The Union cabinet on Wednesday extended the tenure of the 15th Finance Commission by a year to October 30, 2020. The term of the commission, which decides on the division of tax and other resources between the Centre and the states, was originally set to end in October, but was first extended by a month to November 30.

The extension was given on the grounds of the change in the stature of Jammu & Kashmir. Besides, there were delays on account of the model code of conduct of the elections.

The commission will submit its interim report on Saturday, November 30 to recommend a formula for tax devolution for the 2020-21 fiscal year. The validity of the earlier formula ends on March 31, 2020.

When the final report is presented by October next year, the formula of devolution will be valid for 2020-21 to 2025-26.

The cabinet “approved the 15th Finance Commission to submit first report for the first fiscal year viz 2020-21 and to extend the tenure of 15th Finance Commission to provide for the presentation of the final report covering FYs 2021-22 to 2025-26 by October 30, 2020,” according to an official statement. The commission is headed by former expenditure secretary and Planning Commission member N.K. Singh.

“The commission, on account of the restrictions imposed by the model code of conduct, completed its visit to states only recently. This has had a bearing on the detailed assessments of states’ requirements,” the statement said.

The terms of reference for the commission are wide-ranging in nature. “Comprehensively examining their implications and aligning them to the requirements of the states and the central government will require additional time,” it said.

“Making a five-year coverage available for the commission beyond April 2021, will help both state and central governments design schemes with medium- to long-term financial perspective and provide adequate time for mid-course evaluation and correction, the statement said.

It is expected the impact of the economic reforms initiated in the current fiscal year would be manifested in the data by the end of the first quarter.

Though the statement has not mentioned additions to the terms of reference (ToR), it is believed to have been approved. Addition to ToR is required because of the Kashmir development. Since the Finance Commission’s recommendation on devolution is meant only for states and as Jammu & Kashmir ceased to be a state, there was a need to change the terms of reference.

FCI capital

The cabinet has increased the authorised capital of the Food Corporation of India (FCI) to Rs 10,000 crore from Rs 3,500 crore, paving the way for additional equity infusion in the state-owned firm. The decision would also help the FCI, the government’s nodal agency for the procurement and distribution of foodgrains, to reduce its debt and interest cost.

”With the increase of authorised capital, additional equity capital can be infused in the FCI through Union Budget, to fund the foodgrains stock, perpetually held by the FCI,” an official statement said.

Jute packaging

The cabinet has continued with the rule to mandatorily pack all foodgrains in jute bags and 20 per cent of the requirement of the sugar industry

“The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi has accorded its approval for mandatory packaging of foodgrains and sugar in jute material for the Jute Year 2019-20,” the statement said.

The approval will benefit farmers and workers located in the eastern and northeastern regions of the country particularly in the states of West Bengal, Bihar, Odisha, Assam, Meghalaya, and Tripura, which account for 95 per cent of the country's production.

Nearly 3.7 lakh workers and several lakh farm families are dependent on jute. for their livelihood on jute. The jute industry is predominantly dependent on government orders, which purchases bags worth Rs 7,500 crore to pack foodgrains.