National Finance Commission
Composition of the National Finance Commission
The first finance commission was constituted on November 1951.
The Finance Commission is a body of five experts composed of one chairman, four members and a secretary. The Finance Commission is appointed by the President under Article 280 of the Constitution. As per the provisions contained in the Finance Commission [Miscellaneous Provisions] Act, 1951 and The Finance Commission (Salaries & Allowances) Rules, 1951, the Chairman of the Commission is selected from among persons who have had experience in public affairs, and the four other members are selected from among persons who—
(a) Are, or have been, or are qualified to be appointed as Judges of a High Court; or
(b) Have special knowledge of the finances and accounts of Government; or
(c) Have had wide experience in financial matters and in administration; or
(d) Have special knowledge of economics
The main responsibilities of a Finance Commission are as follows:
• The distribution between the Union and the States of the net proceeds of taxes which are to be divided between them and the allocation between the States of the respective shares of such proceeds.
• Determination of principles and quantum of grants-in-aid to States which are in need of such assistance.
• Measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State.
• The last function was added following the 73rd and 74th amendments to the Constitution in 1992 conferring statutory status to the Panchayats and Municipalities.
• These Constitutionally mandated functions are the same for all the Finance Commissions and mentioned as such in the terms of reference (ToR) of different Finance Commissions.
• To enable the Finance Commission to discharge its responsibilities in an effective manner, the Constitution vests the Finance Commission with power to determine its procedures.
• Under the Constitution, the President shall cause every recommendation made by the Finance Commission together with an explanatory memorandum as to the action taken thereon to be laid before each House of Parliament. So far, twelve Finance Commissions have given their reports.
• The Union government has always been accepting the recommendations of the Finance Commissions, exception being the recommendations of the Third Commission relating to Plan grants.
• There have been major changes in the public finances of the Union and the States during the period of over 55 years covered by the Finance Commissions.
• A number of new matters have been referred to the Commissions in consonance with these developments.
Composition of 14th Finance Commission -
1. Chairman - Dr. Y.V.Reddy, Former Governor Reserve Bank of India
• Prof Abhijit Sen, Former Member, Planning Commission
• Ms. Sushama Nath, Former Union Finance Secretary
• Dr. M.Govinda Rao, Director, National Institute for Public Finance and Policy, New Delhi
• Dr. Sudipto Mundle, Former Acting Chairman, National Statistical Commission
3. Secretary - Shri Ajay Narayan Jha
Moreover, it is the duty of the Commission to make recommendations to the President as to-
• 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 principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India;
• 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;
• Any other matter referred to the Commission by the President in the interests of sound finance.
Thus, the Commission determines its procedure and has such powers in the performance of their functions as Parliament may by law confer on them.