Question

Consider the following statements about the State Finance Commission:

1. It reviews the financial position of panchayats and municipalities.

2. The Governor appoints its members.

3. It has the powers of a civil court under the Code of Civil Procedure, 1908.

Which of these statements is/are correct?

• A. 1 and 2
• B. 2 and 3
• C. 1 and 3
• D. 1, 2, and 3

Answer 1

Answer:

D. 1, 2, and 3

State Finance Commission

Constitutional Basis:

• The State Finance Commission (SFC) is a constitutional body established by Article 243-I and Article 243-Y of the Constitution of India.
• These articles were inserted by the 73rd Constitutional Amendment Act, 1992 (for Panchayats) and the 74th Constitutional Amendment Act, 1992 (for Municipalities).

Composition and Appointment:

• The SFC consists of a Chairperson and four other members.
• The Governor of the state appoints the Chairperson and other members.
• The qualifications and selection process for these members are determined by the state legislature.

Functions and Powers:

• The primary function of the SFC is to review the financial position of the Panchayats and Municipalities within the state.
• It makes recommendations to the Governor regarding:
  • The distribution of taxes, duties, tolls, and fees leviable by the state between the state and the Panchayats/Municipalities.
  • The assignment of taxes, duties, tolls, and fees leviable by the Panchayats/Municipalities to them.
  • Grants-in-aid to Panchayats/Municipalities from the Consolidated Fund of the state.
  • Measures needed to improve the financial position of Panchayats/Municipalities.
• The SFC is required to submit its report to the Governor, who then causes it to be laid before the state legislature.
• Powers of Civil Court: The SFC has the powers of a civil court trying a suit under the Code of Civil Procedure, 1908, in respect of certain matters. This includes the power to summon and enforce attendance of any person and examine them on oath, require the discovery and production of any document, and receive evidence on affidavits.

Significance for Competitive Exams:

• Questions often focus on the constitutional articles related to SFC.
• The appointing authority (Governor) is a frequently tested fact.
• The functions, particularly regarding the financial devolution to local bodies, are crucial.
• The powers it wields, similar to a civil court, are also important to remember.
• Understanding the role of SFC in strengthening decentralized governance is key.