Odisha is set to receive a slightly smaller slice of the national revenue pie in terms of percentage, following the latest recommendations from the 16th Finance Commission. The report, which outlines how central taxes are distributed among states for the 2026-27 period, indicates a decline inOdisha central tax share.
According to the details tabled in Parliament by Union Finance Minister Nirmala Sitharaman, the state’s share in the divisible pool has slipped to 4.42 per cent. This marks a reduction from the 4.528 per cent recommendation set by the previous 15th Finance Commission.
Financial Implications for the State
despite the percentage drop, the actual volume of funds flowing into the state treasury remains substantial due to the overall growth of the central tax pool. Odisha is estimated to receive approximately Rs 67,460.46 crore for the upcoming fiscal year.
To put this in perspective, the fund transfer for the 2025-26 period was estimated at Rs 63,073.7 crore based on the older, higher percentage rate. In the fiscal year prior to that (2024-25), the transfer stood at Rs 57,692.24 crore.
Criteria for Allocation
The Commission maintained the overall vertical devolution—the share of taxes states get from the Centre—at 41 per cent. However, the horizontal devolution, which decides how much each specific state gets, has been adjusted based on several factors. The new formula assigns specific weights:
State Demands vs. Reality
Official sources indicate that the final recommendation falls short of what the Odisha government had aggressively campaigned for. Earlier this year, during meetings with the Commission led by Arvind Panagariya in Bhubaneswar, Chief Minister Mohan Charan Majhi made a strong pitch for a hike.
The Chief Minister had requested that the vertical devolution be increased from 41 per cent to 50 per cent. Furthermore, the state had proposed that its specific share be raised to 4.964 per cent to tackle developmental needs.
CM Majhi had outlined a requirement of over Rs 12.59 lakh crore for the 2026-31 period, citing high cess and surcharges levied by the Union government. He specifically sought funds for disaster mitigation, local bodies, and revenue deficit coverage. While the tax share percentage has dipped, officials are now waiting to see if specific grants for state-led programmes and infrastructure projects, such as the requested Rs 41,580 crore for road networks, will be addressed separately.
