UP Seeks 50% Share in Central Taxes: Arvind Panagariya

Uttar Pradesh Seeks 50% Share in Central Taxes, Special Fund for Development Schemes: Arvind Panagariya

By AMIT KUMAR

LUCKNOW, June 4, 2025 – Uttar Pradesh has made a strong case for greater fiscal support from the Centre, demanding a 50% share in central taxes, up from the existing 41%, 16th Finance Commission Chairman Arvind Panagariya said on Wednesday.

Addressing a press conference in Lucknow alongside Commission members, Panagariya revealed that Chief Minister Yogi Adityanath submitted a formal memorandum seeking a revision in the tax devolution formula in favour of Uttar Pradesh. The state also requested a special DDA (Dedicated Development Assistance) fund for targeted development initiatives.

Earlier, Tamil Nadu and Jharkhand Chief Ministers MK Stalin and Hemant Soren had put forth demands for 50% share in Central taxes during the 10^th Governing Council meeting of the Niti Aayog.

The UP government has urged the Commission to alter the weightage of several key devolution criteria. According to Panagariya, the state proposed reducing the weightage for:

• Income Distance from 45% to 30%
• Geographical Area from 15% to 10%
• Demographic Performance from 12.5% to 7.5%
• Forest Cover from 10% to 5%

Simultaneously, it has sought to increase the emphasis on:

• Population from 15% to 22.5%
• Tax Collection Effort from 2.5% to 10%

Panagariya explained that the primary mandate of the Finance Commission is to recommend how taxes should be divided between the Centre and states. These recommendations, once finalised, are submitted to the President of India.

He also shared that the 15th Finance Commission had allocated tax devolution based on parameters like population (15%), area (15%), forest cover (10%), tax effort (2.5%), and demographic performance (12.5%), with income distance receiving the largest share of 45%.

Significantly, Panagariya lauded Uttar Pradesh as a “well-governed state,” highlighting that its tax collection is proportional to its Gross State Domestic Product (GSDP) — the highest among Indian states. He further noted that Uttar Pradesh’s fiscal deficit and debt-to-GDP ratio are within acceptable limits.

“The state has shown fiscal discipline and a strong commitment to reforms,” Panagariya said, adding that the Commission appreciated the reform measures undertaken by the Yogi Adityanath government.

Currently, 41% of the Centre’s tax revenue is devolved to states, with the remaining 59% retained by the Union government. Uttar Pradesh’s demand for a higher share reflects its push for more resources to fund infrastructure, welfare, and development programs tailored to its large and diverse population.

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About The Author

amitkumar

Amit Kumar is a senior Delhi-based journalist with over two decades of reporting experience. His past has been with The Hindustan Times, Mid-Day, and others.

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