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 Explanatory
Memorandum on the action taken on the recommendations of the
Fourth Finance Commission in its Report dated the 12th August,
1965
The Report of the Fourth Finance Commission
is being laid on the Table of Parliament. The main recommendations
of the Commission are summarised in Chapter 12 of the Report
and these have been accepted subject to the modification indicated
in paragraph 2 below.
The Commission has excluded from its assessment
of revenue expenditure certain increase in pay scales and
dearness allowance increases relating to State Government
employees and employees of Local Bodies and School teachers
effected by the State Governments of Andhra Pradesh, Mysore
and Uttar Pradesh through orders issued in July, 1965, and
listed in Part 2 of Annexure-1 of the Report. This was because
either there was not sufficient time after receipt of these
orders to re-assess the estimates already adopted or the proposals
were not accompanied by basic particulars and other necessary
data. The Commission's recommendation was that the effect
of these liabilities might also be taken into account in fixing
the Article 275 Grants to be included in the Order of the
President. Accordingly, Government requested Prof. D.G. Karve,
a Member of the Commission, to undertake an assessment of
these liabilities applying thereto the same criteria as were
applied to similar liabilities by the Commission. Prof. Karve
has recommended additional grant of Rs. 6.29 crores to Andhra
Pradesh and of Rs. 2.58 crores to Mysore and a grant of Rs.
9.85 crores to Uttar Pradesh, during each of the years from
1st April, 1966 to 31st March, 1971. The grant in the case
of Uttar Pradesh has been recommended after taking into account
the surplus of Rs. 17.02 crores otherwise available to the
State for the five year period ending 31st March, 1971. These
recommendations have been accepted.
The Commission had also excluded from its
assessment of revenue expenditure provisions for special requirements
of hill districts in Assam, improvement and strengthening
of Police Organisation in Madhya Pradesh and grants to Panchayats
in Mysore, as final orders on these proposals had not been
issued. The Commission has recommended that if these proposals
mature into commitments before the President issues Orders
under Article 275 of the Constitution and the Union is approached
by the State Governments, those requirements might also be
taken into account by the President in determining the amounts
to be granted under Article 275.
It would not be practicable to keep the Order
under Article 275 pending or even open for an amendment later
until these liabilities mature into commitments. Such liabilities
would, therefore, be taken into account during the computation
of the resources for the Plan of the respective States and
their needs for purposes of Central assistance.
The Commission's recommendations fall into
three categories; those to be implemented by an Order of the
President, those to be implemented by law by Parliament and
those to be implemented by executive orders. The recommendations
under Articles 270 and 275 (1) of the Constitution fall in
the first category and the necessary Order will be submitted
to the President for approval. The recommendations relating
to the distribution of Union duties of excise including additional
duties and estate duty on property other than agricultural
land fall in the second category. Necessary legislation will
be promoted to implement them. The recommendations regarding
the distribution of ad hoc grants to States in lieu of their
share of tax on Railway fares will be implemented by executive
orders.
The Commission has made certain general observations
in Chapter 11 of its Report. The Chairman of the Commission
and one of the Members have also appended minutes in which
some general issues have been raised. These do not require
any immediate decision and will be considered in due course
in consultation with the State Governments where necessary.
Sd/-
(G. Venkateshwara Ayyar)
Secretary to the Government of India
New Delhi.
Dated 10th September, 1965.
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