Assam Gets Fiscal Boost under 16th Finance Commission

Guwahati: Recognizing its growing economic footprint, Assam has registered a significant improvement in the share of central tax transfers under the 16th Finance Commission.

The divisible pool of taxes refers the portion of gross central tax revenue of the country.

However, the commission pointed out that the fiscal discipline and debt management still remains a major challenge.

The increased share places Assam among the states that have benefited from the revised horizontal devolution formula, which now includes a component recognising states’ contribution to national GDP alongside population, area, forest cover and demographic performance.

The Commission has retained the overall share of states in central taxes at 41 per cent.

The increased share is likely to provide fiscal cushion to the state economy if the public expenditure goes up from the period beginning from 2026-31.

The commission also recommended for higher allocations to rural and urban local bodies along with disaster management funding.

Assam, which is prone to floods and erosion, is expected to benefit from these grant streams, subject to performance-linked criteria and improved financial accountability at the local level.

This recommendation assumes significance for Assam in the backdrop of rising public debt and sustained revenue expenditure pressures, when there is an increased spending in the welfare schemes.

However, persistent challenge in Assam’s fiscal performance relates to its State Public Sector Enterprises (SPSEs), which have shown mixed results in recent audits.

According to the latest Comptroller and Auditor General (CAG) audit reports, Assam had 47 SPSEs under audit jurisdiction as of March 2024, with the collective turnover of working SPSEs growing faster than the state’s GSDP over the past three years, increasing their contribution to the economy.

Major contributors to turnover included power sector companies such as Assam Power Distribution Company Limited and Assam Power Generation Corporation Limited. These two companies ranked among the leading profit making SPSE’s in the country.

However, red flags have been shown over financial management and accountability, with many SPSEs operating with outdated accounts and some incurring significant losses.

The 16th Finance Commission’s recommendations will shape Assam’s fiscal roadmap until 2031, with the state government expected to align its budgetary priorities to leverage higher devolution while adhering to tighter fiscal norms set out in the report.

Also Read: ⁩Manipur: Arms, Explosives Seized in Imphal West; RPF/PLA Cadre Arrested