8th May, 2025

AAP makes submissions before 16th Central Finance Commission; calls for a more equitable and responsive fiscal framework

Being a responsible national political party, the Aam Aadmi Party led by Preeti Sharma Menon, National Executive member and Mumbai President Preeti Sharma Menon made submissions before the 16th Central Finance Commission, as part of their ongoing visit to Maharashtra. She was accompanied by Vice-Admiral (Retd) IC Rao.

“AAP respectfully submits these recommendations to foster a more equitable and responsive fiscal
framework. From increasing the States’ share of tax revenues to ensuring politically neutral disbursements
and supporting climate and disaster resilience, these steps are essential to strengthen India’s federal
structure and empower States to serve their people effectively. We hope the 16th Finance commission, will take our recommendations seriously and implement the same.”, said Preeti Sharma Menon, National Executive Member, Aam Aadmi Party.

1. Increase in Vertical Devolution from 41% to 50%
The vertical devolution of Central Tax Revenues, fixed by the Fifteenth Finance Commission at 41%, should
now be increased to 50%. This is justified by:
• The increased fiscal burden on States to deliver welfare schemes for weaker sections
• The widening income and development disparities resulting from central policies
Enhanced devolution will better equip States to fulfil their growing responsibilities in key sectors such as
health, education, and social welfare.
2. Inclusion of Cesses and Surcharges in the Divisible Pool
Cesses and surcharges have become a growing share of Central Government revenues, yet remain
excluded from the divisible pool, which violates the spirit of fiscal federalism. AAP strongly recommends
that:
• All cesses and surcharges be included in the divisible pool, ensuring fair revenue sharing with
States.
This will restore financial balance and transparency in Centre-State fiscal relations.
3. Equity in Disbursement of Central Funds
Disbursement delays based on political differences between Centre and State governments have been
observed and must be addressed. The Finance Commission should:
• Recommend a uniform, transparent disbursement schedule for all States, regardless of political
alignment
Such guidelines will reinforce trust in federal institutions and prevent discrimination in financial flows.
4. Climate Action Fund for Eco sensitive States like Maharashtra
States with ecologically vulnerable geographies, such as Maharashtra—with over 720 km of coastline—
face compounded climate risks, including:
• Coastal erosion
• Saline intrusion
• Flooding due to rising sea levels
• Increased frequency of cyclones

Data from the Indian National Centre for Ocean Information Services (INCOIS) reveals that more than 40%
of Maharashtra’s coastline is eroding. These challenges demand targeted and sustained financial support.
AAP proposes the establishment of a dedicated Climate Action Fund under the Finance Commission’s
framework. Allocations should be based on criteria including coastline length, climate vulnerability, forest
cover loss, and exposure to natural disasters. The fund should support both:
• Mitigation efforts (e.g., renewable energy, green infrastructure), and
• Adaptation strategies (e.g., mangrove restoration, sea walls, resilient agriculture)
This fund would enable States like Maharashtra to proactively address climate risks and protect vulnerable
communities.
5. Drought and Flood Relief as a Core Disaster Management Allocation
Maharashtra suffers from recurring drought in Marathwada and Vidarbha and frequent flooding in
Konkan and Western Maharashtra.
• Marathwada and Vidarbha regions—notably Beed, Osmanabad, and Latur—are perennially
drought-affected. In 2019, 151 talukas were declared drought-hit.
• Konkan and Western Maharashtra—including Raigad, Ratnagiri, Kolhapur, and Sangli—are prone
to severe monsoon flooding. The 2021 floods impacted over 400,000 people in Kolhapur and
Sangli alone.
These events cause severe agricultural and human distress.
AAP recommends:
• A dedicated Drought and Flood Relief fund for rapid response
• Investment in long-term resilience infrastructure
• District-level risk assessments to guide funding priorities

The Aam Aadmi Party notes with concern that the tenure of the 16th Finance Commission ends on 31
October 2025, yet consultations with political parties are being held toward the end of the Commission’s
term. This limits the time available for discussion, deliberation, and incorporation of recommendations.
We urge that the Finance Commission recommend to the 17th Finance Commission that consultations
with political stakeholders be conducted early in the Commission’s tenure, to enable more meaningful participation and impact.