CHENNAI: The State government has accepted in toto 144 recommendations of the Fifth State Finance Commission (SFC) and 10 more with modifications while rejecting seven. The SFC, headed by senior IAS officer S Krishnan, was constituted on December 1, 2014, reviewed the financial position of rural and urban local bodies as on March 31, 2015 and submitted its report to the Governor on December 12, 2016. In all, the SFC had made 161 recommendations.
The detailed report of the SFC and the Action Taken Report on its recommendations were tabled in the Assembly on Friday. The Commission has made recommendations on various topics including the distribution between the State and the local bodies of the net proceeds of the taxes, duties, tolls and fees leviable by the State, which may be divided between them and the allocation between the local bodies of their respective shares of such proceeds. Besides, it also suggested possible new avenues for tapping resources in rural and urban local bodies.
One of the key recommendations of the SFC is that “The existing overall vertical devolution proportion of 10 per cent of the net State’s Own Tax Revenue (SOTR) may be retained for the award period of the Commission (2017-2022).” It is also recommended that 56:44 sharing ratio between rural local bodies and urban local bodies may be adopted while the vertical sharing between the rural local bodies may be determined at 8:37:55 among district panchayats, panchayat unions and village panchayats. The government accepted these three recommendations in toto.
Other recommendations accepted by the government are the following: the proportion of revenue from minor minerals to be shared with local bodies should be fixed at 60 per cent to leave the government with an incentive to levy and collect this revenue more effectively at higher rates. Sixty per cent of revenue from sand quarrying should also be transferred to local bodies on the same basis as other minor mineral-based revenue.