UP, Bihar, MP, Bengal top devolution from Centre in June

Uttar Pradesh, Bihar, Madhya Pradesh, West Bengal and Rajasthan are top five recipients of the latest round of funds that the Centre has allotted for the states towards devolution of taxes in the Interim Budget of the fiscal year 2024-’25 (FY25).

Of the Rs. 12.19 trillion that the Finance Ministry has earmarked for the purpose, Uttar Pradesh has received Rs 25,069.88 crore while Bihar received Rs 14.056.12 crore. Madhya Pradesh received Rs. 10,970.44 crore, West Bengal received Rs 10,513.46 crore and Rajasthan received an allotment of Rs 8,421.38 crore, , the finance ministry said. With the latest round of funds released, the total amount devolved to the states for FY25 as of June 10 is Rs. 2.8 trillion. In all, the Centre gave Rs 1.39 lakh crore to the states for the purpose of devolution of tax revenue in the month of June.

The ministry released an additional instalment in June along with the regular amount towards devolution, amounting to Rs. 1,39,750 crore. According to the ministry, the money is aimed at helping states in India expediate capital spending and development.

Interestingly, of the five top recipients, only West Bengal is an Opposition state, governed by the Mamata Banerjee-helmed Trinamool Congress party. During pre-Lok Sabha election campaigning, Banerjee, like leaders of most Opposition leaders, had alleged that the Centre was not releasing ample funds to her state for various needs including tax devolution instalments.

The 15th Finance Commission formulated a five-year devolution regulation that is valid till FY26. According to the current regulation, the Centre devolves 41 per cent of tax revenue to the states. A formula that calculates incentive according to demographic performance, along with a state’s effort to generate tax revenue, decides the individual state’s allocation. The formula considers the state’s per capita income, too, besides geography and forest spread.

Arvind Panagariya chairs the 16th Finance Commission, which is presently working out details about how to develop tax devolution for FY27 to FY31.