Limitations of the State Finance Commission
State Finance Commission is a very important institution for the decentralized democracy of India, despite that, it is facing a number of limitations. These are:
- A significant concern is the composition of the State Finance Commission. It is mainly dominated by the presence of bureaucrats and not academicians and experts.
- The SFCs face a crucial problem of reliable data. Since local governments lack a proper budgetary system so they face problems while collecting data and, as a result, evaluating the local government’s financial situation.
- Many states have seen a discrepancy between the State Government’s actual money transfers to the local bodies as suggested by State Finance Commission. For example, Manipur has seen such a discrepancy.
- Local governments and SFCs are thought to have a lower Constitutional status than the Union Finance Commission. The empowerment and finances of local bodies have been impacted by these changes.
- The XIth and XIIth Finance Commissions have lamented the fact that the majority of State Finance Commissions are not doing their duties to a high standard.
State Finance Commission
The State Finance Commission (SFC) is a Constitutional body, formed under the 73rd and 74th Constitutional Amendment Act, 1992. It recommends the transfer of funds from the State Government to the Panchayati Raj Institutions and provides suggestions for augmenting their resources. Municipalities and city councils are also brought under the purview of the State Finance Commission as per Article 243-Y.