Question

Which of the following assertions about the State Finance Commission (SFC) is correct?

i. The SFC is established to supplement the resources of the Central Government based on recommendations from the Central Finance Commission.
ii. The commission consists of a chairman and four other members who may be appointed on a part-time basis.
iii. It has the power to requisition any public record from any office while performing its functions.
iv. The chairman of the first state finance commission of Kerala was Dr. K.N. Harilal.

• A. Only iii
• B. Only i and ii
• C. Only iii and iv
• D. Only ii, iii and iv

Answer 1

Answer:

A. Only iii

State Finance Commission (SFC)

• Constitutional Basis: The State Finance Commission is a constitutional body established under Article 243-I and 243-Y of the Constitution of India. This article mandates the Governor of a State to constitute a Finance Commission.

• Purpose: The primary role of the SFC is to review the financial position of the Panchayats and Municipalities within the state and recommend the distribution of taxes, duties, tolls, and fees levied and collected by the State Government between the State and the Panchayats/Municipalities. It also suggests measures to improve the consolidated fund of the Panchayats/Municipalities.

• Composition: A State Finance Commission typically consists of a Chairman and not more than four other members. The qualifications and selection methods for these members are determined by the State Legislature.

• Powers: While performing its duties, the SFC is vested with certain powers similar to a civil court. This includes the power to:

  • Summon and enforce the attendance of any person.

  • Require any public record from any office to be produced.

  • Conduct inquiries and investigations.

• Distinction from Central Finance Commission: The Central Finance Commission (Article 280) deals with the distribution of central taxes between the Union and the States. The SFC, on the other hand, focuses on the financial relations between the State and its local government bodies (Panchayats and Municipalities). Statement (i) is incorrect as SFCs supplement state resources, not central, and their recommendations are not directly based on the Central Finance Commission's advice.

• Kerala SFC Example: The first State Finance Commission of Kerala was indeed chaired by Dr. K.N. Harilal, highlighting the factual accuracy of such specific details in competitive exam questions. Statement (iv) is factually correct.

• Part-time Appointments: While not explicitly stated in the Constitution, state governments can appoint members on a part-time basis depending on the specific legislation enacted by the state legislature. Statement (ii) is a plausible composition.