15th Finance Commission Forms Panel For Separate Defence And Internal Security Fund
15th Finance Commission Chairman NK Singh (left) with other members. (Photograph: PTI)

15th Finance Commission Forms Panel For Separate Defence And Internal Security Fund

The 15th Finance Commission has set up a panel to examine if India needs a separate mechanism to fund defence and internal security.

The panel, the government said in a statement, will be chaired by NK Singh, who is also the commission’s chairman, and will comprise the following members:

  • AN Jha, member of the 15th Finance Commission
  • Secretary of Ministry of Home Affairs
  • Secretary of Ministry of Defence
  • Expenditure Secretary

The Finance Commission, in its report for 2020-21, had said there’s merit in ensuring a predictable and stable flow of funds for defence and internal security, adding that “this will receive appropriate consideration in our final report”.

With the objective of ensuring predictability and stability in the flow of funds for defence and internal security, the Finance Commission had said it will constitute an expert group comprising representatives of the ministries of Defence, Home Affairs and Finance to consider the detailed modalities and implementation plan for accretion to, and utilisation of, the proposed non-lapsable fund or an alternative mechanism.

Creation of such a fund had become a contentious issue as it was deliberated that money for the dedicated fund would be set aside from gross tax revenues of the Central Government. This means that the money for the fund would be set aside before the devolution of taxes to state governments, reducing the Centre’s burden on defence expenditure.

Another Panel For Fiscal Framework

The Finance Commission has also decided to form a panel to address issues of debt and fiscal deficit of states and centre, NK Singh told reporters.

The panel will help in designing a legal framework for a fiscal architecture for the states and centre, Singh said.

There is need for a fiscal roadmap for states and centre debt, and also their contingent liabilities and off-budget borrowings, Singh said.

The 15th Finance Commission, in its report for 2020-21, had also pointed out that outstanding extra-budgetary liabilities of the state and central governments need to be clearly identified, and eliminated in a time-bound manner. This needs to be done in a transparent way of reporting deficit and debt as provided in the amended FRBM Act of 2018, according to the report.

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