State Finance Commissions

The state finance commissions were added by 73rd amendment act. They have been enshrined in article 243-I and 243-Y in Part IX A and IX B.

• They are constituted by Governor every five years.
• Primary concern is to suggest ways and means to strengthen the institutions of local governance viz. PRIs and ULBs
• They recommend principles and methodology as regards the devolution of funds to PRI’s and ULB’s.
• The recommendations of the state finance commissions include:
• The distribution between the State and the local bodies of the net proceeds of the taxes, duties, tolls and fees leviable by the State.
• Determination of the taxes, duties, tolls and fees levied or appropriated by the local bodies
• The grants-in-aid to the local bodies from the Consolidated Fund of the State
• Measures needed to improve the financial position of the local bodies
• Any other matter referred to the Finance Commission by the Governor in the interests of sound finance of the local bodies.

The Governor is required to cause every recommendation made by the State Finance Commission together with an explanatory memorandum as to the action taken thereon to be laid before the Legislature of the State.