Bhubaneswar: Based on the Sixteenth Finance Commission (SFC) report, the benefits for Odisha are distributed across various sectors and governance levels through a formula that prioritizes regional equity and fiscal stability. The commission’s framework ensures that the state receives support tailored to its specific developmental and administrative needs.
The following details outline the areas and sectors in Odisha that stand to benefit from the SFC recommendations:
Odisha will receive significant funding directed toward its third tier of government, which includes both Rural Local Bodies (RLBs) and Urban Local Bodies (ULBs). The commission has continued the practice of providing grants to these entities to ensure that essential services reach the grassroots level. These funds are intended to support critical local infrastructure such as water supply, sanitation, and waste management. By providing both tied and untied grants, the SFC allows Odisha’s local governments the flexibility to address specific community needs while ensuring national priorities in health and hygiene are met.
The SFC has introduced a revised forest criterion that specifically rewards states for maintaining and increasing their forest cover. Odisha, which possesses significant forest tracts, benefits from the inclusion of open forest areas alongside moderately and very dense forests in the devolution formula. The commission has also introduced a small reward for any increase in weighted forest area over a base period, providing a financial incentive for Odisha to continue its environmental conservation efforts and manage its natural resources sustainably.
The state benefits from the commission’s focus on macro and fiscal stability, which encourages a path toward consolidating finances to create fiscal space for development spending. The SFC recognizes the importance of capital expenditure for long-term growth and provides a framework that supports states in managing their debt-to-GSDP ratios. This is particularly relevant for Odisha, as the commission noted an increase in subsidies in the state both in absolute terms and as a proportion of its GSDP. The SFC’s recommendations on rationalizing these subsidies and improving the targeting of beneficiaries are designed to help the state government redirect funds toward more productive capital investments.
Odisha benefits from the area criterion in the horizontal devolution formula, which compensates states for the higher costs associated with providing public services across large or difficult terrains. This ensures that the state has the necessary resources to maintain administrative efficiency and service delivery even in its more remote or less densely populated regions.
The state remains eligible for ongoing support systems such as the Special Assistance to States for Capital Investment (SASCI), which provides long-term, interest-free loans for capital projects. These resources are vital for Odisha to build and modernize its transportation networks, industrial hubs, and social infrastructure, thereby supporting its overall contribution to the national economy.