Rural democratic
decentralisation in India;
background, current situation,
challenges
Islamabad, September 2013
T.R. Raghunandan
Outline of the Presentation Part 1: Historical context:
Why we do what we do
Part 2: Action:
What we do (particularly on the fiscal side)
Part 3: Challenges, issues and the future:
What we are experimenting with, where we succeed and where
work is in progress..
1.1. A brief history Existence of self-governing village communities across
sub-continent that over millennia, served as main interface between predominantly agrarian village economies and
Custom and tradition elevated these earlier councils or assemblies called “sabhas” to a position of considerable authority.
“Panchayat” (an assembly of five respected elders) became pivot of administration, focus of social solidarity and principal forum for dispensation of justice and resolution of local disputes.
Characteristics of village panchayats remained unchanged during medieval and Mughal periods.
Local governments in British India
1687: Municipal corporation of Madras constituted, on the British model of a town council, with powers to levy taxes and deliver services, comprising of nominated members.
1870: Revival of traditional village panchayat system in Bengal
1882: Ripon Resolution, providing for rural local boards with two-thirds of membership to be composed of elected, non-official representatives and presided over by a non-official Chairperson.
The Indian freedom movement and
local governments
Indian freedom movement starts demanding “self-government” as the first political goal, before evolving to demand for independence.
1909: Royal Commission on Decentralisation recognises importance of Panchayats in the governance of India.
1919: Government of India Act 1919, brings in system of ‘dyarchy’, and transfers self government to the domain of Indian Ministers in the provinces.
1935-39: Provincial Autonomy under the Government of India Act, 1935 results in popularly elected governments in Provinces, who in turn enacted legislation for further democratization of local self-governments,
The first constitutional steps
Mahatma Gandhi: The entire edifice of Indian democracy
should be based upon one popularelection to the Village Panchayat andindirect elections from panchayats toState Assemblies and from the StateAssemblies to the Parliament.
Article 40 of the Constitution: The State shall endeavour to constitute
village Panchayats as institutions oflocal self government
More history.. 1953: Autonomous councils set up in tribal areas
1955: Balwant Rai Mehta Committee submits report and recommendsthree tier system of local governments in rural areas,
1959 to 1965: LGs set up in the first flush of enthusiasm, but then furtherelections are delayed, except in a few States, Gujarat andMaharashtra.
1972: West Bengal constitutes Panchayats at three levels andundertakes election,
1977: Ashok Mehta Committee, recommending two tier Panchayats,
1987: Big-bang devolution to Panchayats in Karnataka
1989: The failed 64th and 65th amendments
Salient features of the 73rd & 74th
Constitution Amendment Acts, 1993 Constitutional status for Gram Sabha (assembly of the community
in rural areas),
Three tier Panchayat system at the village, intermediate anddistrict levels. (State with populations of less than 2 million need nothave intermediate level), Single tier municipalities in urban areas
Elections from separately delimited territorial constituencies atevery level of LG
Reservation of seats and leadership positions for deprivedcommunities and women,
Regular elections every 5 years through independent StateElection Commissions,
State Finance Commissions to be set up once in 5 years torecommend financial share of LGs, Central Finance Commission todo the same, from central revenues,
Powers to be so devolved upon LGs to enable them to function asinstitutions of self government.
Article 243G reads as under, Powers, authority and responsibilities of Panchayats.-
Subject to the provisions of this Constitution, the Legislature of aState may, by law, endow the Panchayats with such powersand authority as may be necessary to enable them tofunction as institutions of self-government and such law maycontain provisions for the devolution of powers andresponsibilities upon Panchayats at the appropriate level,subject to such conditions as may be specified therein, withrespect to-
(a) the preparation of plans for economic development andsocial justice;
(b) the implementation of schemes for economic developmentand social justice as may be entrusted to them including thosein relation to the matters listed in the Eleventh Schedule.
Analogous clause for Municipalities too
Family welfare
Eleventh Schedule lists 29 matters as
below Land improvement, land reforms, consolidation
soil conservation.
Minor irrigation, water management
watershed devpment
Agriculture, incl.
extensionAnimal husbandry, dairying and poultry
Welfare of the weaker sections, in particular of SCs and STs
Markets Fairs
Technical training vocational education
Khadi, village and cottage industries
FisheriesSocial forestry farm forestry
Minor forest produce
Rural housing Drinking water
Fuel and fodder
Small scale industries, food processing industries
Roads, culverts,bridges, ferries, waterways
other means of communication
Non-conventional
energy
Education, including primary
and secondary schools
Poverty alleviation programme
Rural electrification, distribution of
electricity
Health and sanitationhospitals. Primary health centres
dispensaries
Cultural
activitiesLibraries
Adult and non-formal education
Public distribution system
Maintenance of
community assets
Social Welfare, Welfare lf handicapped and
mentally retarded
Women and
Child development
Public amenities, incl. street lighting
parking lots, bus stops
Twelfth Schedule
Regulation of land use andconstruction of buildings
Planning for economicand social development
Urban Planning, incl.
town planning
Safeguarding interests of weaker sections, including handicapped and mentally retarded
Burial and burial grounds, cremations,
crematoriums
Provision of urban amenitiesand facilities such as
parks and playgrounds
Urban forestry, environmental protection
and promotion of environmental aspects
Regulation of Slaughter houses and
tanneries
Fire services
Water supply for drinking,industrial and commercial
purposesRoads and bridges
Promotion of cultural,educational and
aesthetic aspects
Urban Poverty alleviation
Public health, sanitationConservancy and solid waste
management
Cattle pounds, prevention of cruelty
to animals
Slum improvement andupgradation
Vital statistics incl.
registration of births and deaths
Inclusion of people in governance: 537 District Panchayats, 15,694 elected
representatives. (37 % women, 17 % SC, 11 % ST)
6094 Intermediate Panchayats, 1,56,609 electedrepresentatives. (37 % women, 21 % SC, 7 % ST)
2,33,913 Village Panchayats, 26,56,476 electedrepresentatives. (37 % women, 19% SC and 12% ST)
6000 Urban LGs, with 600000 elected reps.
At the Village Panchayat level, each electedrepresentative’s constituency comprises of about 340people, (70 families)
Current position on Panchayat design –
champions emerging amongst States
Maharashtra, Gujarat, Rajasthan (1959 onwards): First champions – strong elected district governments (Zila Parishads)
West Bengal – (1972): Local government and rural land reforms going hand in hand
Karnataka (1987): big bang decentralisation –30 percent of State budget devolved to 2 tier LGs
Kerala (1996): Big bang decentralisation - 33% State budget devolved as block grants to 3 tier LGs and massive ‘peoples’ planning campaign’ launched.
Recent developments in decentralised
planning
2004: Newly constituted Federal Ministry of Panchayati Raj
organises 7 Round Tables on various dimensions of Panchayati
Raj
July 2004: 2nd Round Table passes resolutions on decentralised
planning; urges 11th Plan to be built on the foundation of participative plans developed from Gram Panchayat and
Municipality levels upwards
Recent developments in decentralised
planning
August 2006: Planning Commission issues fresh guidelines on
decentralised planning
Feb 2008: BRGF launched, giving untied funds for gap filling on
the basis of integrated participative planning.
Jan 2009: Planning Commission comes out with the Handbook
on Decentralised Planning
What are the dividends from
decentralisation? Political?
Politicians have always led decentralisation:
Yet evidence is that political benefits are shortlived for the visionary who triggers decentralisation.
Efficiency? Bureaucrats have generally resisted decentralisation:
Feeling that too many levels of decision are slowing down decisions; that we are paying a ‘democracy tax’ in the form of delays, the belief that corruption is decentralised.
Economists are newcomers;
Lack of data and good research prevents in depth examination of economic arguments
Equity? Civil society remains skeptical of benefits:
Elite capture hinders better targeting through Panchayats
Elements of good design for
devolution
Role clarity,
Finance to follow function,
Rules of devolution to be clear,
Clear accountability for devolved responsibilities,
institutions able to respond to the emerging demand for capacity support,
a minimum level of capacity to absorb a program of capacity building,
Role clarity for Panchayats through
Activity Mapping Identification of activities related to devolved functions
Attribution of appropriate activity to a Panchayat level, based on the principle that each activity ought to be undertaken at the lowest level that it can be undertaken.
Activity Mapping to trigger transfer of funds and functionaries,
Role clarity - the trigger for capacity
development and accountability…
Normal fear about devolution: Panchayats do not
have the capacity to manage enhanced powers.
Skeptics feel that capacity building of Panchayats
should precede devolution.
If you really give Panchayats clear roles and hold
them accountable for these, they will have an
incentive to seek out the capacity support they
need;
Capacity building then becomes demand driven;
Thus, devolution accelerates capacity building of Panchayats.
Role Clarity, challenges
Sizes of Panchayat jurisdictions vary from State to State,
Pull of competing loyalties because of dual control of staff,
Parallel committees fostered by departments and multilateral lending agencies continue,
Lip service to Panchayat system by co-opting office bearers into parallel systems,
Parallel system accounts not captured in Panchayat accounts
User groups created at sub-panchayat level with no connection to the Panchayat.
Some interesting good features
Bihar:
13000 teachers recruited at GP level and placed with GPs
50 percent reservation for women
Jharkhand:
Only state to merge DRDAs with ZPs through law!
Punjab:
Outsourcing of hiring of doctors by ZPs
Chhattisgarh & MP:
Declaration of dying cadres and appointment of field staff
at Janpad Panchayat levels
Money matters - Richard Bird and Enid Slack
Who has it?
(Central, State and local taxation system)
Where does it come from?
(Central & State transfers)
How does it come?
(Modalities of transfer)
Under what conditions can it be spent?
(General purpose or specific purpose transfers)
By whom?
(Extent and scope of decentralisation)
Centre
Constitutional framework for inter-governmental fiscal transfers
Share of
Central taxes
Recommended
By CFC
[Art.280(3)(a)].
Augmentation
to supplement
LG resources
[Art. 280(3)(b) &
(bb)]
Grants in aid (Art. 275)
Grants for any
public purpose
(Art. 282)
States
Local government
Funds recd
to supplement
LG resources
[Art. 280(3)(b) &
(bb)]
Share of
State taxes
Recommended
By SFC
[Art. 243(I)]
Power to collect and
appropriate own
revenues
[Art. 243(H)]
Entrustmentof
Schemes[Art. 243(G)]
A B
H
G
FE
DC
Central to State fiscal transfers- the changing scenario
Compiled from Expenditure Budgets, MoF
Centre to State Fiscal transfers made under Art. 280 & 275 Centre to State Fiscal transfers made under Art. 282
Sl
Item
Amt (Rs. Bill)
Sl Item
Amt (Rs. Bill)
2009-10
2010-11
2011-12
2012-13
2009-10
2010-11
2011-12
2012-13
1
States' share of
Taxes and
Duties[Art.280(3)(a)]
1648 2193 2554 3019 1
Central
Assistance for
State and UT
Plans (PlanningCommission)
845 931 1052 1300
2
Non-Plan Grants
& Loans
[includes grantsunder Art.275(1)]
460 499 554 643 2
Assistance for
Central
and CSSs
(PlanningCommission)
245 306 371 416
3Direct releasethrough MPLADS 15 15 30 40
4
Direct releases
to State/District
level
autonomous
bodies/implementing agencies
905 1187 1128 1334
Total 2109 2692 3108 3662 Total 2010 2440 2581 3090
Fiscal imbalance in India
Revenues % Expenditures %
National/Federal 66.19% 47.70%
State/Provincial 31.31% 45.19%
Local 2.5% 7.11%
Total public R&E 100% 100%
Source: 13th FC and MoF statistics
Inter-governmental transfers: Centre to
states1. An amount nearly equivalent to FC devolution
and grants gets sent to the State through Schemes from the centre.
2. A relatively small percentage of this is actually allocated to and spent by rural local governments.
3. The states also allocate funds from their resources.
4. Expenditure is being incurred by the Centre and States in the rural sector but not entirely through rural local governments.
Concerns regarding fiscal decentralisation
Own revenues of LGs very low and collection skewed, leading toover dependence on fiscal transfers,
Most Central and State fiscal transfers are tied and conditional;
States undergoing fiscal stress used to intercept & divert funds meantfor LGs,
Some States do not meet commitment to release their shares to LGs.
Parallel structures capture significant share of fund entitlements ofLGs.
Local governments
Finding solutions; ensuring
that finance follows function
State governments
Central Government
The difference between real and
not-so-real devolutionReal Devolution:
Clear role assignment,
Power to spend money,
Power to tax,
Discretion in spending money,
Power to hire fire and control staff,
Direct Accountability.
Not-so-real devolution:
Scheme bound expenditure,
Staff on deputation,
Limited power to collect resources
Somebody else (above or below) acting for the Panchayats
Somebody else (above or below) responsible for Panchayat performance
Insitutional design the key for good
inter-governmental relations
LGs cannot be excessively policed from above – both as a
matter of constitutional design and as being logistically
inefficient.
Good design the key to providing the right incentives for goodbehaviour by levels of government.
Putting in safeguards to prevent diversion of Central funds meant for Panchayats.
A legally mandated separately identifiablenon-lapsable fund for each LG,
A mechanism of tagging and tracking fundtransfers to LGs,
A budget control system that can identify lineitems of expenditure within the Stateconsolidated fund or the Panchayat fund, so asto prevent the possibility of overdrawal onindividual budget line items,
Just in time fiscal transfers,
Direct fiscal transfers to the poor – the universalidentity number?
The way forward – the current thrust of reforms
Activity Mapping
Fund allocations to follow functions-create budget windows for the local government in each department’s budget
Reform accounting and classification systems
Reform of fund flow mechanisms- state treasuries and bank transfers; allowing for just in time transfers
Clarify the agency function of panchayats through well designed contracts
Build up the taxation power of panchayats-concentrate on property taxes and user charges
Equalisationgrants
Poorest areas Not so poor areas
Incentives& Innovations
A model for fiscal
Sustainability?
Own revenues
Borrowings
Thank you
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