|Topic: GS3 – Environment- Conservations
This analysis provides a comprehensive understanding of the intersection between fiscal policies, environmental conservation, and climate resilience, making it highly relevant for UPSC for both the prelims and mains examinations.
- Although the needs for state revenues and expenditures are directly impacted by forest protection, there may be significant and often prohibitive opportunity costs involved.
- The Finance Commission (FC), which is in charge of overseeing fiscal federalism, is crucial to striking this careful balance.
- Over various FC terms, incentives and resources have been offered to states to encourage the maintenance and improvement of their forest cover.
- There was a shift in the financial assistance for forestry between the 12th and the 15th Finance Commissions.
- 10% of the 15th FC’s divisible central tax pool was set aside for forest protection, up from Rs 1,000 crore in the 12th FC.
- The fifteenth FC established the largest Payment for Ecosystem Services (PES) scheme globally by allocating more over Rs 4.5 lakh crore, taking into account both density and forest cover.
- The 16th FC’s assumption of power coincides with India’s adherence to the Paris Agreement at a pivotal moment.
- By 2030, India wants to cut its greenhouse gas emissions by 33–35% and contribute another 2.5–3 billion tonnes of CO2 to the atmosphere.
- The Commission bears the ability to determine tax distribution principles for 2026-31, consequently influencing the performance of national projects like the National Carbon Market and National Green Credit Market.
- The inclusion of state emission intensity and climate sensitivity in the tax devolution formula can be a crucial function of the 16th FC.
- The Commission will then be able to coordinate state initiatives with India’s NDCs, or nationally determined contributions, as per the Paris Agreement.
- India’s preparedness for climate change can also be strengthened by looking into performance-based grants for industries that are essential to reaching NDCs and SDGs, such as clean energy, creative ways to burn crops, and mangrove restoration.
- By utilising data from remote sensing, pollutant inventories, and scientific studies, the 16th FC can create a budget allocation mechanism that is based on performance.
- A sophisticated budgetary plan that balances environmental requirements with economic growth can be informed by knowledge of the degree of climate sensitivity in various areas and ongoing monitoring of mitigation initiatives.
- The 16th FC is in a unique position to become an orchestrator of India’s climate preparation, rather than just a traditional fiscal arbitrator.
- Acting as a vital institutional tool, the Commission can ensure India’s resilience to the challenges posed by a changing climate by providing a budgetary roadmap that balances economic growth with environmental imperatives.
|Practice Question: Discuss the evolving role of fiscal federalism in India, with a specific focus on the Finance Commission’s contributions to climate resilience. (150 words/10 m)