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Political Economy of Greening Fiscal Federalism in India

Political Economy of Greening Fiscal Federalism in India. Rohini Chaturvedi 19 September 2013. 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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Political Economy of Greening Fiscal Federalism in India

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  1. Political Economy of Greening Fiscal Federalism in India RohiniChaturvedi 19 September 2013

  2. Structure of Presentation Environment & Development Trade-offs Centre-States negotiations in the Twelfth and Thirteenth Finance Commissions Understanding Greening of Fiscal Federalism

  3. 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?

  4. ‘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

  5. 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

  6. 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)

  7. States’ shares: Twelfth and Thirteenth Finance Commissions

  8. 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’

  9. Shifting Power in the Federal System

  10. Forest Linked Transfers from Centre to States

  11. 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…..

  12. Diversion of forest land since 1980 But, can it address this? Unlikely…….. Source: Centre for Science and Environment, 2011

  13. Thank you

  14. Spatiality of trade-offs

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