Manas Dasgupta
NEW DELHI, Dec 31: The Centre on Sunday appointed former Niti Aayog vice chairman and Columbia University professor Arvind Panagariya as the chairman of the Sixteenth Finance Commission, which will recommend the tax revenue sharing formula between the Centre and the States for the five-year period beginning April, 2026.
The Finance Ministry on Sunday notified President Droupadi Murmu’s order appointing Indian-born US-educated economist Mr Panagariya’s as the chief of the critical Constitutional body, whose terms of reference were approved by the Cabinet on November 29. Mr Panagariya is a trade economist who had served as the first vice chairman of the Niti Aayog, which replaced the erstwhile Planning Commission, from 2015 to 2017.
Every five years, the government sets up a Finance Commission to suggest the formula for sharing of taxes between the union and state governments, and make recommendations on public finances. Presently, the Centre shares 42% of federal taxes with states. “The Commission shall make its report available by October 31, 2025 covering a period of five years commencing on the 1st day of April, 2026,” the government order said.
The names of the other members of the Commission will be notified separately, as per the order, which also appointed Ritvik Ranjanam Pandey, who was earlier a joint secretary in the Department of Revenue, as the panel’s secretary.
“The Chairman and other members of the Commission shall hold office from the date on which they respectively assume office up to the date of the submission of report or October 31, 2025, whichever is earlier,” the order specified.
October 2025 is the deadline set for the Commission to submit its recommendations, so that they can be incorporated in the Budget exercise for 2026-27. The Finance Commission usually takes about two years to consult stakeholders in the States and Centre and arrive at their conclusions.
While the Fifteenth Finance Commission was constituted in November 2017, under the chairmanship of NK Singh, its terms of reference were tweaked and its tenure was expanded to six years in late 2019. The panel was mandated to submit two reports, a first report for 2020-21 and a final report for an extended period of 2021-22 to 2025-26.
As per the terms of reference of the Sixteenth Finance Commission, apart from recommendations on the tax sharing formula between the Centre and the States, it has been tasked with reviewing the present arrangements for financing Disaster Management initiatives and mooting measures to augment States’ consolidated funds in order to supplement resources available with Panchayats and Municipalities.