Hyderabad: Calling for a more predictable and equitable fiscal framework, Telangana chief secretary K Ramakrishna Rao on Wednesday urged the Centre to adopt formula-based grant allocations to states, warning that discretionary funding mechanisms could disadvantage revenue-deficit regions and weaken local governance.He stressed that transparent criteria are essential to ensure fair distribution of resources, particularly for states struggling with structural fiscal gaps. Speaking at a conference on the 16th Finance Commission organised by the Centre for Economic and Social Studies (CESS), Rao underlined the importance of grants tailored to revenue-deficit states as well as state-specific and sector-specific needs. While welcoming certain recommendations of the commission, he expressed reservations about linking funds for local bodies to performance metrics and mandatory state contributions, calling such conditions unnecessary. He pointed out that allocations to local bodies currently lack a clear formula and argued that predictable funding could instead be ensured through a fixed, transparent mechanism. “But asking for state share is also not needed in case of local bodies,” he said. Rao noted that although the Centre has broadly accepted the commission’s recommendations on tax devolution, it plans to further examine those related to grants. “Our discussions in the conference will provide us with the opportunity to express our concerns about the absence of a formula for the allocation of grants to local bodies,” he said. Resilient structure: DuvvuriIn his inaugural address, former RBI governor Duvvuri Subba Rao described India’s federal structure as remarkably resilient compared with other federations facing separatist or ethnic tensions. He highlighted three key aspects: First, India’s model as a ‘union of states’ blends centralised authority with decentralised governance, enabling management of a vast and diverse population. Second, he noted that state finances are central to national economic management, with states accounting for roughly 60% of public expenditure and a substantial share of borrowing. “Third, the growing divide between the central govt and the states, seen in limited spending freedom, borrowing limits, and reduced ability to raise resources, needs urgent attention to maintain growth,” he said.
