Question

Consider the following statements regarding the composition of the State Finance Commission:

1. The Commission shall consist of a chairman and a maximum of three other members.

2. The state government determines the number of members in the Commission.

3. The members of the Commission must be appointed on a full-time basis.

4. One member must have experience in public administration or local administration.

Which of the statements given above are correct?

• A. 1 and 3 only
• B. 2 and 4 only
• C. 1, 2 and 4 only
• D. All of the above

Answer 1

Answer:

B. 2 and 4 only

State Finance Commission (SFC)

• The State Finance Commission is a constitutional body established by the Governor of a state under Article 243-I of the Constitution of India.

• Article 243-I mandates the establishment of a State Finance Commission to review the financial position of Panchayats and Municipalities and to make recommendations to the Governor.

• The composition of the State Finance Commission is determined by the State Legislature, not by the state government. This means the number of members and their qualifications are decided by the respective state's legislative assembly or council.

• The SFC shall consist of a Chairman and not more than four other members. This contradicts statement 1 which mentions a maximum of three other members.

• The members of the Commission are appointed by the Governor of the state.

• The qualifications of the members, including the Chairman, are determined by the state legislature. There is no mandatory requirement for all members to be appointed on a full-time basis; some can be part-time members. This makes statement 3 incorrect.

• A common requirement stipulated by state legislations is that at least one member should have experience in public administration or local administration. This aligns with statement 4.

• Key Functions of SFC:

  • Distribution of net proceeds of taxes, duties, tolls, and fees leviable by the state between the state and the Panchayats/Municipalities.

  • Assignment of taxes, duties, tolls, and fees leviable by the Panchayats/Municipalities to these bodies.

  • Grants-in-aid to Panchayats/Municipalities.

  • Measures to improve the financial position of Panchayats/Municipalities.

• The recommendations made by the State Finance Commission are generally advisory in nature and are laid before the State Legislature. The state government decides the extent to which these recommendations are to be implemented.