- Prelims: Parliament-Structure, organization and functioning, article 340, tribes, 73rd and 74th amendment etc
- Mains GS Paper II: Parliament- structure, functioning and conduct of Business etc
ARTICLE HIGHLIGHTS
- Three decades passed since the 73rd and 74th Constitutional Amendments Acts came into effect
- The Ministry of Panchayati Raj was constituted in 2004 to strengthen rural local governments.
INSIGHTS ON THE ISSUE
Context
73rd and 74th Constitutional amendment Act:
Challenges faced by Panchayats:
- Failure of the State government to release funds in time: It forces them to utilize either private resources or borrow large amounts to complete panchayat activities and meet various targets.
- State governments: through the local bureaucracy, continue to exercise considerable discretionary authority and influence over panchayats.
- Gram panchayats remain fiscally dependent on grants (both discretionary and non-discretionary grants) from the State and the Centre for everyday activities.
- Their own sources of revenue (both tax and non-tax): They constitute a tiny proportion of overall panchayat funds.
- For example: In Telangana, less than a quarter of a panchayat’s revenue comes from its own sources of revenue.
- Access to discretionary grants for panchayats remains contingent on political and bureaucratic connections.
- An inordinate delay in transferring approved funds to panchayat accounts stalls local development.
- Delays in the disbursement of funds by the local bureaucracy have led to pressure on sarpanches leading some to end their life.
- State governments also bind local governments’ through the local bureaucracy.
- Approval for public works projects often requires technical approval (from the engineering department) and administrative approval
- Higher-level politicians and bureaucrats intervening in selecting beneficiaries for government programmes and limiting the power of sarpanches further.
- The ability of sarpanches to exercise administrative control over local employees is also limited.
- In many States, the recruitment of local functionaries reporting to the panchayat, such as village watchmen or sweepers, is conducted at the district or block level.
- Sarpanch does not have the power to dismiss these local-level employees.
- Unlike elected officials at other levels, sarpanchs can be dismissed while in office.
- Gram Panchayat Acts in many States have empowered district-level bureaucrats, mostly district Collectors, to act against sarpanches for official misconduct.
- For example: Section 37 of the Telangana Gram Panchayat Act allows District Collectors to suspend and dismiss incumbent sarpanches.
Fiscal devolution of Panchayats:
- Generation of own revenues: Emanating from the Central Act, various States Panchayati Raj Acts have made provisions for taxation and collection.
- Participatory planning and budgeting were the end result of such interventions by the Ministry.
- Panchayats earn only 1% of the revenue through taxes”, with the rest being raised as grants from the State and Centre
- 80% of the revenue is from the Centre and 15 % from the States.
Major Own source of revenue OSRs where panchayats can earn maximum income:
- Property tax
- cess on land revenue
- surcharge on additional stamp duty
- tolls, tax on profession
- advertisement
- User charges for water and sanitation and lighting
Steps for maximizing revenue:
- Establish a conducive environment for taxation by implementing appropriate financial regulations.
- Making Decisions regarding the tax and non-tax bases
- Determining their rates
- Establishing provisions for periodic revisions
- Defining exemption areas
- Enacting effective tax management and enforcement laws for collection
- Collection from Non-tax revenue includes fees, rent, and income from investment sales and hires charges and receipts.
- Income from
- rural business hubs
- Innovative commercial ventures
- renewable energy projects
- carbon credits.
- Corporate Social Responsibility (CSR) funds and donations.
The role of gram sabhas:
● Gram sabhas have a significant role in fostering self-sufficiency and sustainable development at the grass-roots level by leveraging local resources for revenue generation.
● They can be engaged in planning, decision-making, and implementation of revenue-generating initiatives like agriculture and tourism to small-scale industries.
● They have the authority to impose taxes, fees, and levies, directing the funds towards local development projects, public services, and social welfare programmes.
● Through transparent financial management and inclusive participation, gram sabhas ensure accountability and foster community trust
○ empowering villages to become economically independent and resilient.
What steps need to be taken?
● Gram sabhas need to promote entrepreneurship, and foster partnerships with external stakeholders to enhance the effectiveness of revenue generation efforts
● In several States, gram panchayats lack the authority to collect taxes, while in numerous others, intermediate and district panchayats are not delegated the responsibility of tax collection.
● Gram panchayats collect 89% of their own taxes, the intermediate panchayats collect 7% and the district panchayats a nominal amount of 5%.
○ There is a need to demarcate OSR for the entire three-tier panchayats to ensure equitable sharing.
The allocation for rural local bodies:
- The 10th and 11th CFC was ₹4,380 crore and ₹8,000 crore, respectively.
- In 14th and 15th CFCs there was a huge increase by way of allocating ₹2,00,202 and ₹2,80,733 crore,
- The tax collected in 2018-19 was ₹3,12,075 lakh which diminished in 2021-2022 to ₹2,71,386 lakh.
- The non-tax collected for the same period was ₹2,33,863 lakh and ₹2,09,864 lakh.
Way Forward
- There is a need to educate elected representatives and the public on the significance of raising revenue to develop panchayats as self-governing institutions.
- The dependency syndrome for grants has to be minimized and in due course, panchayats will be able to survive on their own resources.
- Panchayats can achieve such a state of affairs when there are dedicated efforts in all tiers of governance, which includes even the State and central level.
- Sarpanchs need to have administrative or financial autonomy for meaningful decentralization.
QUESTION FOR PRACTICE
To what extent, in your opinion, has the decentralization of power in India changed the governance landscape at the grassroots?(UPSC 2022) (200 WORDS, 10 MARKS)
