The Terms of Reference (ToR) for the 16th Finance Commission has been kept shorter than the previous FCs as desired by states, Finance Secretary TV Somanathan said on Thursday.
“This gives the commission much more leeway and freedom to take into account all the inputs that they get from different experts, different people who appear before the commission and they can then fashion an award which is within the constitutional frame and takes into account all stakeholders without too much of pre-decided items in the ToR,” Somanathan said.
The Union Cabinet on Tuesday approved the broad ToR for the 16th FC as mandated by the Constitution for central tax devolution and grants-in-aid to states, without any mention of other factors such as conditionalities or performance-based incentives that should be factored in by the FC.
It also did not announce who will head the Commission and its members. These will be notified soon. The 16th FC will submit its report by October 31, 2025, and its award will be for five years beginning FY27.