Is Maharashtra Concerned About the Decrease in Central Grants to States?

Mumbai, May 8 (NationPress) The Maharashtra government expressed serious concerns during its meeting with the 16th Finance Commission, headed by Arvind Panagariya, regarding the noticeable decline in the share of grants from the Central government to the states. The financial assistance provided by the Central government decreased from Rs 51,414 crore in 2022-23 to Rs 36,045 crore in 2023-24, and further to Rs 31,830 crore in 2024-25.

In its memorandum, the state government highlighted that this reduction stems from the discontinuation of certain Centrally Sponsored Schemes (CSS) and the revision of the Centre-State share of the remaining CSS, which has resulted in an increased financial burden on the state. Furthermore, the revenue expenditure associated with these schemes has escalated due to enhanced remuneration for contractual employees engaged in the implementation of CSS.

Against this backdrop, the Maharashtra government has argued that increased financial support from the 16th Finance Commission is not merely desirable but absolutely necessary.

Agriculture continues to sustain over half of the population of Maharashtra, contributing approximately 12 percent to the gross state value added (GSVA). The state excels in horticulture exports and boasts a robust infrastructure network comprising two major ports and 48 minor ports, with the Jawaharlal Nehru Port Authority handling 56 percent of India's total container cargo. As a frontrunner in renewable energy, Maharashtra has installed 17.53 GW of capacity, reflecting a growth of 52 percent over the last six years. Nonetheless, the state faces significant challenges, including inter-district disparities, dependency of agriculture on monsoon rains, the pressures of rapid urbanization, and an aging population,” stated the memorandum.

The government further emphasized that Maharashtra needs sustained growth in its gross state domestic product, supported by robust public and private investments, to fulfill its vision of becoming a $1 trillion economy by 2030.

In light of the Supreme Court's recent directive for the state government to conduct local body elections within four months, the Maharashtra government has requested a substantial increase in local body grants to 5 percent of the divisible pool, along with the continuation of the existing inter-state distribution formula (90 percent based on population and 10 percent based on area).

Additionally, the state government has urged the Finance Commission to consider performance-linked grants and provide support for neonatal health, as well as assistance from the National Municipal Infrastructure Fund to urban local bodies. Maharashtra is home to 396 urban local bodies (ULBs) and nearly 28,000 Panchayat Raj Institutions.

However, the abolition of octroi and local body tax following the implementation of GST has diminished urban fiscal capacity, necessitating ongoing compensation.

Furthermore, with the challenges posed by climate change and global warming, the Maharashtra government has pointed out that the state, being one of the most disaster-prone regions, frequently encounters droughts, floods, and urban calamities.

The Disaster Risk Index for Maharashtra is the highest in the country. The government seeks an increase in allocations to the State Disaster Response Fund, a more equitable Centre-State sharing ratio of 90:10, and dedicated funds for climate adaptation as well as urban flood resilience. It also proposes exploring innovative financial instruments such as catastrophe bonds to bolster fiscal resilience,” concluded the memorandum.