Mizoram, a state heavily reliant on grants and tax-sharing from the central government, recently welcomed the 16th Finance Commission, led by Chairman Dr. Arvind Panagariya and members Ajay Narayan Jha, Annie George Mathew, and Dr. Manoj Panda.
Their visit, which marks the Commission’s 19th stop on its national tour, carries significant implications for Mizoram’s financial future, with the state’s reliance on central funding making this assessment critical for the years to come.
A Deep Dependence on Central Grants
Mizoram’s financial health is closely intertwined with the grants and shared taxes from the government of India. Under the 15th Finance Commission, the state received 42% of its revenue receipts through Central grants, another 42% from tax-sharing, and a smaller 16% from locally generated revenue. This structure highlights the state’s deep dependence on external support for maintaining its financial stability and development. In the current term (2021-2026), Mizoram has been allocated Rs 6,544 crore in Post Devolution Revenue Deficit Grants (PDRDG), along with additional allocations for local bodies, disaster management, and the health sector, which together amount to Rs 7,631 crore.
During the 15th Finance Commission’s tenure, Mizoram’s allocation for local bodies alone was Rs 713 crore, with Rs 259 crore designated for disaster management and Rs 115 crore for health sector grants. The Fifteenth Finance Commission had recommended states’ share in the
divisible pool of taxes at 41% out of which 0.5% is the share of Mizoram.
The Road to Recovery: Preparing for the Visit
Mizoram’s preparations for the 16th Finance Commission’s visit have been months in the making. In November 2024, Chief Minister Lalduhoma, who also holds the Finance portfolio, led a high-level meeting to fine-tune the state’s proposals. These proposals focus on increasing state-specific grants and implementing more robust financial strategies to help Mizoram overcome its unique challenges.
An economic evaluation report prepared by James LT Thanga of Mizoram University also sheds light on the state’s growing reliance on central transfers. Between 2018 and 2023, revenue transfers from the centre have grown at impressive rates, yet there is still a pressing need for sustainable local revenue generation. The report highlighted the state’s commendable growth in its tax revenue, particularly through the state excise following the MLPC Act of 2014, which allowed liquor sales.
Governor’s Concerns: A Call for Special Consideration
The Governor of Mizoram, Gen (Dr) Vijay Kumar Singh, met with the Finance Commission delegation on February 23rd, urging them to acknowledge the state’s financial limitations, which stem from its low revenue collection and ongoing development challenges. He emphasized that Mizoram’s hilly terrain creates significant hurdles for infrastructure development and resource mobilization. The Governor also brought attention to issues arising from conflicts in neighbouring regions, which have caused an influx of refugees, further straining the state’s resources.
Additionally, the Governor highlighted the alarming rise in drug trafficking throughout the state and called for increased efforts to enhance law and order. He also underscored the importance of improving the lone airport in Mizoram and creating more employment opportunities for the youth. These concerns resonate deeply with the state’s economic and social realities, making the Commission’s visit a crucial moment for securing much-needed support.
The Chief Minister’s Appeal: Sustainable Development and Special Financial Considerations
On February 24th, the Commission met with Chief Minister Lalduhoma, who provided a detailed account of the state’s unique geographic and economic challenges. With over 84% of Mizoram’s land covered by forests, the Chief Minister stressed the importance of sustainable land use and conservation. He pointed out that despite Mizoram’s high literacy rate, the state’s mountainous terrain, limited industrial development, and high transportation costs continue to impede economic growth.
The Chief Minister also highlighted the state’s ongoing reliance on tax devolution and grants-in-aid, which together account for nearly 83.56% of the state’s total revenue. With ongoing natural disasters, including floods, landslides, and water scarcity, he urged the Commission to take these challenges into account when recommending financial allocations.
Activists Weigh In: Questioning the Focus on Forests
However, not all voices are fully aligned with the state’s approach. Activists have expressed concern that Mizoram’s financial proposals might not be focusing on the right issues. Ruatfela Nu, an activist from the region, raised questions about the state’s prioritization in its discussions with the Finance Commission. “Other states have proposed increasing the percentage weightage for Forest and Ecology in the devolution formula from 10% to 20%. In Mizoram, however, the focus seems to be more on increasing disaster response funds, as evidenced by their visit to the landslide-affected area in Hunthar,” she said.
The weightage assigned to Forest and Ecology in the devolution formula by the 15th Finance Commission is 10%. However, states like Tripura have proposed raising this to 20%, advocating for more funds to address ecological preservation, forest management, and sustainable use of resources.
The Role of Bamboo in Mizoram’s Future
In discussions with the media, Dr Arvind Panagariya advised Mizoram to build up its infrastructure, particularly focusing on the state’s vast bamboo resources, which have an untapped potential for economic development. Mizoram is home to some of the best bamboo species, and Panagariya noted that with proper skill development and entrepreneurial support, the state could become a key player in the global bamboo products market, potentially even replacing China in exports. Despite previous interest from global giants like IKEA in establishing production units in Mizoram, progress has been slow.
Proposals for the 16th Finance Commission
Mizoram has put forward several key proposals to the 16th Finance Commission, including a request to increase its share of divisible pool funds from 41% to 50%. The state also called for a reduction in the weightage assigned to income distance (from 45% to 40%) and an increase in the population-based share (from 15% to 25%). Additionally, Mizoram proposed removing the weightage for tax and fiscal efforts and demographic performance, advocating instead for new criteria such as achievement of Sustainable Development Goals (SDGs), which would account for 7.5% of the allocation and an additional 7.5 per cent based on the cost of essential commodities. Another proposal included increasing untied funds while reducing tied funds to give local bodies more financial autonomy.
The state also requested that major disasters such as landslides, fires, and cloudbursts be officially recognized under the 16th Finance Commission’s disaster response mechanisms. Mizoram has faced significant challenges due to these disasters, with devastating losses recorded between 2013 and 2020, including 68 deaths from landslides and 20 from fires. The recent Cyclone Remal alone caused widespread damage, killing 27 people and damaging several houses.
Mizoram’s lone airport
A journalist raised the question of whether the Finance Commission could make provisions to assist Lengpui Airport, the only state-managed airport in India, which the state is struggling to maintain. The state had revealed plans to hand over the airport to the Indian Air Force (IAF), but this proposal faced strong opposition from local NGOs. In response, the chairman suggested that Mizoram consider a shared operational model for Lengpui Airport, similar to several other airports across the country that operate in coordination with the IAF. He strongly questioned why there was opposition to the involvement of the national military force.
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