New Delhi, Sept. 7 -- Increasingly faced with natural disasters, India's hilly states as well as the border states have urged the 16th Finance Commission to provide extra fiscal room, arguing that rehabilitation costs and the challenges of administering remote terrain demand a more flexible and resilient framework than what the standard funding formula allows, two people familiar with the matter told Mint.

The Finance Commission is tasked with recommending how central tax revenues should be divided between the Centre and the states (vertical devolution), and how that share should be distributed among states (horizontal devolution). The official deadline for its recommendations is 31 October.

In consultations with the Finance Commission ...