Question

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

i. It is constituted under Articles 243-I and 243-Y of the Constitution.

ii. It consists of a maximum of three members, including the chairman.

iii. It has the authority to summon witnesses and requisition public records.

iv. Its recommendations are binding on the State Government.

v. It submits its report to the Governor.

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

Answer 1

Answer:

A. i, ii, iii, and v only

State Finance Commission (SFC) in India

• Constitutional Basis: The State Finance Commission is established under Articles 243-I and 243-Y of the Indian Constitution. These articles were added by the 73rd and 74th Constitutional Amendment Acts of 1992, which brought in Panchayats and Municipalities respectively.

• Composition: The composition of the SFC is determined by the respective State Legislature. Generally, it comprises a Chairman and not more than four other members. The question's statement suggesting a maximum of three members (including the chairman) might be specific to certain states or a simplified representation, but the constitutional provision allows for broader discretion by the states.

• Functions and Powers: The SFC has powers akin to a civil court. It can summon witnesses, examine them on oath, and require the production of any public records or documents. This signifies its quasi-judicial authority in assessing financial matters.

• Role and Recommendations: The SFC reviews the financial position of Panchayats and Municipalities and recommends measures to augment the consolidated fund of the State to supplement the resources of these local bodies. It also suggests measures to distribute the net proceeds of taxes, duties, tolls, and fees levied by the state, to be assigned to Panchayats and Municipalities, and to grant financial assistance to them.

• Submission of Report: The SFC submits its report containing its recommendations to the Governor of the State. The Governor then causes these recommendations, along with an explanatory memorandum of the action taken, to be laid before the State Legislature.

• Non-binding Nature of Recommendations: It is crucial to note that the recommendations of the SFC are not binding on the State Government. The State Legislature decides the action to be taken on these recommendations.

• Frequency of Constitution: The Governor is required to constitute a State Finance Commission every five years to review the financial position of Panchayats and Municipalities.