No plans to give permanent status to FC
The government has no plans to give permanent status to the finance commission (FC), Union Minister Anurag Singh Thakur said on 10 February 2020. Currently, the government appoints finance commission for a fixed term. While replying to a question in the Lok Sabha, Thakur also said the RBI was also not considering any proposal to give permanent status to the commission. No, Government of India is not considering any proposal to give permanent status to Finance Commission, the Minister of State for Finance said.
- Core responsibilities of the finance commission include evaluating the state of finances of the Union and State governments, recommending the sharing of taxes between them, laying down the principles determining the distribution of these taxes among states.
- The government in November extended the term of 15th Finance Commission, headed by former bureaucrat N K Singh, by one year to October 30, 2020.
- The term of the commission was originally set to end in October 2019, but was extended by one month to November 30.
- Singh presented the first report pertaining to financial year 2020-21 to the government in December 2019.
- The recommendations made by the Finance Commission will be examined in the ministry in consultation with various departments and approval of Cabinet will be sought.
- In accordance with approval of the Cabinet, "an explanatory memorandum as to the action taken on the recommendations made by the 15th Finance Commission will be laid on the floor of both the Houses of Parliament during Budget Session.
What is Finance Commission?
- The Finance Commission is a constitutional body, that determines the method and formula for distributing the tax proceeds between the Centre and states, and among the states as per the constitutional arrangement and present requirements.
- Under Article 280 of the Constitution, the President of India is required to constitute a Finance Commission at an interval of five years or earlier.
- The Finance Commission has a chairman and four members appointed by the President. The government of India provides necessary support and manpower including a secretary to the commission to facilitate its work.
- In November 2017, President of India constituted the 15th Finance Commission and appointed former Planning Commission member NK Singh as its chairman.
- The Commission had former economic affairs secretary Shaktikanta Das as its member but he resigned from the post in December 2018 following his appointment as RBI Governor. The Union government appointed former Finance Secretary Ajay Narayan Jha in his place in March 2019.
The Finance Commission has the following functions or duties:
- The Commission makes recommendations to the President of India on the distribution of tax proceeds between the Union and the States and the share of each state.
- The Commission also decides the principles that govern the payment of grants-in-aid to states from the Consolidated Fund of India.
- The President of India can also refer any other matter to the Finance Commission in the interest of building a sound financial system.