Global Economy

Centre should start incentive scheme for states to mobilise resources at local level: Niti Aayog VC

The central government should come up with an incentive scheme on the recommendation of the Finance Commission for states to mobilise resources at the local level, Niti Aayog vice chairman Suman Bery said on Friday. Addressing the captains of the Indian industry at a CII Annual Business Summit, Bery said there is not enough pressure on either cities or states to generate non-tax revenue.

“So, how do we construct an incentive structure through the Finance Commission otherwise, so that, as it were, there is more incentive for states to mobilise resources at the local level,” he said.

Also, noting that a lot of fiscal resources will be needed for climate financing, Bery said domestic resource mobilisation will be more for mitigation, while adaptation will require private finance.

“There is a large demand that is going to be made on fiscal resources at a time when tax revenues are themselves going to be affected by decarbonisation as a large part of our revenues, at both the state and the centre level, comes from fossil fuel taxes,” he said.

“So, resource mobilisation is implicitly about mitigation while private finance is needed for adaptation,” Bery added.

Citing the success of the Jan Dhan scheme, Bery said that it should be possible to move away from subsidies to direct payments. “It will clean up the subsidy side of the government to create fiscal space for some of the new requirements,” he said. Bery highlighted that climate finance is both about addressing mitigation as well as adaptation needs.

He also suggested that clean technology projects could be bundled together, along with capital from various sources, to bring in greater private sector participation.

Speaking at the event, 15th Finance Commission NK Singh said it is important to recognise what makes private capital reticent and what can be done to minimise and mitigate the risks, including regulatory risks so that they can contribute to climate finance.

Singh noted that multilateral development banks have a long way to go to improve their processes to address the daunting challenge of meeting the financing needs required for an orderly climate transition.


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