Local bodies must find own revenue sources: TN Finance Commission

Subject: Polity

Section : Local Government and 5^th and 6^th Schedule

Concept:

The Sixth State Finance Commission constituted to review the financial position of rural and urban local bodies, has recommended 14 key reforms for the civic bodies to be implemented before June 2024 with the support of the respective departments.
The state government has accepted 11 of these recommendations.
If these reforms are not implemented by the due date, the annual quantum of Special Grants to be administered at the state level should be reduced by 20% from 2024-25 onwards, the Commission said.

Constitutional Provisions

The state finance commissions were added by 73rd and 74th constitutional amendment acts.
They have been enshrined in article 243-I and 243-Y in Part IX A and IX B and are constituted by Governor every five years.
Their Primary concern is to suggest ways and means to strengthen the institutions of local governance. (Panchayati raj institutions and Urban local bodies)
They recommend principles and methodology as regards the devolution of funds to PRI’s and ULB’s.
Their recommendations are not binding.
The recommendations of the state finance commissions include:
The distribution between the State and the local bodies of the net proceeds of the taxes, duties, tolls and fees leviable by the State.
Determination of the taxes, duties, tolls and fees levied or appropriated by the local bodies.
The grants-in-aid to the local bodies from the Consolidated Fund of the State.
Measures needed to improve the financial position of the local bodies.
The governor is required to place every recommendation made by the SFC and actions taken by the state governments on it before the state legislature.

Concerns:

States have not been setting up their SFCs regularly as mandated.
They are not submitting the reports in time, lacking the proficiency.
They have huge task of considering large number of local governments.
They face a crucial problem of reliable data.
SFCs and local governments are seen to be of inferior constitutional status than the Union FC.