DMPQ- Discuss the composition and functions of finance commission.

The Finance Commission consists of a chairman and four other members to be appointed by the president. They hold office for such period as specified by the president in his order. They are eligible for reappointment. The Constitution authorises the Parliament to determine the qualifications of members of the commission and the manner in which they should be selected. Accordingly, the Parliament has specified the qualifications of the chairman and members of the commission.The chairman should be a person having experience in public affairs and the four other members should be selected from amongst the following:

  • A judge of high court or one qualified to be appointed as one.
  • A person who has specialised knowledge of finance and accounts of the government.
  • A person who has wide experience in financial matters and in administration.
  • A person who has special knowledge of economics.

The Finance Commission is required to make recommendations to the president of India on the following matters:

  • The distribution of the net proceeds of taxes to be shared between the Centre and the states, and the allocation between the states of the respective shares of such proceeds.
  • The principles that should govern the grants-in-aid to the states by the Centre (i.e., 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 and the municipalities in the state on the basis of the recommendations made by the state finance commission
  • Any other matter referred to it by the president in the interests of sound finance.

Till 1960, the commission also suggested the grants given to the States of Assam, Bihar, Odisha and West Bengal in lieu of assignment of any share of the net proceeds in each year of export duty on jute and jute products. These grants were to be given for a temporary period of ten years from the commencement of the Constitution.

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