The Sixteenth Finance Commission, chaired by Dr Arvind Panagariya, held a press conference at Hotel Vivor in Kohima on 5 November 2024. This visit marked the Commission’s tenth stop on its nationwide tour, which began in Himachal Pradesh. Nagaland’s key demands included the inclusion of cesses and surcharges in the divisible pool, an increase in the weightage for the state’s forest cover, and the incorporation of a “disability index” to reflect the challenges posed by the state’s hilly terrain.
One primary demand focused on the inclusion of cesses and surcharges in the divisible pool, which currently deprives states of these funds. The Nagaland government also requested a 15% increase in forest cover weightage for horizontal distribution, reflecting the state’s significant forested areas.
Additionally, Nagaland urged the Commission to recognize the challenges of its hilly terrain by incorporating a “disability index,” which increases the costs of economic activities. The Chairman acknowledged the request for Capital Deficit Grants to support infrastructure projects previously funded by the now-dissolved Planning Commission, along with project-specific grants for initiatives like airports, foothill roads, and hydroelectric projects.
Chief Minister Neiphiu Rio emphasized the need for additional support to drive Nagaland’s economic transformation. He highlighted Revenue Deficit Grants as a primary concern, stating these grants are critical for the government to fulfill its service obligations and allocate resources for vital infrastructure. Rio urged the Commission to … address pending projects, including the Foothills Road, a proposed airport at Ciethu, Kohima, and the New High Court Complex.
Dr Panagariya acknowledged that Capital Deficit Grants are a new area for the Commission. He stated, “Conventionally, commissions have provided revenue deficit grants; however, Nagaland’s special circumstances warrant consideration for capital deficit grants.”
Dr Panagariya provided an overview of discussions with Nagaland’s officials, including the Chief Minister and Deputy Chief Minister, highlighting the state’s developmental progress and unique needs. A significant part of the meeting involved a presentation by the Additional Chief Secretary, detailing Nagaland’s economic and financial landscape and its expectations from the Commission.
He added that the Finance Commission advised on the vertical devolution of resources, defining the division of the divisible pool between the Centre and states, and horizontal devolution, which determines how states’ shares are distributed based on criteria such as per capita income, population, and forest area. Additionally, the Commission makes recommendations on grants to local bodies from the Consolidated Fund of India and disaster relief grants.
The Sixteenth Finance Commission also engaged with Urban Local Bodies, Rural Local Bodies, political parties, and representatives from Trade, Industries, and Commerce.