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FOREWORD The ena tment of the 73rd and 74th onstitutional amendments is the histori step in the evolution and development of the Pan hayati Raj System and the Urban Lo al Bodies. The subsequent ena tment of the Haryana Pan hayati Raj A t, 1994, (A t II of 1994), the Haryana Muni ipal Amendment A t, 1994 and the Haryana Muni ipal Corporation A t, 1994 and the formulation of the Haryana Finan e Commission Rules were a logi al sequel to these onstitutional amendments. In pursuan e of the onstitutional provisions, the First State Finan e Commission was onstituted on 31st May, 1994 overing the period of four years i.e. 1997-2001. The Se ond State Finan e Commission has been onstituted by the State Government vide notifi ation dated 6th September, 2000. The s ope of enquiry of the State Finan e Commission is mu h wider as ompared to the Central Finan e Commission whi h, besides re ommending sharing of State resour es between the State and the Lo al Bodies, is also required to suggest measures to improve the finan ial position of these bodies to enable them to be ome viable units of lo al governan e. The Commission had to walk through a riti al path of striking a proper balan e between two onfli ting situations of onstraint of budgetary resour es before the State Government and mounting requirements of lo al bodies for their effi ient and effe tive fun tioning. This intri ate task has been rendered all the more diffi ult in the absen e of reliable and authenti data. The Commission, however, has gone ahead with its task by olle ting basi information to the extent possible from the State Government Departments as well as the lo al bodies. Dis ussions were held with ele ted representatives of these bodies at the distri t level. Suggestions were also invited from the publi and other stakeholders apart from as ertaining the position existing in various other States. The question of delegation of ertain duties and responsibilities of sele ted departments to the Pan hayati Raj Institutions has been under the onsideration of the State Government from time to time. The Commission attempted to analyse the administrative and finan ial profile of the lo al bodies parti ularly their sour es of revenue and the ability to generate additional resour es at their own level. We have suggested ertain devolutions, both by way of sharing of taxes and levies as well as grants-in-aid. Attempt has also been made to ensure that these bodies have a ess to elasti sour es of revenue so that they may not have to depend on State budgetary support for their existen e. We are aware of the fa t that the fis al position of the State has been under stress sin e long. The position has further deteriorated due to pay revision on entral pattern, imposition of prohibition, impa t of e onomi re ession on State E:\Stat Financ Commissions\R port of 2nd SFC\R port of F.C..doc finan es, mounting ommitments at State level et . These budgetary onstraints reveal that any s heme of resour e devolution from the State to lo al bodies would have to be limited. But we hope that the State Govt. would make sin ere efforts to bolster their resour es to fully implement the s heme of resour e transfer being suggested by us. The Commission's re ommendations on funds transfer to lo al bodies take into a ount the delegation of fun tions made or likely to be made in the period overed under this report, parti ularly the role envisaged for all the tiers of Pan hayati Raj Institutions. While doing so, the Commission has kept in view the finan ial position of the State and the organizational apa ity of the rural and urban lo al bodies to absorb the transferred funds for proper and meaningful utilization. We are of the firm view that the empowerment of lo al bodies has to be a gradual pro ess and subsequent devolution of fun tions to the grass root levels would be a ompanied by proportional transfer of funds as well as staff. We further hope that the State Government would expedite this pro ess with a view to a omplish the onstitutional requirement both in letter and spirit. We want to pla e on re ord our sin ere appre iation of Shri Ram Niwas, IAS, our Member-Se retary, who had to shoulder a very onerous and heavy responsibility. Our gratitude is also due to Shri Gian Singh Kamboj, Adviser (Resour e Planning) and Shri Daya Nand Chahal, Dy. Dire tor, Finan e Department for their valuable suggestions and fine-tuning of ontents of the report. We would like to thank Dr. Rajvir Bhardwaj, Resear h Offi er, Shri Surinder Kumar Badhwar and Sh. Om Prakash Thapliyal, Computer Clerk as well as other offi ials of the Commission who rendered valuable assistan e in drafting and finalizing this report. Our thanks are also due to all offi ers and offi ials of the State Government and NIC, Haryana State Unit who have extended whole hearted o-operation by responding to our queries promptly and freely giving the benefit of their views on various subje ts. Suraj Bhan Kajal Chairman P.P. Singh Sahni, IAS (Retd.), Member Ami Chand Sehrawat, Advocate, Ram Niwas, IAS, Member Member Secretary 2 CHAPTER - I CONSTITUTION OF THE COMMISSION 1.1 In pursuan e of the provisions of the arti le 243 I and 243 Y of the Constitution of India and Se tion 213 of the Haryana Pan hayati Raj A t, 1994 (A t No. II of 1994) and rule 3 of the Haryana Finan e Commission Rules 1994, the Governor of Haryana onstituted the Se ond State Finan e Commission vide notifi ation No. 19/5/2000-Pol (2P) dated 6th September 2000 under the hairmanship of Shri Suraj Bhan Kajal (Ex-MLA) as Chairman with the followings as Members:- 1. Sh. P.P. Singh Sahni, I.A.S.(Retd.) Member 2. Sh. Ami Chand Sehrawat, Advo ate Member 3. Sh. Ram Kumar, Advo ate Member 4. Sh. P.K.Dass, I.A.S. Member Se retary 1.2 The Chairman, Sh. Suraj Bhan Kajal, joined on 6.9.2000, Sh. P.P.Singh Sahni, I.A.S. (Retd.) joined on 8.9.2000, Sh. Ami Chand Sehrawat Advo ate and Sh. Ram Kumar Advo ate joined on 12.9.2000. The Member Se retary joined on 7.9.2000 with additional harge of the Commission in addition to Spe ial Se retary Finan e (Budget). 1.3 After the transfer of Sh. P.K. Das, I.A.S., Sh. G.S.Sorot, I.A.S. joined on 19.9.2002 as Member Se retary (Additional harge). But after a short period, there was another hange and onsequently Sh. Ram Niwas, I.A.S., Spe ial Se retary Finan e (Budget) joined on 14 O tober 2002 as Member Se retary of the Commission with additional harge. One painful tragedy o urred and one member Sh. Ram Kumar, Advo ate expired on 1st April, 2004. No new member was appointed in repla ement. TERMS OF REFERENCE 1.4 The Commission is required to make re ommendations relating to the following matters:- (a) The principles which should govern- (i) the distribution between the State and the Zila Parishads, Pan hayat Samitis and Gram Pan hayats of the net pro eeds of the taxes, duties, tolls and fees leviable by the State whi h may be divided between them under Part IX of the Constitution of India and the allo ation among the 3 Zila Parishads, Pan hayat Samitis and Gram Pan hayats at all levels of their respe tive shares of su h pro eeds; (ii) the determination of the taxes, duties, tolls and fees whi h may be assigned to or appropriated by the Gram Pan hayats, Pan hayat Samitis and Zila Parishads; (iii) the grants- in- aid to the Zila Parishads, Pan hayat Samitis and Gram Pan hayats from the Consolidated Fund of the State, and (iv) the measures needed to improve the finan ial position of the Gram Pan hayats, Pan hayat Samitis and Zila Parishads. (b) The principles which should govern:- (i) the distribution between the State and the Muni ipalities of the net pro eeds of the taxes, duties, tolls and fees leviable by the State whi h may be divided between them under part IX A of the onstitution of India and the allo ation between the Muni ipalities at all levels of their respe tive shares of su h pro eeds; (ii) the determination of the taxes, duties, tolls and fees whi h may be assigned to or appropriated by the Muni ipalities; (iii) the grants-in-aid to the Muni ipalities from the Consolidated Fund of the State, and (iv) the measures needed to improve the finan ial position of the Muni ipalities. 1.5 In making its re ommendations, the Commission shall have regard among other onsiderations to: (i) the obje tive of balan ing the re eipt and expenditure of the State and for generating surplus for apital investment; (ii) the resour es of State Government and demands thereon parti ularly in respe t of expenditure on ivil administration, maintenan e and upkeep of apital assets, maintenan e expenditure on plan s hemes and other ommitted expenditure or liabilities of the State, and (iii) the requirement of the Pan hayati Raj Institutions and the Muni ipalities, their potential for raising resour es and redu ing expenditure.

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