues which arise across
states, but are required to be addressed
locally. For instance, the Ministry of
Home Affairs referred to the gaps in
training capabilities for the police force
across states; the Ministry of Culture
indicated the states continued need for
assistance, by means of grants, to protect
monuments, etc.
The point that therefore arises is that
based upon memoranda received which
draws attention to specic local issues,
the FC can recommend grants.
Accordingly, this FC can build in gender
sensitivity into the analysis of local issues
and recommend grants which can further
the goal of gender resource budgeting
(GRB). The FFC sought notes on a wide
range of issues which total up to around 57
in number. Sadly, there is no reference to
gender and no note has been sought from
the states on their initiatives for gender re-
form and uplift for which FC grants can be
considered and recommended. States can
be asked to suggest areas where the gap
lling for GRB can be considered. This can
go beyond the normal infant-mother mor-
tality perception of gender issues and can
perhaps be more focused on capacity buil-
ding, a core aim of GRB. Special allocations
for local governance, for skill building, for
sports, etc, targeted at women benecia-
ries could be considered by the FC.
Accordingly, the FFC can look at invit-
ing suggestions from the states on these
lines. Both the core recom mendations of
the FC can be tweaked so that the gender
impact of the devolutions is strength-
ened and augmented.