Main recommendation of the Twelfth Finance Commission

The Twelfth Finance Commission (TFC) was appointed by President on 1st November 2002 under the Chairmanship of Dr. C. Rangarajan. The Terms of Reference of the Commission are at Annex-I.

Summary of the recommendations of the TFC are placed at Annex-II.

State-wise estimation of share in central taxes and specific amounts of grants recommended for various purposes have been compared with the recommendations of the Eleventh Finance Commission (EFC). The comparative position is encapsuled in Annex-III.

Salient Features of TFC Recommendations

1. Total Transfers recommended

The 12th Finance Commission has recommended a total transfer of Rs.7,55,751.62 crore ( share in central taxes and duties Rs.6,13,112.02 Crore + Grants-in-aid Rs. 1,42,639.60 crore) to States during 2005-10 as against Rs.4,40,209.26 crore ( Rs. 3,76,318.01 crore as share in central taxes and duties + Rs. 58,587.39 crore as grant-in-aid + Rs.5,303.86 crore as Centre's share of Incentive Fund) by 11th Finance Commission for the five years period 2000-05, showing an increase of 71.68% over TFC award period.

2. Grant in aid of States' revenues

The Non-plan grants under Article 275 of the constitution as per 12th Finance Commission are significantly higher when compared with the corresponding grants for the period of 11th Finance Commission 2000-05 as shown below:

(Rs. in crore)

Purpose of Grant During 2000-05 (11th FC) During 2005-10 (12th FC)
1. Local Bodies grants 10,000.00 25,000.00
2. Centre's share in Calamity Relief 8,255.69 16,000.00
3. Non-Plan revenue deficit grants 35,359.07 56,855.87
4. Grant for education Nil 10,171.65
5. Grant for heath Nil 5,887.08
6. Grant for maintenance of roads and bridges Nil 15,000.00
7. Grant for maintenance of public buildings Nil 5,000.00
8. Grant for maintenance of forest. Nil 1,000.00
9. Grant for heritage conservation. Nil 625.00
10. Grant for State-specific needs Nil 7,100.00
11. Upgradation and special problem grants. 4,972.63 Nil
12. Centre's share of Incentive Fund 5303.86 Nil
Total Non Plan Grants 63891.25 1,42,639.60

Under the scheme of transfer recommended by the TFC, the share of grants in the total transfer is 18.9 percent, whereas it was 8.1%, 11.1%, 13.8%,10.3% and 14.5% as per the recommendations of last five commissions.