The Union Ministry of Panchayati Raj (MoPR) organized a One-Day Finance Commissions Conclave – Devolution to Development at Vigyan Bhawan, New Delhi, on November 14th, 2024.
- The Conclave, held under the leadership of Dr. Arvind Panagariya, Chairman of the 16th Finance Commission, brought together key stakeholders to discuss and enhance the role of State Finance Commissions (SFCs) in the effective allocation of funds to Rural Local Bodies (RLBs).
- Arvind Panagariya articulated a comprehensive vision for fiscal devolution, emphasizing the imperative of enhancing Own Source Revenues (OSR) for sustainable rural development.
- A significant emphasis was placed on strengthening State Finance Commissions, with participating Chairpersons discussing challenges in fiscal devolution and proposing solutions for more effective resource allocation.
- The discussions highlighted the importance of standardizing SFC operations while maintaining flexibility for region-specific challenges.
- Special attention was given to the unique challenges faced by peri-urban Panchayats in managing rapid development.
About State Finance Commissions (SFCs)
- Article 243I of the Indian Constitution prescribes that the Governor of a State shall, as soon as may be within one year from the commencement of the Constitution (Seventy-third Amendment) Act, 1992, and thereafter at the expiration of every fifth year, constitute a Finance Commission (SFC) to review the financial position of the Panchayats.
SFC recommends:
- (1) principles which should govern the distribution between the State and the Panchayats of the net proceeds of the taxes, duties, tolls and fees leviable by the State;
- (2) principles which should govern the determination of the taxes, duties, tolls and fees which may be assigned as, or appropriated by, the Panchayats;
- (3) principles which should govern the grants-in-aid to the Panchayats from the Consolidated Fund of the State;
- (4) measures needed to improve the financial position of the Panchayats;
- (5) Any other matter referred to the Finance Commission by the Governor in the interests of sound finance of the Panchayats.
Article 243Y
- Article 243Y of the Constitution further provides that the Finance Commission constituted under Article 243 I shall make similar recommendation vis-a-vis municipalities.
- 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.
