Question

Salient features of the State Finance Commission's constitutional framework include:

1. Fixed number of five members.

2. Appointment by the Governor.

3. Eligibility of members for re-appointment.

4. Direct submission of report to the legislature.

Select the correct answer using the code given below:

• A. 1 and 4 only
• B. 2 and 3 only
• C. 1, 2 and 3 only
• D. 2, 3 and 4 only

Answer 1

Answer:

B. 2 and 3 only

State Finance Commission

Constitutional Basis:

• The State Finance Commission (SFC) is a constitutional body established under Article 243-I and Article 243-Y of the Constitution of India.

• It is analogous to the Finance Commission at the Union level (Article 280).

Composition of the State Finance Commission:

• The Constitution does not specify a fixed number of members for the SFC. This composition is determined by the respective State Legislatures.

• The Governor of the State appoints the Chairperson and members of the SFC.

• Members are eligible for re-appointment.

Functions of the State Finance Commission:

• The primary role of the SFC is to review the financial position of Panchayats and Municipalities.

• It makes recommendations to the Governor regarding:

  • The distribution between the State and the local bodies of the net proceeds of taxes, tolls, duties, fees, etc., leviable by the State.

  • The assignment to the local bodies of all or any part of the net proceeds of any State taxes, duties, tolls, etc.

  • Grants-in-aid to the local bodies from the Consolidated Fund of the State.

Reporting Mechanism:

• The SFC submits its report to the Governor of the State.

• The Governor then lays the report, along with an explanatory memorandum of the action taken thereon, before the State Legislature.

Significance for Competitive Exams:

• Understanding the constitutional articles (243-I, 243-Y) related to SFC is crucial.

• Distinguishing between the fixed number of members in the Union Finance Commission (typically five) and the variable number in SFCs is important.

• Recognizing that the SFC's report is submitted to the Governor, not directly to the legislature, is a key point.