2. About Finance Commission
๏ The Finance Commission of India came into
existence in 1951.
๏ It was established under Article 280 of the Indian
Constitution by the President of India.
๏ It was formed to define the financial relations
between the centre and the state.
๏ This has led to major changes in the Finance
Commissionโs recommendations over the years. Till
date, Thirteen Finance Commissions have submitted
their reports.
3. ๏ As per the Constitution, the commission is
appointed every five years.
๏ It consists of a chairman and four other members.
4. GENERAL GUIDELINES
โข
The Finance Commission is being set-up every five years by
Government of India to discharge the mandate laid down in
articles 280 of the constitution to perform the main task of
allocation of the total funds which have been collected by the
Central Govt.
โข
Article 280 of the constitution relates to the allocation of the
expenses by the Central Govt.
5. Why was finance commission
established
๏ The finance commission of India came into existence
in 1951.it was established under article in 280 of Indian
constitution by the president of India. It was formed to
define the financial relations between the centre and
the state. The financial commission act of 1951 states
the terms of qualification, appointed and
disqualification the terms, eligibility and power of the
finance commission.
6. Functions
๏ The distribution between the Union and the States of the net proceeds
of taxes which are to be, or may be, divided between them and the
allocation between the States of the respective shares of such proceeds.
๏ The measures needed to augment the Consolidated Fund of a State to
supplement the resources of the Panchayats in the State on the basis of
the recommendations made by the Finance Commission of the State.
๏ The measures needed to augment the Consolidated Fund of a State to
supplement the resources of the Municipalities in the State on the basis
of the recommendations made by the Finance Commission of the State
7. Qualifications of the members
๏ Should have the qualification as a Judge of High court.
๏ Should have knowledge of Government finances or
accounts.
๏ Have had experience in administration and financial
expertise.
๏ Have special knowledge of economics
8. Powers of the Commission
๏ Has all powers of the civil court as per the Code of
Civil Procedure, 1908.
๏ Can summon and enforce the attendance of any
witness or ask any person to deliver information or
produce a document.
๏ Can ask for the production of any public record or
document from any court or office.
๏ Shall be deemed to be a civil court for purposes of
Sections 480 and 482 of the Code of Criminal
Procedure, 1898
9. Disqualification from being a member of
the Commission
๏ mentally unsound
๏ He has been convicted of an immoral offence
11. How are the recommendations of
Finance Commission implemented?
๏ Those to be implemented by an order of the President
๏ Those to be implemented by executive orders
12. Major Recommendations of 13th Finance
Commission
๏ The share of states in the net proceeds of the shareable
Central taxes should be 32%.This is 1.5% higher than the
recommendation of 12th finance commission
๏ Revenue deficit to be progressively reduced and eliminated,
followed by revenue surplus by 2013-14.
๏ Fiscal deficit to be reduced to 3% of the GDP by 2014-15.
๏ A target of 68% of GDP for the combined debt of centre and
states.
๏ The Medium Term Fiscal Plan(MTFP)should be reformed
and made the statement of commitment rather than a
statement of intent.
13. ๏ Initiatives to reduce the number of Central
Sponsored Schemes(CSS)and to restore the
predominance of formula based plan grants.
๏ States need to address the problem of losses in the
power sector in time bound manner.
Editor's Notes
The recommendations relating to distribution of Union Taxes and Duties and Grants-in-aid fall in this category.Those to be implemented by executive orders:ย ย The recommendations in respect of sharing of Profit Petroleum, Debt Relief, Mode of Central Assistance, etc. are implemented by executive orders.