Delays in constituting or reporting by State Finance Commissions undermine the objectives of the 73rd and 74th Constitutional Amendments. Comment.

Articles 243-I and 243-Y, inserted by the 73rd and 74th Constitutional Amendment Acts, 1992, oblige every State to constitute a State Finance Commission (SFC) once in five years. Since fiscal capacity is what converts panchayats and municipalities from paper bodies into "institutions of self-government", chronic delay in constituting SFCs or in submitting their reports directly defeats the amendments' purpose.

How delays defeat the constitutional objective

• Fiscal autonomy stays notional: without a current SFC award, devolution runs on ad-hoc, discretionary state grants rather than a formula-based, predictable share — local bodies cannot budget for water supply, sanitation or roads under the 11th and 12th Schedules.
• Award periods are squeezed: Tamil Nadu's 7th SFC (Chairman K. Allaudin), notified in May 2025, had its tenure extended to December 2026 though its award period begins April 2027 [3], leaving the legislature little time to examine and act on the report.
• Union grants are jeopardised: the 15th Finance Commission made grants to local bodies conditional on States constituting an SFC and acting on its recommendations by March 2024 [1]; the 16th Finance Commission retains "timely constitution of the State Finance Commission" as an entry-level criterion for local body grants [2]. Delay thus penalises the very bodies it neglects.
• Accountability weakens: unfunded local governments depend on higher tiers, blunting the grassroots democracy and citizen-level answerability the Second ARC's report on Local Governance sought to deepen [4].

A fair qualification Delay is a symptom, not the sole ailment. SFC reports are only recommendatory, action-taken reports are often tabled late, and weak local-body accounting data hampers credible assessment — so timeliness alone will not guarantee genuine devolution.

Fiscal decentralisation is the unfinished half of the 1992 amendments. States should synchronise SFC cycles with the Union Finance Commission, make constitution and tabling time-bound with mandatory action-taken reports, and build reliable local-body databases. Only then will the third tier become, in substance, the self-governing unit the Constitution envisages.