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 TERMS OF REFERENCE
OF THE NINTH FINANCE COMMISSION
Paras 3-10 of the Presidential Order dated 17th June, 1987
containing the terms of reference of the Ninth Finance Commission
are reproduced:-
3. The Commission shall make recommendations as to the following
matters:-
(a) the distribution between the Union and the States of
the net proceeds of taxes which are to be, or may be, divided
between them under Chapter I of Part XII of the Constitution
and the allocation between the States of the respective
shares of such proceeds;
(b) the principles which should govern the grants-in-aid
of the revenues of the States out of the Consolidated Fund
of India and the sums to be paid to the States which are
in need of assistance by way of grants-in-aid of their revenues
under article 275 of the Constitution for purposes other
than those specified in the provisos to clause (1) of that
article.
4. In making its recommendations, the Commission shall:-
(i) adopt a normative approach in assessing the receipts
and expenditures on the revenue account of the States and
the Centre and, in doing so, keep in view the special problems
of each State, if any, and the special requirements of the
Centre such as defence, security, debt servicing and other
committed expenditure or liabilities;
(ii) have due regard to the need for providing adequate
incentives for better resource mobilisation and financial
discipline as well as closer linking of expenditure and
revenue raising decisions;
(iii) take into account the need for speed, efficiency
and effectiveness of Government functioning and of delivery
systems for Government programme; and
(iv) keep in view the objective of not only balancing
the receipts and expenditure on revenue account of both
the States and the Centre, but also generating surpluses
for capital investment.
5. The Commission may suggest changes, if any, to be made
in the principles governing the distribution among the States
of:-
(a) the net proceeds in any financial year of the additional
duties of excise leviable under the Additional Duties of
Excise (Goods of special Importance) Act, 1957 (58 of 1957);
and
(b) the grants to be made available to the States in lieu
of the tax under the repealed Railway Passenger Fares Tax
Act, 1957 (25 of 1957).
6. In making its recommendations on the various matters aforesaid,
the Commission shall adopt the population figures of 1971
in all cases where population is regarded as a factor for
determination of devolution of taxes and duties and grants-in-aid.
7. The Commission may examine the feasibility of the merger
of additional duties of excise in lieu of sales tax with basic
duties of excise and evolve a suitable formula for allocating
a part of the duties of excise in respect of the goods described
in column(3) of the First Schedule to the Additional Duties
of Excise (Goods of Special Importance)Act, 1957 (58 of 1957)
for distribution among the States, in lieu of sales tax.
8. The Commission may make an assessment of the debt position
of the States as on the 31st day of March, 1989 and suggest
such corrective measures as deemed necessary keeping in view
the financial requirements of the Centre. The corrective measures
will be with particular reference to investments made in infrastructure
projects and shall have linkage with improvements in financial
and managerial efficiency.
9. The Commission may review the policy and arrangements
in regard to the financing of relief expenditure by the States
affected by natural calamities and suggest such modifications
as it considers appropriate, in the existing arrangements,
having regard, among other considerations, to the need for
avoidance of wasteful expenditure. The Commission may examine,
inter alia, the feasibility of establishing a national insurance
fund to which the State Governments may contribute a percentage
of their revenue receipts.
10. On the matters aforesaid, the Commission shall make two
reports, the first report covering a period of one year commencing
on the 1st day of April, 1989, by the 30th June, 1988, and
the second report covering a period of five years commencing
on the 1st day of April, 1990, by the 30th June, 1989. (By
subsequent notifications dated the 30th June, 1988, and 13th
June 1989 respectively the Commission was to make their first
Report by 31st July, 1988 and second Report by 31st December,
1989.)
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