Political Economy of Greening Fiscal Federalism in India
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Political Economy of Greening Fiscal Federalism in India
Rohini Chaturvedi19 September 2013
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Structure of Presentation
Environment & Development Trade-offs
Centre-States negotiations in the Twelfth and Thirteenth Finance Commissions
Understanding Greening of Fiscal Federalism
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Environment & Development Trade-offs
Addressing environment and development in an integrated way involves trade-offs
– Who decides?– How can the costs and benefits be equally
distributed?
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‘Forest Rich’ States’: compensation for costs of conservation
• Flow of ecosystems goods and services beyond States’ territorial boundaries.
• Increasing gap between revenue and expenditure wrt forests
• High opportunity costs of conservation• Absence of domestic markets for carbon trading
The Himalayan Chief Ministers Conclave, 2009
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States arguments before the 12FC and 13FC
State Spill-over Benefits Cost-Revenue Gap Opportunity Cost Carbon Credit
Andhra Pradesh - - 13FC -Arunachal Pradesh 12FC, 13FC 13FC - 13FCAssam 12FC, 13FC - -Bihar Chattisgarh 12FC, 13FC 12FC, 13FC 12FC, 13FC -Goa - - - 13FCGujarat Himachal Pradesh 12FC, 13FC 12FC, 13FC 12FC 13FCJammu and Kashmir 13FC 13FC - -Jharkhand - - 13FC -Karnataka - 13FC - -Kerala - 13FC 13FC -Madhya Pradesh 13FC 12FC, 13FC 12FC -Manipur - 13FC 13FC 13FCMeghalaya 13FC - 13FC -Mizoram - - - 13FCOrissa - 13FC - -Sikkim - 13FC 12FC -Tripura 12FC, 13FC - - -Uttarakhand 12FC, 13FC 12FC 12FC 13FC
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Twelfth Finance Commission
• Agenda setting: representation from the States + members experiences of forest issues + political acceptability
• The Transfer: 1000 crore/five years distributed on the basis of forest cover estimates; Additionality
• Balancing E&D: ‘Preservation of forests’; Fungibility of the State treasury
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Thirteenth Finance Commission
• Agenda setting: terms of reference of the Finance Commission
• Rs. 5000 crore/five years; additionality; IIFM study – formula with multiple variables
• Balancing E&D: – Year 1 & 2- 12.5% for preparation of working plans; – Years 3-5 – 25% (75% for development and 25% for forestry)
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States’ shares: Twelfth and Thirteenth Finance Commissions
Andhra Prad
esh
Arunachal
Pradesh
Assam
Chhattisga
rh
Himach
al Prad
esh
Karnata
ka
Madhya
Pradesh
Mahara
shtra
Orissa
Rajasth
an
Tamil N
adu
Uttarakh
and
West Ben
gal
0%
2%
4%
6%
8%
10%
12%
14%
16%
12FC13FC
12FC
13FC
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Political Economy of Greening
• Ecosystems services framework in policy narratives and estimates of forest value
• Domestic responses to the international negotiations on climate change
• Shifts in power within the Indian federal system– Coalitional politics– Economic liberalisation and ‘Provincial Darwinism’
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Eighth Lok Sabha (1984-89)Ninth Lok Sabha (1989-91)Tenth Lok Sabha (1991-96)
Eleventh Lok Sabha (1996-98)Twelfth Lok Sabha (1998-99)
Thirteenth Lok Sabha(1999-2004)Fourteenth Lok Sabha (2004-09)
Fifteenth Lok Sabha (2009-)
0%10%
20%30%
40%50%
60%70%
80%90%
100%
National Parties Regional Parties & Independent Candidates
Percentage of Seats in Lok Sabha
Shifting Power in the Federal System
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2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
2011
-12
2012
-13
2013
-14
2014
-150
200
400
600
800
1000
1200
1400
Central Sector Schemes
Centrally Sponsored Schemes
Total non-formulaic transfer from Plan-ning Commission
Grants-in-aid from Finance Commission tied to forest
Am
ount
in R
s. C
rore
Forest Linked Transfers from Centre to States
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Comparison between outlays to selected States in the National Afforestation Programme and Forest Transfers
National Afforestation Programme (2002-13)
Forest Transfers Forest transfers tied to forest spending (2005-15)
(Rs.in crore)
Arunachal Pradesh 30 827 414Chattisgarh 227 496 262Himachal Pradesh 65 120 63Madhya Pradesh 182 605 326Maharashtra 188 379 204Orissa 139 406 218Rajasthan 59 113 63Uttarakhand 84 240 124
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So,
Greening of fiscal federalism has taken place through the inclusion of environmental criteria in fiscal transfers– Environmental Performance Index and green bonus – Commission on Centre-States relations
Symptomatic of shifts in power in the federal system
Is it here to stay? Likely…..
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Diversion of forest land since 1980
Source: Centre for Science and Environment, 2011
But, can it address this? Unlikely……..
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Thank you
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Spatiality of trade-offs