NEW DELHI: According to a statement from the finance ministry, the Sixteenth Finance Commission (SFC), whose members were nominated last month, convened for the first time on Wednesday to review the commission's terms of reference and other issues.

According to the statement, the SFC recognised the necessity of extensive engagements with a range of stakeholders, including state and local governments, Union ministries, and experts.

The SFC acknowledged that it would be doing in-depth analysis and that it would need to enlist the help of every expert it could find, including from eminent think tanks, research institutions, and other organisations involved in fiscal federal relations, it continued.

The commission will have its headquarters at Jawahar Vyapar Bhawan on Janpath in New Delhi. The panel was formed by the president to specify the financial relationships between the federal government and the states.

It will release its recommendations by October 31, 2025, for a five-year award term starting on April 1, 2026.

The SFC, led by economist Arvind Panagariya, will make sure that states have effective mechanisms and procedures in place for funding local bodies in accordance with the recommendations of the state finance commissions, in addition to determining how the Center's tax revenue will be distributed to the states over a five-year period beginning in FY27.

The SFC will assess federal and state disaster management budgets and make recommendations for how to increase the states' combined funds for panchayats and municipalities.

The SFC has the freedom to make recommendations about the distribution of tax revenue within constitutional bounds because the government has limited the commission's "terms of reference."

A.N. Jha, a former member of the 15th Finance Commission and expenditure secretary; Annie George Mathew, a former special secretary to the department of expenditure; and Niranjan Rajadhyaksha, the executive director of Artha Global, have all been named as full-time members of the SFC.

Soumya Kanti Ghosh, the group chief economic adviser of State Bank of India, has been appointed to the panel on a part-time basis.

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