Center Finance Commission (CFC)

Centre Finance Dept manages state finances, including resource mobilization and budget execution. Recommended significant grants for local governments, with specific allocations for Urban Local Bodies.

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The Finance Department, Government of Uttar Pradesh is responsiblefor management of finances of the State Government starting from mobilization of resources- raising Tax and Non-Tax Revenue, borrowing from different sources like internal debt, Small Savings and Provident Fund etc. to efficient use of resources through formulation of Annual Budget and execution of Budget, Public Expenditure Management.

The 15th Finance Commission (FC) recommended a total grant of Rs 4,36,361 crore for local governments for the period 2021-22 to 2025-26. The 15th FC also recommended a total grant of Rs 1,08,916 crore for Urban Local Bodies (ULBs) for the same period. The Ministry of Housing and Urban Affairs (MoHUA) is responsible for administering the 15th FC grants to the ULBs. The 15th FC's recommendations cover the six-year period up to March 31, 2026.

Ensure that your local body (Zila Panchayat, Kshettra Panchayat, or Gram Panchayat) meets the eligibility criteria set by the CFC for receiving funds.

  1. Empowerment of Local Bodies: Funds recommended by the Central Finance Commission (CFC) since 1996-97 strengthen the autonomy of State Panchayats.
  2. Flexible Allocation: With 20% to Zila Panchayats, 10% to Kshettra Panchayats, and 70% to Gram Panchayats, funds allow tailored development based on local needs, with a priority on drinking water and sanitation initiatives.

  1. Interested individuals or community representatives can submit applications to the relevant municipal authorities or designated offices.
  2. Authorities will verify the eligibility of applicants and assess the suitability of proposed locations for the proposed works.
  3. Upon approval of the application, necessary permits and permissions will be granted to initiate the construction works.
  4. The construction works will be carried out by appointed contractors or agencies under the supervision of designated engineers and project officers.
  5. Progress of the works will be regularly monitored by authorities to ensure compliance with guidelines and standards.

  1. Official Application Form: A duly filled application form provided by the relevant authority responsible for disbursing funds.
  2. Proof of Eligibility: Documents verifying the eligibility of the local body to receive funds, such as registration certificates, official resolutions, or other relevant documents.
  3. Financial Statements: Recent financial statements, including income statements, balance sheets, and audit reports, to assess the financial standing of the local body.
  4. Project Proposal: Detailed project proposals outlining the intended use of funds, including project objectives, scope, budget estimates, timelines, and expected outcomes.
  5. Utilization Certificates: Certificates or reports detailing the previous utilization of any funds received from previous grants or allocations.
  6. Bank Account Details: Details of the local body's official bank account, including the account number, IFSC code, and other relevant information for fund transfer purposes.
  7. Authorization Letters: Any necessary authorization letters or resolutions from the governing body or officials approving the submission of the funding application.
  8. Legal Documents: Legal documents confirming the establishment and status of the local body, such as incorporation certificates, bylaws, or memorandum of association.
  9. Identity Proof: Identity proof of the authorized representatives or officials submitting the application, such as government-issued ID cards or passports.
  10. Any Additional Requirements: Any additional documents or information requested by the funding authority to support the application process or verify eligibility.

The Finance Commission is constituted by the President under article 280 of the Constitution, mainly to give its recommendations on distribution of tax revenues between the Union and the States and amongst the States themselves. Two distinctive features of the Commission’s work involve redressing the vertical imbalances between the taxation powers and expenditure responsibilities of the centre and the States respectively and equalization of all public services across the States.

It is the duty of the Commission to make recommendations to the President as to— the distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them and the allocation between the States of the respective shares of such proceeds; the principles which should govern the grants-in-aid of the revenues of the States 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 in the State on the basis of the recommendations made by the Finance Commission of the State; the measures needed to augment the Consolidated Fund of a State to supplement the resources of the Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State; any other matter referred to the Commission by the President in the interests of sound finance. The Commission determines its procedure and have such powers in the performance of their functions as Parliament may by law confer on them.

The Finance Commission is appointed by the President under Article 280 of the Constitution. As per the provisions contained in the Finance Commission [Miscellaneous Provisions] Act, 1951 and The Finance Commission (Salaries & Allowances) Rules, 1951, the Chairman of the Commission is selected from among persons who have had experience in public affairs, and the four other members are selected from among persons who-- (a) are, or have been, or are qualified to be appointed as Judges of a High Court; or (b) have special knowledge of the finances and accounts of Government; or (c) have had wide experience in financial matters and in administration; or (d) have special knowledge of economics

The recommendations of the Finance Commission are implemented as under:- Those to be implemented by an order of the President: The recommendations relating to distribution of Union Taxes and Duties and Grants-in-aid fall in this category. Those to be implemented by executive orders: Other recommendations to be made by the Finance Commission, as per its Terms of Reference

The First Finance Commission was constituted vide Presidential Order dated 22.11.1951 under the chairmanship of Shri K.C. Neogy on 6th April, 1952. Fifteenth Finance Commissions have been Constituted so far at intervals of every five years.

Most federal systems resolve the vertical and horizontal imbalances through mechanisms similar to the Finance Commission. For example Australia and Canada.

The Composition of the Fifteenth Finance Commission is as under: Chairman Shri N.K. Singh Former Member of Parliament and former Secretary to the Government of India Member Shri Shaktikanta Das Former Secretary to the Government of India Member Dr. Anoop Singh Adjunct Professor, Georgetown University Member (Part Time) Dr. Ashok Lahiri Chairman (Non-executive, part time) Bandhan Bank Member (Part Time) Dr. Ramesh Chand Member, NITI Aayog Secretary Shri Arvind Mehta

The Finance Commission is required to give its report by 30th October, 2019. Its recommendations will cover the five year period commencing from 1st April, 2020.