ISSUES OF FUNDING IN LOCAL GOVERNMENT - POLITY
News: There
is hardly any autonomy at the panchayat level
What's in the news?
● A
few weeks ago, Balineni Tirupati, an up-sarpanch in Telangana’s Jayashankar
Bhupalpally district, died by suicide
due to indebtedness.
● He
had taken out a loan to undertake development works in the village and was
unable to bear the burden after the State Government’s inordinate delay in
releasing bill payments.
Key takeaways:
● Sarpanchs
alleged that the failure of the State Government to release funds in time has
forced them to utilize either private
resources or borrow large amounts to complete panchayat activities and meet
various targets.
Issues of Local Government:
● More
than three decades after the 73rd and 74th Amendment Acts, which gave
constitutional status to local governments, State Governments through the local
bureaucracy, continue to exercise considerable discretionary authority and
influence over panchayats.
● In India, the powers of
local elected officials remain seriously circumscribed by State Governments and
local bureaucrats in multiple ways, thereby diluting the spirit of the
constitutional amendments seeking to empower locally elected officials.
Sources of Funds to Local Government:
● Gram
panchayats remain fiscally dependent on grants (both discretionary and
non-discretionary grants) from the State and the Centre for everyday
activities.
● Broadly,
panchayats have three main sources of
funds such as
○ Their
own sources of revenue (local taxes, revenue from common property resources,
etc.).
○ Grants
in aid from the Centre and State Governments
○ Discretionary
or scheme-based funds.
Issues of Finance in Local Government:
1. Lack of finances from own sources:
● Their
own sources of revenue (both tax and non-tax) constitute a tiny proportion of
overall panchayat funds.
● For
instance, in Telangana, less than a quarter of a panchayat’s revenue comes from
its own sources of revenue.
2. Issues in discretionary grants:
● Access
to discretionary grants for panchayats remains contingent on political and
bureaucratic connections.
3. Delays in approval:
● An
inordinate delay in transferring approved funds to panchayat accounts stalls
local development.
4. Limits on expenditure:
● There
are also severe constraints on how panchayats can use the funds allocated to
them.
● State
Governments often impose spending limits on various expenditures through
panchayat funds.
● This
could include quotidian activities such as purchasing posters of national
icons, refreshments for visiting dignitaries, or distributing sweets in a local
school at national festivals.
5. Double authorization in panchayat finance:
● Almost
in all States, there is a system of double authorization for spending panchayat
funds.
● Apart
from sarpanchs, disbursal of payments
requires bureaucratic concurrence.
● The
sarpanch and the panchayat secretary, who reports to the Block Development
Officer (BDO), must co-sign cheques issued for payments from panchayat funds.
6. Political interference:
● State
Governments also bind local governments through the local bureaucracy.
● The
higher-level politicians and bureaucrats intervening
in selecting beneficiaries for government programmes and limiting the power of
sarpanchs further.
● Sarpanchs
reported that they need to be in the “good books” of politicians and local
bureaucrats if they wanted access to discretionary resources, timely
disbursement of funds, and be able to successfully execute any project or
programme in their village.
7. Emergence of Parallel Governance:
● Approval
for public works projects often requires
technical approval (from the engineering department) and administrative
approval from local officials of the rural development department, such as
the block development officer, a tedious process for sarpanchs that requires
paying multiple visits to government offices.
8. Shadow of bureaucrats:
● 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 sarpanchs for official misconduct.
● Conditions for their
removal:
○ Apart
from abuse of power, embezzlement, or misconduct, the conditions include mere
refusal to “carry out the orders of the District Collector or Commissioner or
Government for the proper working of the concerned Gram Panchayat”.
○ For
instance, Section 37 of the Telangana Gram Panchayat Act allows District
Collectors to suspend and dismiss incumbent ssarpanchs. In Telangana, more than
100 sarpanchs have been dismissed from office in recent years.
Impacts:
1. Use of Sarpanch's private funds:
● Inadequate
and delayed funds from state sources forced sarpanchs to use private funds for
panchayat activities to fulfil mandated targets and avoid public pressure.
2. Pressure and Debt trap:
● The
disbursement of funds by the local bureaucracy have led to pressure on
sarpanchs leading some to end their life in several parts of the country.
Balineni Tirupati, an up-sarpanch in Telangana’s Jayashankar Bhupalpally
district, died by suicide due to indebtedness.
3. Affects development at the ground:
● Adequate
finance is an important aspect of the development process, without which can
hamper the economic and social progress of the country.
4. Lowers trust between people and government:
● Without
the actual ground level deployment of financial and developmental needs, the
people themselves lost trust and confidence from the government machinery.
5. Hampers the proactive role of Sarpanches:
● In
terms of information, monitoring and immediate action, local governments are at
an advantage, and eminently, to meet any disaster such as COVID-19.
● The
inadequate finances to local government will cause troubles during the
emergency conditions.
6. Failure of policies:
● Lack
of finances makes the local government to non transformation of policies into
actions.
WAY FORWARD:
The
State Government needs to re-examine the
provisions of their respective Gram Panchayat laws and consider greater devolution
of funds, functions, and functionaries to local governments. The following
measures needs to be adopted wholistically.
● More
tax imposing authority to local government.
● Implement
the recommendation of finance commission to meet fiscal federalism in letter
and spirit.
● Panchayat
Devolution Index of NITI Aayog to be seen as a criteria for devolution of funds
to local government.
● Constitution
of bottom up approach by the provision of meaningful decentralization.
● Provisions
of autonomy to overcome the bureaucratic shadows.
● Own
Revenue sources should be above 50% of the total revenue.
● Maintain
high tax buoyancy.
● Rationalize
the Operations and Maintenance expenses.
● Stable
and Predictable Inter-governmental transfers.
● Increasing
tax base for local government.
India
has limited decentralization because if local governments get genuine autonomy
to allocate the monies, power will shift from the MLAs and State
government-controlled bureaucracy to the sarpanch.