Question

Which of the following statements are correct about the State Finance Commission’s procedures?

1. The Commission determines its own procedures for conducting business.

2. The Commission submits its report to the Governor, who presents it to the state legislative assembly.

3. The Commission can appoint an unlimited number of members.

• A. 1 and 2
• B. 1 and 3
• C. 2 and 3
• D. All are correct

Answer 1

Answer:

A. 1 and 2

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 Central Finance Commission but deals with the financial matters of the states.

• Independence in Procedures:

  • The SFC has the autonomy to decide its own procedures for conducting its business. This includes how it will gather information, conduct hearings, and analyze data.

  • This procedural flexibility allows the Commission to tailor its approach to the specific needs and context of the state it serves.

• Reporting Mechanism:

  • Upon completion of its work, the SFC submits its report to the Governor of the state.

  • The Governor then lays the report, along with an explanatory memorandum on the action taken, before the State Legislative Assembly.

  • This process ensures transparency and accountability in the state's fiscal management.

• Composition of the Commission:

  • Unlike some other bodies, the SFC does not have a fixed number of members. The strength of the Commission is determined by the state legislature.

  • Generally, a State Finance Commission consists of a Chairman and four other members. However, the exact number and qualifications can vary from state to state.

  • The Finance Commission acts as an advisory body to the state government on financial matters.

• Key Role in Decentralization: The SFC plays a crucial role in strengthening the financial autonomy of Panchayats and Municipalities, thereby promoting fiscal decentralization in the country. It recommends the distribution of net proceeds of taxes, duties, tolls, and fees leviable by the state between the state and its Panchayats and Municipalit