Question

Consider the following statements about the State Finance Commission:

i. It is constituted under Articles 243-I and 243-Y of the Constitution.

ii. It has the powers of a civil court for summoning witnesses and requisitioning documents.

iii. Its members are appointed by the President of India.

Which of the statements given above is/are correct?

• A. i and ii only
• B. i and iii only
• C. ii and iii only
• D. All of the above

Answer 1

Answer:

A. i and ii only

State Finance Commission

• Constitutional Mandate: The State Finance Commission (SFC) is a constitutional body established under Articles 243-I and 243-Y of the Indian Constitution. These articles were added by the 73rd and 74th Constitutional Amendments in 1992, which aimed to strengthen local self-government.

  • Article 243-I deals with the constitution of Finance Commissions of a State to review financial position of Panchayats.

  • Article 243-Y deals with the constitution of Finance Commissions of a State to review financial position of Municipalities.

• Composition and Appointment:

  • The Chairperson and members of the SFC are appointed by the Governor of the State, not the President of India. This is a crucial distinction for exam purposes.

  • The qualifications and method of selection are determined by the State Legislature by law.

• Functions of the SFC: The primary role of the SFC is to review the financial position of Panchayats and Municipalities and recommend measures to augment the Consolidated Fund of the State to supplement the resources of the local bodies.

  • It makes recommendations on the distribution between the State and the local bodies of the net proceeds of taxes, duties, tolls, and fees leviable by the State.

  • It suggests the principles that should govern grants-in-aid to local bodies from the State's Consolidated Fund.

  • It also recommends measures to improve the financial position of local bodies.

• Powers: The SFC is vested with certain powers to effectively discharge its duties.

  • It has the powers of a civil court while summoning witnesses, examining them on oath, and requiring the production of any public record or other document. This judicial-like power aids in thorough investigation.

• Reporting: The SFC submits its report to the Governor of the State, who then causes it to be laid before the State Legislature along with an explanatory memorandum on the action taken on the recommendations.

• Frequency: An SFC is constituted every five years.