The Union Cabinet on Wednesday extended the term of 15th Finance Commission, which is to decide on division of tax and other resources between the centre and the states, by one-year to October 30, 2020. The cabinet "approved the 15th Finance Commission to submit first report for the first fiscal year viz. 2020-21 and to extend the tenure of 15th Finance Commission to provide for the presentation of the final report covering FYs 2021-22 to 2025-26 by October 30, 2020," according to an official statement said.
The term of the commission was originally set to end in October 2019, but was extended by one month to November 30.
The extension of the term will enable the commission to examine various comparable estimates for financial projections in view of reforms and the new realities to finalise its recommendations for the period 2020-2026, it said.
"The commission, on account of the restrictions imposed by the model code of conduct, completed its visit to states only recently. This has had a bearing on the detailed assessments of states requirements," the statement said.
The terms of reference for the commission are wide-ranging in nature, as per the statement. "Comprehensively examining their implications and aligning them to the requirements of the states and the central government will require additional time," it said.
The proposed increase in coverage of the period for which the commission's recommendations are applicable, will help medium-term resource planning for the state governments and the central government.
"Making a five-year coverage available for the commission beyond 1st April 2021, will help both state and central governments design schemes with medium- to long-term financial perspective and provide adequate time for mid-course evaluation and correction," it further said.
It is anticipated that the impact of the economic reforms initiated in the current FY would be manifested in the data by the end of First Quarter 2020-21, it added.