14th Finance Commission and its Role

Author: Parveen Kaswan (Follow)

14th finance commission has been  constituted by the Government of India consisting of Dr. Y.V. Reddy, former Governor Reserve Bank of India, as the Chairman and the following four members:

  1. Prof Abhijit Sen
  2. Ms. Sushma Nath
  3. Dr. M.Govinda Rao
  4. Dr. Sudipto Mundle.

The new commission shall make its report available by the 31st October, 2014, covering a period of five years commencing on the 1st April, 2015.


Role of Finance commission:

Finance commission is a constitutional body(Finance Commission Act, 1951). Article 280 speaks about the provision of formation of Finance commission by the president. The article says:

280(1). The President shall, within two years from the commencement of this Constitution and thereafter at the expiration of every fifth year or at such earlier time as the President considers necessary, by order constitute a Finance Commission which shall consist of a Chairman and four other members to be appointed by the President.

The main function of finance commission is to recommend how the Union government should share taxes levied by it with the states. These recommendations are meant for the period of five years. The commission also lays down rules by which the centre should provide grants-in-aid to states out of the Consolidated Fund of India and also in case of special provision of states. Finance Commission is also assigned the duty of suggesting measures to augment the resources of states and ways to supplement the resources of Panchayati Raj institutes and municipalities.

Apart from its recommendations on the sharing of tax proceeds between the Centre and the States which will apply for a five-year period beginning April 1, 2015, the Commission has been asked to suggest on:

  • Pricing of public utilities such as electricity and water in an independent manner and also look into issues like disinvestment, GST compensation, sale of non-priority PSUs and subsidies.
  • measures for maintaining a stable and sustainable fiscal environment consistent with equitable growth including suggestions to amend the Fiscal Responsibility Budget Management Acts.
  • With regard to debt-stressed states, the Commission has been asked to suggest steps for augmenting revenues of states which are lagging.
  • Review the present arrangements as regards financing of Disaster Management with reference to the funds constituted under the Disaster Management Act, 2005(53 of 2005), and make appropriate recommendations thereon.

In making its recommendations on various matters, the Commission shall generally take the base of population figures as of 1971 in all cases where population is a factor for determination of devolution of taxes and duties and grants-in-aid; however, the Commission may also take into account the demographic changes that have taken place subsequent to 1971.


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