Telangana govt seeks 50% share in central taxes from 16th Finance Commission

The Telangana Government on September 10 has asked the 16th Finance Commission to increase its share of Central taxes from the existing 41 per cent to 50 per cent, PTI reported.

The request comes as cesses and surcharges by the Centre that are not shared with states have increased over the years, Deputy Chief Minister and state Finance Minister Bhatti Vikramarka told Finance Commission Chairman Arvind Panagariya, as per the report.

During the meeting with Panagariya, Vikramarka urged the 16th Finance Commission to also consider “necessary autonomy” for states to tailor their centrally sponsored scheme (CSS) programmes as per specific requirements, the report added.

On Central taxes share for states…

“We propose increasing the share of states in Central taxes from 41 per cent to 50 per cent. Over the years, cesses and surcharges that are not shared with states have increased, leaving states with a smaller share of total gross tax revenue,” he said.

He noted that increasing the vertical devolution “will give states the fiscal space they need to strengthen welfare programmes, address infrastructure gaps and prioritise local development”.

Vikramarka added that the demand is “not just for Telangana, but for all states”, to ensure a “more cooperative federal structure”.

On Measure to Determine Resource Allocation…

He also proposed that the Panel “reconsider the use of per capita income distance as the primary indicator in determining horizontal devolution as measuring prosperity”, stating that sole use of this measure “would deny Telangana the resources needed to address inequities that exist within the state”.

The state government is suggesting that the formula for horizontal devolution be modified to add at least a 50 per cent weightage to gross state domestic production (GSDP) contribution.

“A greater weight on GSDP would incentivise states to adopt reforms that improve productivity, attract investment and create jobs, ultimately contributing to the national economy. This approach would not only make states more competitive but also help reduce regional disparities, encouraging more balanced growth across the country,” he said.

On Recognising Welfare Investments…

Vikramarka also objected to the “mislabelling” of government expenditure on welfare schemes such as Rythu Bharosa, farm loan waivers and food subsidies as “freebies”, and asked the Panel to recognise the necessity of such programmes as “investments in the welfare of our people”.

On Debt Servicing…

He mentioned that a large part of the state's resources is now being diverted toward debt servicing and requested the Panel's support to either restructure this debt or provide additional assistance to help free up resources, as per the report.

The 16th Finance Commission has been visiting Telangana since September 9 and has held meetings with political parties, local body representatives, and industry chambers.

(With inputs from PTI)