Question

Consider the following statements regarding the features of the State Finance Commission's report:

1. The report is submitted to the Chief Minister for review before being sent to the Governor.

2. The report, when tabled in the legislature, must be accompanied by a document explaining the government's action on it.

Which of the statements given above is/are correct?

• A. 1 only
• B. 2 only
• C. Both 1 and 2
• D. Neither 1 nor 2

Answer 1

Answer:

B. 2 only

State Finance Commission (SFC) and its Report

• The State Finance Commission is a constitutional body established under Article 243-I of the Constitution of India.
• Its primary role is to review the financial position of Panchayats and Municipalities and recommend principles for distribution of taxes, duties, tolls, and fees between the State and the local bodies.
• Article 243-I also mandates the Governor to constitute a Finance Commission to review the financial position of Panchayats. Similarly, Article 243-Y extends this provision to Municipalities.
• The SFC submits its report to the Governor of the state, not the Chief Minister.
• The Governor then causes the report to be laid before the State Legislature.
• Along with the report, the Governor must also place an explanatory memorandum before the State Legislature.
• This memorandum should contain the *action taken* by the State Government on the recommendations made by the SFC.
• It should also explain the reasons for the *rejection* of any recommendations, if any.
• This ensures transparency and accountability in the fiscal decentralization process.
• The SFC's recommendations are generally advisory in nature, but the government's response to them, presented to the legislature, is a crucial step in their implementation or rejection.