SunCorp

Even as India tries to resist attempts from the developed world to impose emission caps, going green seems to be firmly on the government’s agenda. In a significant move expected on Friday, the government is expected to ask the 13th Finance Commission (TFC)—a constitutional entity to recommend sharing of taxes between the Centre and states—to fuse the challenges of ecology management and environment protection in development policies.
    More important, there are indications that the government may incentivise the measures designed to protect ecology and the environment. Taken together with the plan to introduce user charges for power and water, the move will mark the greening of the country’s fiscal management.
    According to the constitution, the Centre has to set up a finance commission to decide on the tax-sharing formula every five years. While recommendations other than the sharing formula are not binding on the Centre, the move to include ecology in the terms of reference of the TFC is being seen as the result of a growing recognition of the threats emerging from climate change and unsustainable growth.
    Although officials were unwilling to share the details, sources said the panel, which will be constituted if the cabinet approves the move on Friday, could go to the extent of suggesting rewards for states which follow a green policy or promote schemes that minimise environmental damage.
    The rewards can be in the form of a higher share in the divisible pool of central taxes or grants.
ECO LOGIC
The govt is set to ask the finance commission to marry fiscal management with eco awareness
Move prompted by global warming and unsustainable growth
States that promote eco-friendly schemes will get a higher share of central taxes or grants
Centre also plans to get economists to vet financial viability of irrigation and power projects User charges for irrigation projects on the cards
New Delhi: The Centre plans to reward states that minimise environmental damage. The 12th Finance Commission had recommended incentives for states committing to reduce deficit to a prescribed level and the recommendation has already been implemented by the Centre.
    The move is significant and reflects the desire to combat the threat emerging from climate change even as the country continues to fight off western evangelism to force mandatory cuts through its gullet. The last finance commission had also suggested a Rs 10,000 crore allocation to reward states that maintained higher green cover at the cost of their economic development. But the move in the works goes much farther.
    While the TFC would be set up over the next few weeks, the panel is expected to submit its report by October 2009 to enable the government to implement its recommendations from April 2010. Among a host of agenda items for the TFC, the Centre also intends to seek an assessment by the panel of economists on ensuring the commercial viability of irrigation and power projects, and services offered by PSUs and government departments through various methods, including levy of user charges.
    While the government has often spoken about higher user charges for services offered by its departments, irrigation projects have not always been part of the agenda. The move could have stemmed from depletion of ground water, thanks to free power being offered by states like Punjab. Levy of charges on companies tapping ground water has also been debated in recent months. In fact, the finance ministry, which has moved the note, is according the same treatment to environment as it is giving to goods and services tax, a common tax to be levied by the Centre and states.