State PCS - Jharkhand (JPSC)

• 02 Jun 2025

Jharkhand Demands Increased Tax Devolution for Development Needs

Why in News? 

The Jharkhand government has urged the Sixteenth Finance Commission to increase the state’s share in central tax devolution from the current 41% to 50%, citing its economic contributions and unique developmental needs. 

Key Points 

• Higher Tax Devolution for Developmental Needs:  Jharkhand, contributing significantly through mining and bearing its environmental and social costs, stressed the need for increased financial support to improve key sectors like agriculture, health, education, and livelihoods.  
  • The state highlighted its large farming-dependent population and potential for agricultural growth, calling for flexible fund usage to address local needs effectively. 
• Issues Related to Mining Activities: The state emphasized planned land reclamation, proposing that mined land be returned after operations end. It also seeks the release of ₹1.40 lakh crore owed by mining companies operating in the region. 
• State Budget and Welfare Initiatives: Jharkhand’s ₹1.45 lakh crore budget allocates ₹62,844 crore for social welfare targeting the poor, women, and vulnerable groups. ₹13,363 crore is dedicated to women’s financial support schemes, and ₹5,000 crore for free electricity to eligible residents. 

16th Finance Commission 

• The 16th Finance Commission, established under Article 280 of the Indian Constitution, will cover the five-year period starting 1st April 2026. 
• It is chaired by Dr. Arvind Panagariya, with members Ajay Narayan Jha, Annie George Mathew, Manoj Panda, and Soumya Kanti Ghosh (part-time).  
  • Ritvik Ranjan Pandey serves as Secretary. 
• Role and Terms of Reference: The Finance Commission is a constitutional body formed every five years to maintain fiscal federalism and recommend: 
  • Tax revenue distribution between the Union and the States. 
  • Principles for grants-in-aid to revenue-deficient States. 
  • Support for local bodies (Panchayats and Municipalities). 
  • Review of disaster management financing under the Disaster Management Act, 2005. 
  • Measures to strengthen the Consolidated Fund of States. 

 

• Importance: 
  • Ensures equitable resource allocation to address regional disparities. 
  • Supports grassroots governance and local development. 
  • Advises on fiscal discipline, expenditure efficiency, and public finance reforms.