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Chapter 3
KERALA PANCHAYAT FINANCE
3 In the second chapter, we discussed the evolution of panchayati raj in
India. Panchayat raj and panchayat finance are complementary in nature. This
chapter discusses the trends, structure and challenges of Kerala panchayat
finance.
Kerala has a population of 31.8 millions (2001 census) and an area of
38800 sq. !an. with a density of population 819 per sq. Km. 9.81 per cent of
the population belongs to scheduled castes and 1.14 per cent belongs to
scheduled tribes. The Hindus ,constitute 58 percent, Christians 20.5 percent
and Muslims 21.25 percent. Fotlr-fifth of the population lives in 1364 villages
which have been grouped into 152 development blocks and 14 districts.
Kerala has the lowest population growth rate of 9.4 per cent during 1991-
2001. The average size of the household is 4.7 persons. Kerala continues to be
the only state in India where the sex ratio favours the females with 1058
females per 1000 males. (Census 2001) '
Literacy in the state is the highest in India, 90.92 percent; male literacy
being 94.2 percent and women literacy 87.9 percent (2001 census). People are
well informed about social and political affairs. The mass media of
' a) Economic and Political Weekly, April 21,2001, p.1275. b) Final population and primary abstract of Census 2001 released on Monday March 1,
2004. The Hindu, March 2,2001, p.4.
communication is well developed. Kerala ranks high in terms of density of
books published and highest in news paper circulation in India.
Kerala's health indicato~s reflect a much higher quality of life in the
state (Isaac & Franke 2000).~ Birth rate per thousand was 17.2. Death rate was
6.4 and infant mortality rate 11 (2001 Census). In respect of education, health
and population control, the state occupies foremost position in the country.
Expectation of life at Birth in Kerala (1996-2000) is 69.1 years. for males and
76.1 for females in 1998.~ Economically, however, progress has been
moderate. In 1977-78 about 4 % percent of rural people were living below
poverty line and by 1987-88 the percentage declined to 16.92. As per National
Sample Survey data (1999-2000) Kerala has poverty figures of 9.38 per cent
in rural areas and 20.27 per cent in Urban areas where as the all India figures
are 27.09 per cent in rural areas and 23.62 per cent in Urban areas4. According
to a survey of Rural i3evelopmc:nt Department 17.23 lakh families live below
poverty line in the state. Out of this 19 per cent are scheduled caste families,
3 per cent Scheduled tribe anti the remaining 78 per cent belong to other
categories. Many marginal farmers, fishermen and landless workers form the
large bulk of the poor. Kerala's development experience shows that even at
low levels of economic devc:lopment, basic needs can be met through
appropriate redistribution strate3ies. The achievements in the social sector has
not resulted in comparable achievements in the material production sectors
and hence Kerala continues to be an economically back ward state.
2 Thomas T.M. Isaac with Richard W Franke, (2000), Local Democracy and Development People's Campaign for Decentra1is:d Planning in Kerala, Left World Books, New Delhi, p.7. Economic Review 2003, Kerala State Planning Board, Thiruvananthapuram, p.28.
4 Ibid., p.302.
In recent years migration of some of the labour force to gulf countries
has tended to contribute towrrds improvement of income of many rural
households on account of remittances from abroad.
Modernity is gaining increasing ground among the rural people as a
result of wide spread education, comprehensive exposure to media of
communication and good travel opportunities. If all mass organizations and
all the types of civil society o~ganizations are added, more than half of the
population can be said to be actrvely involved in organised civic life, (Issac &
Franke 2000). This is a microscopic picture of the present day state of affairs
existing in Kerala.
3.2 Developments in Kerala'r; Economy
Kerala's economy sh0wc.d a significant growth rate of 5.99 per cent in
the nineties while in the 70's and 80's it was relatively stagnant. The rates of
growth for different sectors as well as the total economy for the last three
years are sunlmarised below.
Table 3.1
Kerala Economy: Structural Growth Rates (in per cent)
Source: Economic Review 2003, State Planning Board, September 2004, Govt. of Kerala, Thirvrananthapuram.
Sectors
Secondary
10.14
200 1-02 -1.03 -6.00
2002-03 4.80
Tertiary
10.48
9.28
9.78
Overall
2.60
4.00
6.10
Structurally it is the service sector which is growing fast. The service sector
has grown from 61.7 per cent to 63.8 per cent. At the same time the
contribution of agriculture sec tx declined from 19.1 per cent in 2001-02 to
17.2 per cent in 2002-03. The per capita income at constant prices (1993-94)
increased from Rs.10832 in 2001-02 to Rs.11388 in 2002-03 recording a 5.1
per cent growth. The per capit3 income at the national level is Rs.10754 in
2001-02 and Rs.11010 in 2002-03. The state income at constant prices (1993-
94) is estimated at Rs.37031.33 crores in 2002-03. It is Rs.83782.01 crores at
current prices. It remittances fram abroad are also included the figure would
go up by around 25 per cent.
Kerala continues to have the highest rate of unemployment at 20.77 per
cent. There is a wide gap ketween the emerging needs and skills and
knowledge of those coming out of the formal educational and training
systems. 'Employability' in new areas is a major challenge facing the youth.
At the same time, employment through micro enterprises, especially in the
non-traditional areas like information technology, biotechnology, service units
etc. has shown an encouraging .rend. Considering the institutional finance, the
credit deposit ratio which was 42.71 in March 2002 has gradually increased to
46.69 in September 2003. The increase in drawal of micro finance by self help
groups is again a positive de~~elopment. It is interesting to notice that the
neighbourhood groups under Kudumbashree alone have attracted bank
finance to the tune of Rs.392.5(1 crores.
Coming to the state finances, after recording a marked improvement in
2001-02 the revenue deficit and fiscal deficit have jumped up as per the latest
estimates for 2002-03. The details are summed up below.
Table 3.2
Majo,. Deficit indicators5
( Fixed deficit 1 Revenue deficit 1 Primary deficit 1 Year % to
Amount Amount % t o Amount 1 I GSDP I I GSDP 1 ZibOP 1 3.52
3.48
3.36
3.47
4.88
5.36
7.25
5.56
4.12
5.49 Source: Economic Review 2003, SPB, January 2004, Government of Kerala, p.8.
The increase is mainly attributable to settlement of several pending
claims. The total debt of the State as per the latest estimate is Rs.3 1060 crores.
In this scenario government has taken very important reform initiatives in
financial management. Two important Acts namely the Kerala Fiscal
Responsibility Act 2003 and the Kerala Ceiling on Government Guarantees
Act 2003 have been brough. into force. Reduction and elimination of
government non plan deficit is essential for stepping up capital expenditure.
In 2002, the overall fisc;~l health of the State witnessed a positive trend
as evident from the level of relevant fiscal indicators given in the table above.
The overall trend reveals that in spite of fiscal reform measures taken by the
State, fiscal deficit remains high. The Kerala Fiscal Responsibility Act 2003
envisages reduction of revenue deficit to 'nil' and the fiscal deficit to 2 per
cent of Gross State Domestic Product, by the end of March 2007.
Prioritisation of expenditures, restructuring of public sector units, growth
oriented sectoral policies, speedy and time-bound completion of long pending
feasible projects, new budget cycle facilitating early budget implementation,
legal authority for financial management and responsibilities, improved asset
management system etc are cr:rtain other measures being taken up by the
government, with which it is expected that the State can achieve fiscal
soundness and sustainability in two to three While these are the state
of affairs, the financial and administrative mechanism of the Kerala state
underwent radical changes since the launching of decentralization and
consequent by the enactment of the new Panchayat Raj Act.
The Kerala Panchayat Act, 1994 came into force on 3oth May, 1994.
The Act provided for the constitution of grama panchayat at the village level,
block panchayat (152) at the i~termediate level and district panchayat (14) at
the district level, for facilitating the process of decentralization of power to
the grass grassroots level. On the basis of this Act, elections to panchayati raj
institutions were held in September 1995 and again in September 2000 and
the new bodies officially started functioning heralding a new era in the
governance of the villages of tk e state.
Financing of panchayti raj institutions has become a matter of great
concern. One of the crucial prc~blems is the procurement of adequate financial
resources to meet their varied requirements. Without finance nothing can be
6 Ibid., p. 19.
done. The capacity of a panchayat to discharge its duties and responsibilities
as well as to chalkout plans for the future depends mainly upon its revenue
resources. In this context it is appropriate to start with the grama panchayat
system.
3.3 Existing Grading of Gran~a Panchayats
Kerala has 991 grama piinchayats divided into special grade, grade I,
grade I1 and grade 111 panchayats. The classification of panchayats in 1983
was based upon their annual inc:ome at that time. This classification made in
1983 has remained unchanged eventhough it has ceased to have any
relevance.
There has been a ma-ginal reduction in the number of village
panchayats from 1001 in 1985 to 991 in 2000. This has taken place due to the
merger of village panchayats to urban local bodies, bifurcation of some of the
panchayats for administrative convenience and the upgradation of some of
them to municipalities.
While 19 village pancha:iats have been merged with urban local bodies
20 new village panchayats have been created due to the bifurcation of 20 large
village panchayats having a population of more than 50000. '
The changes were brought into effect in September 2000, with the
general elections to Local Self Government Institutions. With this
reorganization of urban and rural local Governments, the share of the urban
7 Report of the Second State Finance Commission 2001, Govt. of Kerala, Thiruvananthapuram, p.33
population in the state with respect to 2001 census has gone up to 26 per cent
from 16.87 per cent in 1991.
The average population cf a panchayat in 2001 was 25004. Around this
average, there are wide variations. The least populous panchayat, (Vattavada
in Idukki district) has a population of only 5102 and the most populous
(Munnar in Idukki) has a popul~~tion of 68205.
The average area of a 3anchayat in the state is 37.50 sq. Km. The
biggest panchayat is Kumily ir Idukki district with 816.72 sq. Km. And the
smallest is Valapattanarn in Karlnur district with 2.04 sq. ~ m . '
The distribution of population among the village panchayats is given in
the table below.
Table 3.3
Distribution of p3pulation of village panchayats9.
/ Below 10000 1 15 I
Range of population
/ Between 10000 and 20000 1 297 1
Number of village
panchayats
/ Between 20000 and 30000 1 460 1
( Above 50000 6 1 1 Total 1 99 1 I Source: Economic Review, 2003
8 Op.cit., p.4. 9 Economic Review 2003, State Planning Board, government of Kerala,
Thiruvananthapuram, January 20114, p.411.
Table 3.4
Table of Local Self Governments in Kerala ''
Ernakulam 1 (240813098378)
District (Area in No. of No. of No. of Grama Block District
Panchayids Panchayats Panchayats
78 12 1
69 13 1
54 9 1 (273111231577)
73 12 1
Kottayam 74 11 1 (220411952901)
Thrissur 1: 1: 1 1 (303212975440)
Palakkad (4480126 17072)
Malappuram (354813629640)
Kozhikode (234512878498)
No. of Munici- palities
4
2
3
5
4
Wvnad 2 5 1 3 1 1
No. of Corpo- rations
1
1
-
-
-
Kannur 1 8 1 9 1 1 (2997124 12365)
Kasaragod (196111203342)
Total (3886313 183619)
Source: Kerala panchayat guide 2005, Department of panchayats, government of Kerala.
10 Panchayat Guide (2005), Department of Panchayats, Government of Kerala, p. 12.
It would be interesting to compare the distribution of village
panchayats according to areas a:; well.
Table 3.5
Distribution of Crrama Panchayats - ~rea-wise '
Ares. Number of
village panchayats
Below 5 sq. Km. 2
Between 5 and 10 sq. Km. 48
Between 10 and 15 scl. Km. 133
Between 15 and 20 scl. Km. 188
Between 20 and 30 scl. Km. 290
Between 30 and 40 scl. Km. 125
Between 40 and 50 scl. Km. 46
Between 50 and 75 scl Km.
Between 75 and 100 :;q. Km.
Between 100 and 15C sq. Km. 3 1
Between 150 and 20C sq. Km. 6
Above 200 sq. Km. 16
Total 99 1
Kerala has a long sea-coast and 89 village panchayats face the sea.
1 1 Ibid., p.411.
Table 3.6
Density of Population among grama panchayats12
- -
Below 100 - -
Between 100 - 500 - -
Between 500-1000 324
Density of population
(Persons/Sq. Km.)
Number of grama panchayats
Source: Economic Review 2003.
-
Between 1000- 1500
Between 1500-2000
Between 2000-3000
Above 3000 -
Total
As per the extent of income norms the village panchayats were
classified as special grade (annual income of more than Rs.1.75 lakhs), grade
I (Rs.1 Lakh and above and upto Rs.1.75 lakhs), grade I1 (Rs.50000 and
above up to 1 lakh), grade 111 :exceeding Rs.50000). The grading was based
on their annual income excluding all grants - in - aid, contributions and debt
heads. The grading using the same norms showed 976 village panchayats as
special grade and the remainin: four panchayats as first grade (two each) on
the basis of the data on 987 village panchayats available. This shows that the
relevance of the grading has been lost. The regrouping was expected to be
done every three years. But it h a s not done after 1983.
256
128
89
15
99 1
'' Ibid., p.412.
A few interesting statistical highlights regarding village panchayats
are given below.
Largest village panchayat (area) Kumily - 8 16.72 sq. Km.
Largest village panchayat (population) Munnar grama panchayat -
68205
Smallest village panchayat (area) Valapattanam grama panchayat -
2.04 sq. Km.
Smallest village panchayat (population) vattavade grama panchayat
- 5 102 (200 1 census)
The panchayat with the lowest percentage of Scheduled Caste
population is New Mahe in Kannur. 218 panchayats have less than
0.1 percent of Sched~ led Tribe population.
Orumanayoor panchayat in Thrissur tops in sex ratio with 1232
females per 1000 males. Vettavada in Idukki is having the lowest sex ratio
(930). Nedumudi panchayat in Alappuzhe tops in Literacy rate (97.73 per
cent) and Pudur in Palakkad is having the lowest - literacy rate 48.31 per
cent. The panchayat with the highest percentage of Scheduled Caste
population is Munnar with 53 33 per cent. The panchayat with the highest
percentage of Scheduled Tribe population is Pudur in Palakkad with 64.2 1 per
centi3. There are 152 block pmchayats and 14 district panchayats in Kerala.
They have no powers of taxation and they depend on grant-in-aid given by the
government. Our focus of study is on grama panchayats.
'"pcit., p.4., The Hindu, March 2, ,004, p.4
Financial Resources of Panchayats
The existing structure O F financial resources of village panchayats in
Kerala has the following elemelits. The traditional sources of income could be
classified in to the following ca~egories,
• Tax revenue i.e.., taxc:s assigned by statute.
• Non-tax revenue i.e., income from sources such as property, licence
fees etc.
• Grants-in-aid from gcwernment which may be tied or untied
• Loans from governmc:nt and other financial institutions.
The tax revenue could be further divided into,
• Own taxes
• Assigned taxes
• Shared taxes
3.3 Own Taxes
These are taxes assigned by statute to panchayats and which are levied
by them. Mobilisation of resources at the local level assumes added
significance in the context of development from bottom. Tax income
constitutes and plays a vital role in the financial structures of panchayati raj
institutions in Kerala. A sound system of panchayat finance should generally
rest on a sound foundation of panchayat taxation which is the only means to
make these bodies self-governing and self - reliant
Property tax
This is tax levied on res,idential buildings in the panchayat area at a
given percentage (minimum 6 per cent and maximum 10 per cent) of the net
annual rental value of buildings calculated on the basis of the gross annual
value at which they may be reasonably expected to be rented out minus 10 per
cent of such annual rent in lieu of all allowances for repairs. Panchayats have
found by experience during the past several years that the building tax is the
most productive at the level of local Government.
Building tax is the largest single source of tax revenue of panchayats in
the state. It constituted 22 per cent of the total income in 1967-68, 18 per cent
in 1979-80 16 per cent in 1991..92 and 15 per cent in 1998-99. Receipts from
this tax rose from Rs.61.02 lakhs in 1967-68 to Rs.311.77 lakhs in 1979-80
and to Rs.1723 lakhs in 1991-!P2 and to Rs.2249 lakhs in 1993-1994 and to
14 Rs.3443 lakhs in 1998-99. It may be noted that the contribution of
profession tax shows a steady ir~crease. As per a circular the State government
stopped the panchayats from t h ~ quinquennial revision of building tax. That is
why it shows a declining trend.
Property tax constitutes the major item of revenue for the village
panchayats, which have a percapita collection of Rs.12.39. Though
amendments have been brought about in the Kerala Panchayat Raj Act in
1999 to introduce plinth area based assessment of property tax for both
residential and non-residential buildings including commercial buildings,
rules and operational instruc..ions have not yet been issued. Therefore,
-
I4 Second finance commission, Kerala Report, January 2001, p.40. Sukumaran, V.P. ( 1 996), MBA dissertation, University of Calicut, p.34.
property tax continues to be assessed as per the old system based on rental
value. In anticipation of switching over to the new method of assessment
village panchayats have not done any general revision of property tax since
1993, resulting in colossal 10:;s of revenue to the panchayats. The usual
periodic increase in property tax, which normally works out to be 25 per cent
at the time of each general quinquennial revision.
The property tax is assessed as per rules issued under section 203 of
the Kerala Panchayat Raj Act. 7'he rate is fixed as between 6 to 10 per cent of
the annual rental value in the rL les. Property tax constitutes 15 per cent of the
tax and non tax revenues of village panchayats. Property tax has grown by
40.34 per cent over a period of six years. It is interesting to note that
panchayats tend to levy lower tax even when they have a range to choose
from.
Profession tax
Article 276 of the constitution authorizes a state or other local authority
in a state to levy tax on profession. Panchayats in Kerala have been
empowered to levy profession lax under section 204 of the Kerala Panchayat
Raj Act, 1994. It is levied ever) half year. It constituted 10 percent of the total
income in 1991-92. Receipts fkom this tax was Rs.1076 lakhs in 1991-92,
Rs.1225 lakhs in 1993-94 and Rs 25911akhs in 1998-99, average percentage
of increase being 15 .415
Profession tax is lev ed from individuals and companies. All
companies and individuals tran iacting business or engaged in a profession for
at least 60 days in a half year are bound to pay the tax at such rates as are
fixed by the panchayat concerned subject to the maximum rates prescribed by
Government. However, artcle 2 76 (2) of the Indian Constitution has fixed the
maximum tax leviable per :fear at Rs.25001- Now the 1lth Finance
Commission has recommended that this provision be taken out of the
constitution and be made part o:~. a Central Act so that its amendment could be
easily made.
Based on the report of the first State Finance Commission, profession
tax has been revised in village panchayats.
Table 3.7
Source: Second State Finance Commission 200 1
Rates of profession tax in village panchayats16
16 Pushparajan K. (2002), Panchayatk u Bharanam - Yanthravum, Thanthravum, Thunchan Smaraka Samathi, thiruvananthapi ram, p.390.
Class
1
I1
I11
IV
V
VI
VIII
VIII
Half yearly income -- -
Maximum half yearly tax
Between Rs.12000 and 17999 --
Between Rs. 18000 and 29999 --
Between Rs.30000 and 44999 --
Between Rs.45000 and 59999
Between Rs.60000 and 74999 -
Between Rs.75000 and 99999
Between Rs. 100001) and 124999 --
Above 125000
Rs. 180
Rs.300
Rs.450
Rs.600
Rs.750
Rs.1000
Rs. 1250
Profession tax constitute:; the second largest source of own income for
the panchayats. During the six year period from 1993-94 to 1998-99 the tax
has grown by 101.6 per cent. Tl-is has been mainly due to the steep increase in
salary due to the pay commissio? recommendations.
Entertainment Tax
Entry 62 of the list I1 of the Seventh Schedule to the constitution
empowers the state Governments to levy a tax on entertainment. Among the
southern states, Kerala alone hiis delegated the powers to levy entertainment
tax to the local bodies.
Panchayat raj institutions in Kerala derive their power of taxation on
entertainments from the Kera a local authorities Entertainments Tax Act,
1961 which came into forcc in April 1962. In May 1963, the state
Government imposed an additional tax on entertainments, the proceeds of
which, after allowing a margin to the local bodies towards collection charges
were appropriated by the Govc:rnment. This arrangement continued till July
1975 and afterwards, the entire receipts from additional entertainment tax
were assigned to the local bodies. Now Entertainment Tax and Additional
Entertainment Tax are the income due to local bodies. Under section 3 of the
Kerala local authorities enter( ainment tax act, 196 1, local authorities are
empowered to levy a tax at a r ~ t e not less than 15 percent and not more than
30 percent each on price of admission to any entertainment. In the case of
dramatic or circus performanc; in panchayat areas, the rates are Rs.25 and
Rs. 15 respectively, on each per 'ormance as per section 6 A of the act.
In addition to entertainnent tax, additional entertainment tax at the
rate of 60 percent of the entefiainment tax is also collected. Thus for every
one rupee ticket of admission 24 paise is towards entertainment and additional
entertainment tax (15 paise and 9 paise) respectively and the balance of 76
paise is the exhibitor's share. E~tertainment tax has come to prevail as one of
the major sources of tax revenues of panchayats. In 1991-92 there were 1133
cinema theatres spread over 725 panchayats in the state. The remaining 266
panchayats did not have cinema theatres. Entertainment tax and Additional
entertainment tax together constituted 7 percent of the total income in 1991-
92, the receipts being Rs.526 lakhs. It was Rs.653 lakhs in 1993-94 and
Rs.971 lakhs in 1998-99, the av:rage percentage of increase being 10.8
Entertainment tax is the third largest source of income for village
panchayats. Consequent on the recommendations of the first State Finance
Commission, additional tax on mtertainment and surcharge on Show Tax Act
1963 has been repealed. Now, as per the unified act, Entertainment Tax is
fixed between 24 to 48 percent q~f the price of admission.
Though Entertainment l'ax constitutes a significant local government
income it is to be noted that there are no theatres either temporary or
permanent in 33 per cent villag- panchayats. Although Entertainment Tax has
grown by 48.98 per cent in village panchayats, it is seen that gross collection
of Entertainment Tax declined during the year 1998-99 in comparison with
the previous year. There appears to be considerable 'escaped' tax in this item.
This issue was considered in detail by the first State Finance Commission
which recalled that both the earlier finance commissions viz, the Naha
commission 1985" and the Mohandas commission 1993" had recommended
that the collection of Entertainment Tax be based on gross seating capacity
and recommended optional swi~ ch over to taxation based on seating capacity.
The average collection in villige panchayats is equivalent to the average
occupancy of 9.5 per cent, it is felt that the occupancy would have been much
better. Though Entertainment Tax act has been amended and an enabling
provision introduced to tax on t ~ e basis of seating capacity, the rules have not
yet been franied.
Show Tax
Show tax was levied under section 66(5) Kerala Panchayat Act 1960
and rules 1962. Show tax is levied by panchayats under authority conferred by
the section 200 of the Kerala Plnchayat Act, 1994, show tax rules 1995. Tax
on every show for cinematograph exhibition, dance, dramatic, circus
performance and other shows. The present rates of show tax are as follows
Table 3.8
2. 1 Other cinematographic exhibitions 1 Rs.10 1
~s tes of show tax19
Regular shows other than cinemas
Other exhibitions
-
Regular cinematographic exhibitions at licenced theatres
Source: Second State Finance Commission, 200 1 .
Rs.2
" Report of the Panchayat Finance (:ommission (Naha Commission) 1985, Government of Kerala, Thiruvananthapuram, p.7.
l8 Mohandas Commission 1993, www.localgovkerala.net, Government of Kerala, Thimvananthapuram.
l 9 Second State Finance Commission. Kerala, Report, January (2001), p.48.
The rates have not yet been revised as recommended by the first State
Finance Commission.
Table 3.9
Receipts from show tax2'
Rs.In lakhs
1993-1094
Source: Second State Finance Commission, 200 1.
Diagram 3.1
Receipts from show tax - - -
OC- -- I 1993-1994 1994-1995 1995-1996 1996-1997 1997-1998 1998-1 999 ~
I I ~ ~ ~ .. -
*' Ibid., p.49.
Optimal Tax
In addition to building tax, panchayats are empowered to levy services
tax for sanitation, water supply, street lighting and drainage at such
percentage of annual rental v ~ l u e not exceeding the maximum rate, viz,
sanitary tax (1 per cent), water tax (2 per cent), lighting tax (2 per cent), and
drainage tax (1 per cent).
Advertisement Tax
Advertisement tax is a new tax originally introduced through an
ordinance in 1988 by the Gove~nment of Kerala. This tax is collected as per
the provisions of section 209 of the Kerala panchayat raj act. The tax is
collected based on byelaws framed by the panchayat. Rules are not issued by
the Government regarding minimum rates or the mode of collection. This tax
has a good potential in a consumerist state like Kerala. But the realization of
revenue under this head has been very low. Only 121 village panchayats are
collecting advertisement tax anti its share is only 0.04 per cent.
Service Tax
Service tax is provided tor in section 200 of the Kerala Panchayat Raj
Act 1994 as per which Government is authorized to fix the minimum rates.
The recommendation of the first State Finance Commission to have an
independent service tax has no1 yet been operationalised. The total collection
of service tax in all the 976 village panchayats for which the data are available
comes to Rs.1.89 crores or 0.7 per cent of the own r e ~ e n u e . ~ '
21 Ibid., p.47.
Cess on Conversion of Land L se
This is a cess levied by local Government for conversion of land use
from paddy field, marshy land, pond or water body in to garden or building
site subject to the provisions af Kerala land utilization order 1967 issued
under the essential commodities act. The collection was only a meager sum of
Rs 0.64 lakh in 1998-99.
Surcharges
As per section 208 of' the Kerala Panchayat Raj Act 1994 the
panchayats are empowered to levy surcharges. Up to 5 per cent surcharge can
be levied on the property tax s~bject to a maximum of two surcharges. This
surcharge is to be levied for meeting any extraordinary expenditure by way of
implementation of a scheme, pl;in or project. The total collection during 1998-
99 was Rs.5.29 lakhs which is .ust 0.15 per cent of the property tax collected
during the same year. It is not(: worthy that even with specific provisions in
the act panchayats have been reluctant to impose surcharges.
3.4 Assigned Taxes
These taxes are collectetl by the Government but the entire revenue is
assigned to local Governments.
Basic tax
Kerala has a general tm on land known as the basic tax. The rate of
basic tax for panchayat area is i s . 11- if the aggregate extent of land held by a
land holder does not exceed 20 ares and paise SO per are. If it exceeds 20 ares
the entire collection is given to panchayats after deducting a collection charge
of 3 per cent. 318'~ of the basic tax is given to the village panchayats, 3110'~ to
the block panchayats and 115'~ to the district panchayats. The remaining 118'~
is credited to the rural pool. The distribution is as per the area of the
panchayat concerned.
The basic tax collected and distributed during period 1995-96 to 1999-
2000 is given in table 3.10.
Table 3.10
Source: Second State Finance Commission, 2001
Details of basic tax grant (Rs.in c r o r e ~ ) ~ ~
Diagram 3.2
r Year
1995-1996
1996- 1997
1997-1998
1998-1999
1999-2000
Details of bmic tax grant (Rs.in crores) - - - -- - -- --
0 1 1995-1996 1996-'1997 1997-1998 1998-1999 1999-2000
Year
Amount collected
13.27
13.57
13.52
21.41
22.46
-. -
[ ~ ~ m o u ~ l ~ o ~ t e d +Amount distributed I ..~ -~ ~ -
Amount distributed
5.25
14.18
11.64
15.39
6.98
22 Ibid., p.52
Surcharge on Stamp Duty
Under the provision of the Kerala Stamp Act 1959, for every
transaction relating to land, starnp duty and registration fee are levied. As per
section 206 of the Kerala Panchayat Raj Act, panchayats are entitled to levy 5
per cent of the amount of the vi~lue of the property transacted. But in practice
only the pre 1994 rates of surcnarge, i.e. 4 per cent for village panchayats is
levied.
The rates are given in the table.
Table 3.1 1
Note: Registration fee is collected by state Government and is not shared with local bodies.
Rates of stamp duty and surchnge under the 1960 and 1994 acts for village panchayats23
In accordance with the recommendations of the first State Finance
Commission Government have introduced a system whereby the receipts are
shown in the budget which enaAes direct payments to local Government. The
amounts collected and distribuled during the period 1995-96 to 1999-2000 is
shown in the table.
Stamp ciuty
Under 1960 acts
Under 1994 acts
2 3 Ibid., p.53
Source: Second State Finance Commission, 200 1.
Surcharge
4%
5%
Registration fee
2%
2%
Total
12%
13%
88
Table 3.12
Distribution of surcharge on stamp duty (Rs.in lakhs) to grama panchayats24
1 Year / Collected I Distributed I Percentage /
Source: Second State Finance Commission, 200 1
Stamp duty constitutes an important source of revenue of local
Governments and it constitute:; 13.7 per cent of the total own revenue of
village panchayats during 1598-1999. The proceeds are distributed to
panchayats on population basis, other than 25 per cent credited to the rural
pool.
Shared tax
Only motor vehicle tax collected by Government is shared with the
local bodies. It is called vehicle tax compensation (VTC) and is given as per
section 19 of the motor Vehicles Taxation Act 1976. 20 per cent of the net
collection of motor vehicles tax is distributed among village panchayats as per
road length according to a form ila based in unit length of roads.
Actual collection of Mt~tor Vehicle Tax and the actual distribution
during the period 1995-96 to 1999-2000 is shown in the table.
Table 3.13
Collection and distributian of Motor Vehicle Tax to panchayats (Rs.in lakhslZ5
Year Gross collection
Amount collection distributed
2 1043
1998-99
1999-2000 37 120 36006
Source: Second State Finance Commission. 2001.
Percentage
Diagram 3.3
Collection and distribution of Motor Vehicle Tax to panchayats
Year
OGross collect~on II Net collection [IIArnount distr ibute4 L I Z : - - ~~ ~~
-- ~-
There used to be substantial arrears in the payment of basis tax,
surcharge on stamp duty and \i ehicle Tax Compensation. However, based on
2 1 Ibid., 11.57
the recommendations of the first State Finance Commission Government
released Rs. 150 crores in three installments as a one-time settlement of dues
under the three items.
3.5 Non-tax Revenue
Non -tax revenue of village pai~chayats could be classified in to,
1. Licence fee,
2. Ciate fee,
3. Rent from property,
4. Income from propeny other than rent,
5. Permit fee,
6. Registration fee ,
7. Serviceluser charges and
8. Other sources
Licence fee
This is the most imporkmt source of non-tax revenue. The following
are the important items for which licence fees are collected.
I. Trade licence,
11. Licence under preventior~ of food adulteration act,.
111. Licence under the Kerala cinemas regulation act,
1V.Licencing of private slaughter house,
V. Licencing of private markets,
VI.Licence under the Kerala places of public resorts act,
VII. Licencing of private pafking and halting places,
VIII. Licencing of private burial and burning grounds,
1X.Licencing of technical experts,
X. Licencing of domestic animals,
XI.Licencing of animal stall; kept for commercial purposes and
XII. Licencing of special trades like butchers, fish mongers, poulterers,
commission agents and brokers.
Gate Fees
These are fees which arc: normally given out by auction to the highest
bidder who is then given the right to regulate entry based on certain fees. The
major sources are,
1) Public market
2) Public parking and haltir g places and
3) Public slaughter houses
Income from Property
This is an important itein of non-tax revenue especially for urbanized
village panchayats. The different types are,
1) Rent from buildings
2) Rent from lands and
3) Rent from cloak rooms and comfort stations.
Income from Property other than rent
I. Proceeds from sale of right to collect river sand
11. Proceeds from sale of right tc fish and
111. Proceeds from sale of usufncts of trees
Permit Fees
These are of two types,
(1) Fee for building permits and
(2) Fee for permits for the construction, establishment or installation of
factories, workshops or work pl;ices where electricity is used.
Registration Fees
These can be grouped as,
(1) Registration of hospital and para medical institutions,
(2) Registration of tutorials,
(3) Registration of births ant1 deaths,
(4) Registration of contractors and
(5) Registration of lodging:; (only in Malabar area - under the Madras
public health act)
Service / user charges
These relate to charges collected for use of utilities and amenities
provided by the panchayats
Income from Ferries
As per the Kerala Panchayat Raj Act and as per the various ferries
acts, function of providing lerries has been transferred to the village
panchayats. This income coulcl be either by auctioning of the right to ply
ferries or by charging from users.
Fines and Penalties
Fines and penalties arc realized by the panchayats when there is
violation of regulations or there are belated payments.
Sundry Items
These are miscellaneo~is sources of revenue from proceeds from
auctioning of meat stalls (in a few village panchayats only), interest on
deposits, endowments, return on investments like shares, contributions 1
donations, hire charges of vehicles I machinery, income from cattle pounds,
income from libraries, sale of jorms, sale of unserviceable articles and fallen
trees, and other items which cannot be classified.
The percentage share of important items of non-tax revenue is shown in
table 3.14.
Table 3.14
Share of important items ol'non-tax revenue in total non-tax revenue (1998-99y6
I Items I Village panchayats. / Dangerous and Offensive trade licence
I Public Food Adulteratio:~ licence I 0.20
1 Public halting place fee 1 1.09 1
I Cinematographic licenct:
Places of Public Resorts licence
Building permit fee
Market fee for public market
Public slaughter house gate fee
I Rent on building 1 1 1.03 I
-
0.08
0.03
1.48
3.44
0.20
I Fines I penalties I 0.26 1 / Ferry service 1 0.49 1 River sand
Fisheries
Source: Second State Finance Commission, 200 1.
Grant-in-aid from Governmelit
In the case of village panchayats, there are only two non-plan grants-
in-aid from Government viz., rural pool and level crossing grant-in-aid.
Pooling the 14 specific purpose grants-in-aid, which were in vogue earlier, 25
per cent of the surcharge on stamp duty and 118" of the basis tax, has created
rural pool. The amounts releassd to village panchayats after the constitution
of rural pool are shown in table 3.15.
26 Ibid., p.62.
Table 3.15
AmOun' 1 6 . 3 29.66 1 25.54 (Rs.in crores)
Source: Second State Finance Commission, 2001.
Grants-in-aid from the rural pool27
The grant for level crossing is given only to five village panchayats to
1998-1999
meet the additional burden on them due to existence of manned level
crossings whose establishment costs need to be shared with the railways.
1999-2000
There are two kinds of special ,:rants given to village panchayats. 96 primary
2000-2001
schools and 21 high schools ere run by village panchayats. The education
department gives a grant-in-aid for running these schools, which are treated as
aided schools as per the Kerala 3ducation Rules.
The amounts given duri>~g the last three years are summarized in the
table.
Table 3.16
Grants-in-aid given to local Governments for running schools28
Source: Second State Finance Commission, 200 1
27 Ibid., p.66 28 Ibd., p.68.
Libraries run by village panchayats are affiliated to the Kerala
grandhasala sangham, which gi-fes grant-in-aid as per the size of the library.
The grant-in-aid given during the last three years are given in the table.
Consolidated data are available only up to 1998-99
Table 3.17
Grant-in-aid given to village panchayats for running libraries29
e a r a g e _hayats (Rs.In Lakhs)
1996-97
1997-98 14.99
I 1998-95
Source: Second 5,tate Finance Commission, 2001.
Loans
Village panchayats can take loans with prior Govemment permission
from the Kerala State Rural Development Board (RDB) or commercial banks.
Now rural development board does not give loans and is engaged in
completing the construction of projects taken up earlier. The village
panchayats owe Rs.7.98 crores to rural development board by way of
overdues. Village panchayats have also been taking loans from HUDCO and
cooperative bank, jointly with the block and district panchayats.
Local Self Govemment Institutions in Kollam district have borrowed
Rs.80 crores from HUDCC, in 2000-01. Local Self Governments in
29 Ibid., p.69
Thiruvananthapuram have av.iiled of Rs.89.62 crores from the state
cooperative bank. These loans are for house construction for below poverty
line families. These loans are guaranteed by the government and repayment of
interest would be from future plan funds and repayment of the principal
amount is from fixed deposits which would multiply over a period to the
amount needed for repayment.
Local bodies have certain items of funds, which cannot be used by
them and are kept normally in the debt heads. The major items are earnest
money deposit, the securities, li?rary cess, taxes deducted at source, advances,
etc.
Grants-in-aid for Transferred Responsibilities
Grants-in-aid are being given to panchayats since 1995 to cany out the
new responsibilities transferred to them. These are:
1) General plan grant-in-aic for local development projects and
2) Specific-purpose grant-i1-aid for transferred responsibilities-plan and
non-plan.
General Plan Grants-in Aid
This is given for preparing local level development schemes. This is
untied grant with guidelines that at least 40 per cent should be spent on the
productive sector and not rnore than 30 per cent can be spent on
infrastructure. The amounts g ven to village panchayats is shown in table
3.18.
Table 3.18
Distribution of Plan qant-in-aid to village panchayats30
1 Year 1 Rs.In crores. 1 1996-9"*
1999-2000 595.01
2000-0 1 608.91
Source: Ilconomic Review 2000. * In 1996-97 plan grants were called untied funds.
In 1998-99 the grant-in-aid is devolved as per the formula as shown in
the table.
Table 3.19
Formula for devolution of plan grants3'
Village panchayats Indicators
Weightage (percentage)
excluding sclst)
Geographical area 5
excluding area under forests)
E € ! ! d y yi / ( Labourers, persons engaged I I
(grama panchayats)
index of agriculture
/ / In live stock, fisheries e ~ c . and 1 1
15
30 Economic Review 2000, State Planning Board, Govt. of Kerala, Thiruvananthapuram. p.219.
3 ' Op.cit., p.73.
marginal workers
Total 100
Source: Second State Finance C'ommission, 2001.
Specific Purpose Grants-in-Aid for Transformed Responsibilities
These funds could be broadly classified as,
1) Grant-in-aid for implementing transferred plan schemes both
state sponsored a id centrally sponsored.
2) Grant-in-aid for implementing specific programs under non-
plan, particularly welfare pensions.
3) Non-plan grant-in-aid for managing institutions/officers
transferred to loci11 governments.
For assets and institutio!ls transferred to local governments, the state
government meets the salary components as well as the operational expenses
like supply of medicines in hospitals. However, office expenses and
maintenance costs are given as non-plan grants to local governments. The
funds given are inadequate vis a vis the maintenance requirements.
Expenditure Pattern of Panchayats
Expenditure occupies a !>ride of place in local finance. Expenditure is
to be according to requirements. Resources have to be mobilized and
augmented fbr performing the obligatory functions of the local bodies. Local
bodies suffer from chronic paucity of financial resources. The major items on
which panchayats in Kerala are depending for their resources are:
1. Establishment costs
2. Expenditure on obligatoly duties.
3. Expenditure on development works.
The expenditure on these categories over the last six years for
panchayats in summarized in thc: table.
Table 3.20
Est;iblishment costs3'
1 Village pinchayats (Rs.in Lakhs) 1 96 97 98 99
6597 8124
468 513 718 1002 1165 expenses
Source: Second State Finance Commission. 200 1.
Table 3.2 1
Oi~ligatory duties33
1 llupees in lakhs i 1 Period
Public health/
Sanitation
2. Water supply/
Drainage
lighting 1 I Street
Source: Second State Finance C'ommission, 200 1.
32 lbid., pp.77-78 33 Ibid., p78.
Table 3.22
Development works34
95-96 96-97 97-98 98-99
2854 3814 6138 3104 --
Source: Second State Finance Commission, 2001.
Establishment Expenditure
This includes expenditure on salaries, wages, honorarium, pension
contributions etc. The cost of e:;tablishment is already high and because of its
linkage with state government pay and dearness allowance pattern, has an in
built upward momentum. The tverage annual rate of growth of establishment
expenditure was 9.36 per cent in 1998-99. Reduction in staff is not a realistic
proposition. When additional responsibilities as a result of panchayat raj
legislation requires additional staff, the staff and the funds for them should be
provided by the agency trans'erring the responsibilities to the panchayats.
There are arrears of obligatory payments. The income and expenditure
statements do not reflect the arrears that some panchayats owe by way of
obligatory payments towards xovident fund, pension contribution, decretal
amounts, payment to contributors, arrears to Kerala Water Authority etc.
More than 90 per cent of the Panchayats owe arrears to Kerala Water
Authority. In 30 per cent of the panchayats remittance of Provident Fund
Contribution collected from the employees was pending. Arrears of pension
" Ibid., p.79.
was pending in 17 per cent, decretal payment in 1.2 per cent and payment to
contractors in 13 per cent of panchayats Payments to Kerala Water Authority
made voluntarily is insignifican~ and payment is made by way of government
adjusting a part of the grant-in-aid.
Normative Level of Civic Services
Panchayats are expected to provide a range of civic services. The
general perception about the 1c:vel and quality of civic services provided is
that they are neither adequate nor satisfactory. To provide a satisfactory level
of services, substantial investments would be needed.
The major areas of service which panchayats have been providing are
1. Maintenance and construction of roads,
2. Collection and disposal of solid waste,
3. Street lighting,
4. Water supply through public taps and
5. Health care
Working group on expenditure norms under the chairmanship of Dr.
Raja J. Chelliah had studied the norms and standards for provision of basic
infrastructure services by pimchayats. It concluded that the following
functions should be regarded a:, the core function of panchayats.
1) Water supply 2) SanitationISewage 3) Solid waste collection 4) Primary
education 5 ) Primary health.
In the state of Kerala tht: following might be the core responsibilities
1) Provision of street taps 2) Provision of street lighting 3) Collection
and disposal of solid waste 4) Surface drainage and 5) Upgradation of roads.
etc.
All these items have been included in the 29 subjects of the Eleventh
Schedule of the constitution (Article 2436) added by the Constitution (731d
Amendment) Act, 1992, Sec. 4 l ~ i t h effect from April 24, 1993.
Drinking Water
The average population of a panchayat was 25000. As per Naha
Commission norm of one strect tap for 200 population, a panchayat would
need to have I25 street taps on the average. Fifty percent of the panchayats
had less than 125 street taps and additional street taps required is estimated to
be about 40000. The provision of street taps involves capital expenditure by
way of extending the water line and the estimated cost will come to about
Rs. 100 crores.
Street Lighting
It has been estimated by the first State Finance Commission that in
order to cover the more frequented areas there would be need for nearly 1.97
lakhs additional street lights in the panchayats. The estimated cost of
installation comes to approximately Rs.45 crores.
Removal of Solid Waste
The arrangement for collection, transportation and treatment of
garbage, as it exists today is highly insufficient, inefficient and primitive.
Each panchayat will have tc work out the cost of equipment and the
arrangements required for an efficient and safe handling of garbage and its
disposal in an environment friendly way
(foot note: Municipal Corporation of Cochin has estimated that the capital
cost involved in the physical in:-kastructure by way of vehicles and associated
facilitates for collection and disposal of solid waste capable of 400 M' per day
comes to about Rs.81 lakhs)
Surface Drainage
Panchayats have the res~~onsibility of maintaining drains on the sides
of the roads vested in them ant1 also for providing adequate drainage system
for removing liquid waste generated by establishments like hotels and
buildings. It is essential that 1o';al bodies improve the condition of drains by
lining them with rubble or bric,ks as well as covering the open drains. First
State Finance Commission has estimated that the cost of covering the open
drains by concrete slabs will work out to be Rs.375 per metre and the total
costs would be about Rs.200 crores. The cost of lining the open drains with
stones or bricks will require ancther huge dose of investment.
Improvements of Roads
A major portion of wide net work of roads under the control of
panchayats are earthen (53.78 per cent) and gravelled (31.3 per cent). They
are poorly maintained. The er.timated cost for black-topping the existing
metalled roads with a 3 metre ,carriage way including gross drainage work is
estimated at Rs.385000 per Kilometre road length. The cost of upgrading the
existing gravelled road to black topped ones with a 3 metre carriage way is
estimated at Rs.602000 per Kill~metere. For upgrading even 10 per cent of the
roads require an investment of Rs.210 crores. This indicates that enormous
additional funds are needed to spend on selected civic services, to reach
minimum level of satisfaction.
Minus Fund Panchayats
A significant factor noticed was the diversion of grants by panchayats
for purposes not envisaged by the grants. A panchayat is said to be the minus
fund panchayat when its balance of funds is less than its liabilities. The term
liabilities include funds received for specific purposes which are intended for
use only for specified purposes. But some panchayats utilize these tied funds
for purposes which are not authorized and most of such unauthorized
diversion is to meet the cost of establishment, public works and debt-
servicing. For example, in the Edavilangu panchayat in Thrissur district, the
percentage of establishment expenditure to total expenditure is over 50 per
cent and that of public works to total expenditure is 34.42 per cent. There are
many minus fund panchayats where establishment expenditure constitutes
more than 40 per cent of the total expenditure and expenditure on public
works also constitute more th.m 40 per cent and upwards in most of these
panchayats.
For meeting the establishment cost as well as performing the
obligatory duties the village panchayats can use tax revenue other than shared
tax, non-tax revenue, specific purpose grant and rural pool. The degree of self
sufficiency of village panchayats can be seen from the table.
Table 3.23
Self-sufficiency of village Fanchayats35 number of panchayats having
sufficient funds
Expenditure categories
Salaries & office Expenses -
charges, street light charges, sanitation services
Salaries, office expenses, water charges, street light charges. i
Source: Report of the Second State Finance Commission.
No. of village panchayats
964 --
Table 3.24
Expenditure percentage
37.75%
862
The comparative trends of increase in revenue in relation to increase of
40.26%
expenditure on establishment .is well as obligatory duties over six years for
village panchayats
Source: Second State Finance Commission, 2001.
Period
Revenue
Correlation is also work:d out and the correlation coefficient between
revenue and expenditure is found to be 0.99. Hence, they are highly
correlated.
1995-96
1385650
669400
j5 Ibid., p.83.
1996-97
2099477
845360
1997-98
2413635
943309
1998-99
2597877
11 13131
Devolution of funds
In 1990 a small amount was set apart for village panchayats as a plan
scheme. This had an allotmen: of Rs.28.58 crores in 1995-96, which was
stepped up to Rs.155.72 crol.es. A separate budget document for local
governments was brought into effect and added a specific head of account
"191" which indicated grants to Local Self Government Institutions. Certain
departmental plan schemes which are now called as "state sponsored
schemes" constitute about a tenth of plan grant- in-aid. Plan schemes are
implemented according to the glidelines issued by central/state government.
In July 1996 the government decided to earmark 35 to 40 per cent of
the plan funds to Local Self Government Institutions. The funds transferred to
village panchayats is indicated in the table.
Table 3.25
Total plan grants to village panchayats36
1997-98 2855 506.86
3 100 614.60
3250.1 639.25
2000-200 1 3535 636.37
2002-2003 4026 760.84
Source: Annual f'lan (2002-03), State Planning Board.
The availability of plan grants enabled the panchayats to realize their
functional responsibilities by implementation of projects in respect of the
functions assigned to them by the constitutional amendments and subsequent
36 Annual Pl;m (2002-03), Plan Assistance to Local Governments, State Planning Board, Thiruvananthapuram, p. 17.
state legislations. Well- functioning local governments are expected to
accelerate economic growth and create a new model of growth with equity.
Broad Trends in Panchayat Finance
Based on the discussion:; made, the broad trends may be summarised
as follows:
In 1995 only 32 per cent of the expenditure for functions assigned to
grama panchayats took place at the discretion of the panchayats. Now the
allocations has increased considerably and the grama panchayats now have
control over 68 per cent of erpenditures. The expenditure assignments are
now clear, functions have been divided according to various tiers and each
function has been broken up int3 activities in most cases to avoid overlapping.
The level of grama panchayat spending is significantly higher. In 1999, grama
panchayat spent on an average 11s.328 per capita equivalent about 1.4 per cent
of SDP and 8 per cent of the Stste government spending3'.
Within own source revenues non-tax revenues have been more buoyant
than tax revenues where per capita amounts have increased from Rs.7 in 1994
to Rs.29 in 1999~'. Panchayitts are unwilling to push for higher taxes
especially property tax. It is estimated that only about 40 per cent of the
revenue potential has been exploited. Fiscal pressure in panchayats are
growing due to the increase of expenditure responsibilities.
37 Economic Review 2003, State Plar ning Board, Government of Kerala, Thiruvananthapuram, p.4 17.
38 India: Fiscal Decenttalisation to rural Governments, January 7,2004, Rural Development Unit South Asia Region, The Wor'd Bank, p.16.
Table 3.26 Transfer of Resources to Grarna Panchayats Based on State Finance
~omrnission~' recommendations (Rs.lakh)
1998-99 11270.49 10797.22
1999-00 10997.34 10290.86
2002-03 10501.66 9479.42
2003-04 10501.66 9479.42
Source: Economic Review 2003.
* - Collection from assigned tcsres, i.e., Basic tax - total basic tax collected minus 6per cent shared by the village panchayat, block panchayt and district panchayat in the ratio of 4/8, jYI0 and I/5 respectively upto 2003-04 on the basis of Is' SFC recommendation and share of surcharge on stamp duty.
** - Amount actually passed o~z i.e., Basic tax and surcharge on stamp duty distributed.
@ -Devolution i.e., share of Motor Vehicle Tax.
# - Grant-in-aid i.e., Establishinent grant and other grants, rural pool grant etc. and plan assistance for rocal area plan programmes and grants for transferred schemes.
$ - Others i.e., Centrally sponscred schemes
Note: On the basis of the znd State Finance Commission Report Government have decided to devolve 9 per cent of the State own tax revenue (i.e., 5.5 per cent as Maintenance Grant and 3.5 per cent as General Purpose Grant) to the Local Bodies. The distribution among various tiers is based on the norms recommended by the 2"d SFC.
j 9 Economic Review 2003, State Plarning Board, Thiruvananthapuram, January 2004, p.S.334.
Emerging Issues
The Cirarna Panchayats have a viable population size which make them
ideal units of governance. The density of population is very high in almost all
panchayats. This semi-urban character has implications for service delivery
and creation of infrastructure. The large population and size of grama
panchayats niakes it difficult to have general assembly of voters in the form of
grama sabhas.
The iural-urban continuum implies that there can hardly be any
difference in the quality and quantity of civic services provided by
municipalities and by panchayats.
The decentralisation has helped improving accountability. These are
also the features of good governance40.
1. Committee system of decisicn making.
2. Right to information.
3. Participatory budgeting.
4. Due process in selection of beneficiaries.
5. Audit systems.
6. Social audit and
7. Citizen's charter.
The quality of people's participation has to be enhaned. Grama sabha is
expected to be an institution for meaningful dialogue on development
priorities. It will help chanellirg public contribution for common good. The
40 Economic Review 2003, State Planning Board, Thiruvananthapuram, January 2004, pp.412-416.
main inadequancy is that mainly potential beneficiaries are participating. To
make grama sabha effective all sections of society should participate.
Another issue is that the systems developed for transparency and social
audit are not fully functional. Decentrlisation increases the number of players
involved in governance thereby deepens democracy. But there is risk of new
collusive practices emerging if procedural safeguards are not strictly enforced.
Decentralised local plan~ling caused thin spread of available resources
because of the tendency for ward wise division in order to satisfy every
elected representative. Therefore, quality of planning has to be upgraded. This
is possible by reducing individual beneficiary oriented schemes and also by
fostering productivity increasing schemes. Additional resource mobilization
through credit linkages has to bs obtained.
Though professionals like doctors, engineers, agriculture officers are
available in the panchayat their active involvment in the planning process for
the improvement of quality 01' the project has yet to be fully ensured. The
improvement of office mansgement, human resources management and
financial management has to be made for the improvement in the quality of
delivery of services. The inst tution of Ombudsman should acquire greater
sensitivity to problems of pe0p.e and move closer to them.
top related