Editorial 1 : The Union government’s rein on financial transfers to different States
Context
The Union government not only reduced the financial transfers to States but also increased its own total revenue to increase its discretionary expenditure.
Some basic math on tax revenue
- The Finance Commissions recommend the States’ share in the net tax revenue of the Union government.
- The difference between the gross and the net tax revenue includes collection costs, tax revenue to be assigned to Union territories, and cess and surcharges.
- Though the Fourteenth and Fifteenth Finance Commissions recommended 42% and 41%, respectively, of the net tax revenue to be the shares of States, the share of the gross tax revenue was just 35% in 2015-16 and 30% in 2023-24 (Budget Estimate).
- While the gross tax revenue of the Union government increased from ₹14.6 lakh crore in 2015-16 to ₹33.6 lakh crore in 2023-24, the States’ share in the Union tax revenue increased from ₹5.1 lakh crore to ₹10.2 lakh crore between these two years.
- In other words, the gross tax revenue of the Union government more than doubled while the share of States just doubled.
- Grants-in-aid to States is another statutory grant recommended by the Finance Commission.
- The grants-in-aid to States declined in absolute amount from ₹1.95 lakh crore in 2015-16 to ₹1.65 lakh crore in 2023-24.
- Thus, the combined share of the statutory financial transfers in the gross tax revenue of the Union government declined from 48.2% to 35.32%.
The reasons
- One of the reasons for the States’ share in gross revenue declining during this period is that the net tax revenue is arrived at after deducting the revenue collections under cess and surcharge, revenue collections from Union Territories, and tax administration expenditure.
- Among the three factors, revenue collection through cess and surcharge is the highest and increasing.
- The cess and surcharge collection in 2015-16 was 5.9% of the gross tax revenue of the Union government, and this ratio increased to 10.8% in 2023-24.
- This calculation is excluding the Goods and Services Tax (GST) cess that is collected to compensate for the revenue loss of the States due to implementation of GST till June 2022.
- The Union government is increasing tax collection under cess and surcharge categories mainly to implement its own schemes in specific sectors, and at the same time, the revenues so raised need not be shared with the States.
More centralisation of public expenditure
- When the financial transfers to States either as tax devolution or grants-in-aid decline on the one hand, or do not increase at least proportionately to increase in gross revenue of the Union government on the other, the resultant effect is the availability of larger discretionary funds for the Union government to spend.
- This could affect the equity in distribution of financial resources among States.
- The Union government has two other routes of direct financial transfers to States, that is, Centrally Sponsored Schemes (CSS) and Central Sector Schemes (CSec Schemes).
- The Union government influences the priorities of the States through CSS wherein the Union government provides partial funding and another part is to be committed by States.
- In other words, the Union government proposes the schemes and States implement them, committing their financial resources as well.
- An important aspect of CSS shared schemes is that the States that can afford to commit matching finances from the State budgets alone can avail of the matching grants.
- This creates two different effects in terms of inter-State equity in public finances.
- Wealthy States can afford to commit equivalent finances and leverage Union finances inwards through the implementation of CSS.
- Less wealthy States will have to commit their borrowed finances in these CSS, thus increasing their own liabilities.
- These differential trajectories of the public finances of States accentuate inter-State inequality in public finances, the major reason being CSS.
- The CSec Schemes are fully funded by the Union government in sectors where the Union government has exclusive legislative or institutional controls.
- The Union government allocates a larger share of the finances to CSec Schemes.
- It is quite likely that the Union government can allocate financial resources with a motive to benefit specific States or constituencies through the CSec Schemes.
Scope for anti-federal fiscal policies
- The financial transfers through CSS and CSec Schemes are non-statutory transfers as they are based on neither any legal provisions nor any formula determined by the Finance Commission.
- This non-statutory grant forms 12.6% of gross tax revenue. Together with statutory grants, the total financial transfers as a proportion to gross tax revenue were only 47.9% in 2023-24.
- Further, the non-statutory grants are tied grants, that is, they have to be spent on specific schemes for which the grants are allocated.
- This reduces the freedom of States in conducting public expenditure.
- In addition to retaining more than 50% of gross tax revenue, the Union government incurs a fiscal deficit to the extent of 5.9% of GDP.
- Thus, the Union government wields enormous financial powers with limited expenditure responsibilities.
Way forward
Further, the Fifteenth Finance Commission noted that the Union government had argued for the downward revision of States’ share in Union tax revenue from 42% and the Commission retained the share at 41%. Citing higher expenditure commitments, the Union government may repeat the argument before the Sixteenth Finance Commission. So much for cooperative federalism!
Editorial 2 : Scientists find that a bacteria tricked a wasp to get rid of its males
Context
A hundred years ago, two American researchers named Marshall Hertig and Simeon Burt Wolbach discovered that mosquitoes harboured bacteria within their cells. Other researchers later found similar bacteria in the cells of most insects and many other arthropods. The genus to which the bacteria belonged was named Wolbachia.
The bacteria
- Wolbachia bacteria are also present in insect eggs, but they are absent in the sperm.
- This means females can transmit Wolbachia to their offspring, whereas males can’t — from the bacteria’s point of view, an evolutionary dead end.
- As a result, Wolbachia have evolved ways to manipulate their insect hosts to produce more female than male progeny.
- A new study reports that the bacteria may have taken it a bit too far this time as Researchers from China, published a paper showing that Wolbachia bacteria had manipulated the wasp Encarsia formosa to entirely get rid of its males.
The farmer-friendly Amazon
- E. formosa wasps are of interest to agricultural scientists because they provide an efficient way to control whiteflies.
- Whiteflies feed on the sap of plant leaves, causing productivity losses, and are thus a major agricultural pest.
- Whiteflies belong to the insect order Hemiptera, whereas wasps belong to the insect order Hymenoptera.
- The wasp seeks out the nymphs (or larvae) of whiteflies and lays its eggs on them. When the eggs hatch, the larvae that emerge penetrate the nymph, feed on its tissues, grow to adulthood, and in the process kill the nymph.
- The progeny wasps emerge from the nymph’s carcass. As a parasitoid of whiteflies, the female wasp is in effect a search and destroy weapon. The male wasps are superfluous in this role.
Doubling up with Wolbachia
- Generally, among hymenopterans such as ants, bees, and wasps, the eggs fertilised by sperm cells develop into females, while unfertilised eggs develop into males.
- The males contain only one set of chromosomes, derived from the egg, and are thus said to be haploid. In contrast, the females are diploid because they contain two sets of chromosomes: one set derived from the egg and the other from the sperm.
- The females use a specialised form of cell division called meiosis to transmit only one set of chromosomes to their eggs, while the males transmit their single chromosome set to all of their sperm by the more general cell-division process called mitosis. This, in a nutshell, is how haplo-diploid sex determination works.
- In the laboratory, however, they found that if the female wasp was treated with an antibiotic (usually tetracycline), almost 70% of the progeny were male.
- They are easy to identify with the eye. The females are tiny — about 0.6mm long — and are black with a yellow abdomen; the males are only slightly larger but completely black.
- The reason for this was that antibiotic treatment reduced the titre, or concentration, of the Wolbachia bacteria. As a result, the chromosome number remained undoubled and the eggs developed into males.
- That is, normal titres of Wolbachia bacteria could induce unfertilised eggs to somehow double the chromosome number and enable the development of female wasps.
A coleoptera gene to the rescue
- A gene named tra has an evolutionarily conserved role in promoting female development in insects.
- That is, if the tra gene mutates, cells won’t be able to make a functional Tra protein, and progeny development proceeds along the default mode towards male production.
- The China researchers found that the tra gene in the E. formosa genome was missing some ‘pieces’ important for its function.
- The researchers found the genome of the wasp’s Wolbachia bacteria contained a functional version of tra.
- Ordinarily, bacteria don’t have any reason to possess a tra gene. But the wasp’s Wolbachia acquired one from a distantly related insect, one belonging to the order coleoptera, which includes beetles. That is, the bacteria had acquired the gene through horizontal gene transfer.
- Having lost its own tra gene, the E.formosa wasps had to rely on their Wolbachia’s tra gene to allow their eggs to develop into females.
- This is the first example of a bacterium using a horizontally transferred gene to manipulate female production in an insect.
No males, no species
- The males produced by the SAU researchers after antibiotic treatment didn’t mate with females and didn’t inseminate them.
- This could be because the males were absent from E.formosa populations for so long that they have now lost their ability to mate.
- An alternative possibility is that the inability to mate was an unintended consequence of antibiotic treatment.
Conclusion
The Wolbachia bacteria were shown to be smart enough to double the chromosome number in their host’s unfertilised eggs and to supply them with tra. But are they also smart enough to occasionally allow a few males to emerge and enable sexual exchange and thus delay their own extinction? That remains to be known.
