(14th) Finance Commission

Finance Commission

Art 280

• has provided for constitution of a Finance Commission by President every 5 year or earlier if necessary.
• has empowered Parliament to determine (Hence Finance Commission Act)
• Composition etc.

A quasi-judicial body.

Constitution lists 4 tasks for FC (4th one by 73rd amendment). President can assign anything else, if feels necessary.

FC vs. PC debate

14th Finance Commission

Jan 2013 : Govt. constituted the 14th Finance Commission under former RBI Governor Y.V. Reddy.
This five-member panel has to submit its report by 31st July, 2014.

It will recommend on -

1. Sharing of net proceeds from taxes between the states and the center.
2. Steps for pricing public utilities such as electricity, water, public transport and irrigation in an independent manner to guard these against policy fluctuations. 
3. Other issues like disinvestment, subsidies, GST compensation, sale of non-priority PSU 

The commission will also look into the state of finances, deficit and debt levels of the centre and the states, keeping in view, in particular, the fiscal consolidation roadmap recommended by the 13th Finance Commission.

It will suggest measures for maintaining a stable and sustainable fiscal environment consistent with equitable growth.

Mar 2015 : report released

Recommendations

1. State's share in tax proceeds to be raised to 42% from current 32%. - towards cooperative federalism.
2. Panchayats and Urban local bodies will directly be getting fund - states can have greater flexibility in deciding their own schemes and programs

Post-mortem

• Higher allocation in tax proceeds will be nullified by reduction in Centrally Sponsored Schemes (CSS)

References

1. Laxmikant