Telangana lost Rs 18,278 crore due to 15th Finance Commission’s formula
In a series of posts on X, economic analyst Aravind Varier highlighted systemic drawbacks in the resource distribution criteria used by Finance Commissions since the 1970s
Hyderabad: Telangana is estimated to have suffered a loss of Rs 18,278 crore in its share of Union taxes from financial year (FY) 2020-21 to FY 2024-25 due to the flawed recommendations of the 15th Finance Commission, with an additional Rs 5,000 crore loss expected in FY 2025-26.
In a series of posts on X, economic analyst Aravind Varier highlighted systemic drawbacks in the resource distribution criteria used by Finance Commissions since the 1970s.
According to the formula, States with higher populations receive a greater share of Union taxes, while those with higher per capita income receive less.
Distribution of Net Proceeds of Union Taxes and Duties as per the (Budget Estimate) to HINDI States and SOUTH INDIAN States for the Financial Year 2025-2026 (₹ in Crore) pic.twitter.com/a18mukfTAh
— Aravind Varier (@VarierAravind) February 1, 2025
Telangana’s share in the Union Divisible Tax Pool dropped from 2.437 per cent under the 14th Finance Commission (2015-2020) to 2.102 per cent under the 15th Finance Commission (2021-2026).
This 0.335 per cent reduction has significantly impacted the State’s revenue. Experts point out Telangana’s rapid economic growth and lower population growth, with the per capita income shooting up during the K Chandrashekhar Rao regime, with this good performance actually not being considered at all by the Commission.
With the current formula disproportionately favouring larger States with larger population, Telangana continues to bear the brunt of reduced Central devolution, raising concerns over fiscal fairness.
“The harsh reality is that, all the South Indian States would lose money in a progressive manner in the coming years because these States performed phenomenally in socio-economic indicators and the criteria used by the Finance Commissions penalise the performing States,” Varier said.
