State Finance Commissions

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State Finance Commissions has been established in the various states of India so that they can help in improving the financial condition of the various local bodies such as Panchayati raj institutions and municipal bodies that are there in the states. The Finance Commissions in States are also responsible for many other functions.

The setting up of State Finance Commissions

State Finance Commissions have been set up in the various states of the country according to the guidelines that have been laid down in the Constitution of India, Article 243 (I).

According to this article, the governor of the state shall set up the Finance Commission within the period of one year that begins with the seventy- third amendment act of the Indian Constitution, 1992 and after that at the end of every five years. The Finance Commissions in the States usually comprises of the chairman, member secretary, and other members. State Finance Commissions receive grants from the Finance Commission that is set up by the central government.

The various functions of State Finance Commissions are
  • To review the economic condition of the various Panchayati raj institutions and municipal bodies that are there in the state

  • To take such steps that help in boosting the financial condition of the various municipal bodies and Panchayati raj institutions in the state

  • To allot funds to the various Panchayati raj institutions and municipal bodies in the state from the Consolidated Fund of the State

  • To act as an arbiter between the central and the state governments with regard to issues that are of financial nature

  • To transfer funds that are granted by the central government to the state government

  • To distribute between the various municipal bodies and Panchayati raj institutions that are there within the state and the state government the total proceeds of taxes, fees, tolls, and duties that are charged by the state government

  • To determine the taxes, tolls, duties, and fees that may be levied by the various Panchayati raj institutions and municipal bodies that are there within the state


The various sectors that receive grants from State Finance Commissions are
  • Administration of prisons
  • Health care services
  • Public libraries
  • Administration of districts
  • Administration of police
  • Elementary education
  • Fire services
  • Infrastructure development
  • Training in computers for school children
  • Fiscal administration
  • Heritage protection

The various states where State Finance Commission have been set up are
  • Andhra Pradesh
  • Assam
  • Bihar
  • Kerala
  • Nagaland
  • Orisssa
  • Tamil Nadu
  • West Bengal
  • Jammu & Kashmir
  • Goa
  • Gujarat
  • Manipur
  • Arunchal Pradesh
  • Himachal Pradesh

The state governments must promote State Finance Commissions

The state governments must promote State Finance Commissions for this will help in improving the economic condition of the states by bringing in more funds from the center for the states. Also it will help in improving the financial condition of the various Panchayati raj institutions and municipal bodies that are there in the states. All these will help in the all round development of the states.

For further information on State Finance Commissions, please refer to the following sites