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KOHIMA — Chief Minister of Nagaland, Neiphiu Rio addressed the 16th Finance Commission in Kohima on Tuesday, appealing for financial assistance and highlighting the state’s unique socio-political and economic landscape.
He emphasised that the state was established through political negotiations, stemming from the 16 Point Agreement of 1960 and subsequent 1963 Statehood, distinguishing it from other states created for administrative or economic reasons.
During the meeting held at Hotel Vivor, Rio said that the Government of India’s unilateral discontinuation of Balance from Current Revenue (BCR) Gap funding via Additional Central Plan Assistance (ACA) in 1989-90, during the Ninth Finance Commission’s tenure, was a turning point leading to the deterioration of the state’s financial position.
He outlined the impact of decades of armed conflict, though significantly mitigated by ceasefire agreements in 1997 and 2001, and expressed optimism about the relative peace of the last decade.
While acknowledging the generally positive impact of past Finance Commission awards, barring the negative impact of the Thirteenth Finance Commission due to its ‘Normative Approach’, he expressed concern about the decreasing state share of the divisible tax pool due to rising non-shareable cesses and surcharges.
Rio attributed Nagaland’s high government employment rates to past strategies of employing youth to deter them from joining insurgent movements, given the lack of a robust private sector. This includes seven India Reserve (IR) battalions, established with INR 25 crore per battalion from the central government. He also cited the large number of appointments under Centrally Sponsored Schemes (CSS) as contributing to high revenue expenditure.
Assuring that sustained efforts have been made to reduce these expenses, he stressed the need for Revenue Deficit Grants to cover committed expenditure, crucial for stabilising state finances and enabling development.
The chief minister explained that based on past experience with the 13th Finance Commission, if the state’s required spending (committed revenue expenditure) is not fully funded, it triggers a financial crisis that hinders development for years. Adequate funding for these essential expenses, he said, would free up more resources for development initiatives and address local issues not covered by central government programmes (Centrally Sponsored Schemes).
He buttressed this point by highlighting Nagaland’s that the total planned spending (State plan outlay) for 2024-25 is INR 1,010 crore. However, INR 250 crore (almost 25%) is earmarked for matching funds required by CSS, leaving only INR 760 crore for state-led projects and programmes.
He criticised the restrictive nature of CSS guidelines, and urged the commission to consider Nagaland’s unique local challenges and need for greater resources to address its infrastructure deficit.
Key development projects
Highlighting priority projects, Rio emphasised the urgent need for specific infrastructural developments that could transform Nagaland’s economy:
Economic and other development needs
The chief minister also emphasised the need for economic support, noting low capital expenditure in growth sectors like agriculture. He urged for funding to support value-added agricultural activities and organic farming. He highlighted Nagaland’s low Credit-Deposit ratio of 62.25% (compared to the national average of 78.9%) and the need for increased credit access. He also advocated for raising the expenditure cap on Externally Aided Projects.
He also highlighted the introduction of the Chief Minister’s Micro-Finance Initiative, which has disbursed INR 20.38 crore to almost 1,000 beneficiaries. However, indicated that further funding is essential to sustain growth, particularly in agriculture and related sectors.
Rio proposed a total of INR 40,386.5 crore to the Finance Commission to address the state’s infrastructure deficit and promote sustainable development. He highlighted the growth of Nagaland’s tertiary sector, now at 63.57% of the state’s economy, driven by tourism and hospitality with minimal government intervention, and suggested investments in skills and capacity building. He also addressed the state’s dependence on power purchases (90% of requirements) and the need for power sector reforms.
He also underscored the need for policy support in the forestry sector, as Nagaland has 98% of its forests under community or private ownership, given that 98% of Nagaland’s forests are under community or private ownership, including over 4,000 sq. km managed as Community Conserved Areas (CCAs). He urged support for these communities, particularly given the economic impact of conservation restrictions. He also requested INR 7,884.80 crore for maintenance of aging government infrastructure and support for newly elected municipal bodies and Village Councils.
Further, Rio expressed hope for a favourable response from the Finance Commission, recognising Nagaland's unique circumstances and need for targeted support.