The government has asked the Twelfth Finance Commission to work out norms for distribution of non-tax revenue among states. At present, states receive only 29.5 per cent of the Centre's tax receipts.

The sharing of the Centre's non-tax revenue could improve states' fiscal positions. The Centre's non-tax revenue for 2003-04 is budgeted at Rs 69,766 crore (Rs 697.66 billion), which is almost 16 per cent of the total budgeted receipts of the government.

In a notification issued recently, the finance ministry added this point to the commission's terms of reference.

Sizeable kitty
	Non-tax revenue (Rs crore)	Non-tax revenue as percentage of total receipts
'01-02	67,787	18.7
'02-03*	72,759	18.0
'03-04**	69,766	15.9
* Revised estimates ** Budget estimates

Hitherto, finance commissions recommended a methodology for devolving central tax revenue, comprising income tax, corporation tax and Customs and excise duties, among states. The non-tax revenue was devolved in an ad-hoc manner.

The rising importance of non-tax revenue, especially from the hydrocarbon sector, has been pointed out as the reason for devising a specific formula to share them with states.

The government is expected to realise Rs 1,500 crore (Rs 15 billion) this fiscal as profit petroleum, against Rs 993 crore (Rs 9.93 billion) during 2002-03 and Rs 624 crore (Rs 6.24 billion) in 2001-02.

Profit petroleum is the share of profits realised by the government from private firms through sale of crude or natural gas.

The prominent fields operated by private players include the Ravva, Panna, Mukta and Tapti oil and gas fields. This amount was expected to swell in the next 4-5 years, underlining the need to develop a sharing formula, said officials.

The commission's report, covering five years from April 1, 2005, has to be submitted by July 31, 2004.

The Eleventh Finance Commission had given a 62.5 per cent weight to income, 10 per cent to population, 7.5 per cent each to area and index of infrastructure and 5 per cent to tax effort, while arriving at the devolution formula.

Fiscal discipline was given a weight of 7.5 per cent. The commission had suggested a limit of 37 per cent of the central revenue for devolution.

The Twelfth Finance Commission's terms of reference make special mention of the need to ensure debt reduction along with equitable growth.

It will have to review the fiscal reform facility introduced by the Centre on the basis of the recommendations of the Eleventh Finance Commission.

It will also be required to make an assessment of the debt position of states and suggest corrective measures consistent with macroeconomic stability and debt sustainability.

These corrective measures will be required to assign weights to the performance of states in human development and investment.