State Local Fiscal Relations - PowerPoint PPT Presentation

1 / 30
About This Presentation
Title:

State Local Fiscal Relations

Description:

State Local Fiscal Relations. Dr V N Alok. Indian Institute of ... Two UTs with legislatures. Five Other UTs. Rural local bodies. Urban local ... Subsidiarity ... – PowerPoint PPT presentation

Number of Views:104
Avg rating:3.0/5.0
Slides: 31
Provided by: drvi1
Category:

less

Transcript and Presenter's Notes

Title: State Local Fiscal Relations


1
State Local Fiscal Relations
  • Dr V N Alok
  • Indian Institute of Public Administration
  • 4 December 2006 vnalok_at_gmail.com

2
The federal ensemble in India comprises
  • Union Government
  • Twenty Eight States
  • Two UTs with legislatures
  • Five Other UTs
  • Rural local bodies
  • Urban local bodies

3
Institutions
  • Finance Commission
  • Planning Commission
  • National Development Council
  • Inter State Council
  • Centrally Sponsored Schemes
  • State Finance Commission

4
Principle of Subsidiarity
  • Whatever can be done best at the lower level
    must necessarily be done at that level. Only that
    which cannot be effectively implemented at a
    lower tier might be taken to a higher tier

5
74th Constitutional Amendment
  • Addition of Part IX A
  • 12th Schedule (243 W)
  • Powers to ULBs (243 X)
  • Metropolitan Planning Committees
  • District Planning Committees
  • State Election Commission
  • Finance Commission of States (243 Y)
  • Audit of Accounts of Municipalities

6
12th Schedule(243W)
  • Core functions
  • Roads and Bridges
  • Water supply for domestic, industrial and
    commercial purpose
  • Public health, sanitation, conservancy and solid
    waste management
  • Burial and cremation grounds and electric
    crematoria
  • Public amenities including street lighting,
    parking lots, bus stops and public conveniences
  • Welfare functions
  • Safeguarding the interests of weaker sections of
    society, including the handicapped.
  • Slum improvement and up gradation
  • Urban poverty alleviation
  • Provision of urban amenities and facilities such
    as parks gardens, playgrounds
  • Promotion of cultural, educational and aesthetic
    aspects
  • Cattle pounds prevention of cruelty to animals
  • Development functions
  • Urban planning including town planning
  • Regulation of land-use and construction of
    buildings
  • Planning for economic and social development
  • Fire services
  • Urban forestry, protection of the environment and
    promotion of ecological aspects

7
Legislations in other countries
  • Albania 1992 Law 7572 on the Organization
    and Operation of Local Government
  • . Bangladesh The Pourashava (Municipalitie
    s)
  • Ordinance, 1977.
  • Bulgaria 1991 Law on Local Self- Government
    and Local Administration.
  • Hungary Law 65 of 1990 on Local
    self-Government.
  • Republic of Korea The Local Antonomy Act, 1988.
  • Phillipines The Local Govt. Code, 1991
  • Sri Lanka The Thirteenth Amendment to the
    Constitution.

8
Reasons to cheer
  • Mandatory Provisions of Part IX and IX A
  • Conformity Acts have been enacted in all the
    States
  • Elections have been conducted in almost all
    States
  • All States except six have received their first
    generation Finance Commissions reports
  • About a million women have been elected

9
Areas of concern
  • Recommendatory Provisions of Part IX
  • ULBs in states starved of funds
  • But expanded responsibilities
  • Lack of capacity
  • Institutional
  • Personnel

10
Own Source Revenue of Each Level of Government (
Share)
11
Own Source Revenue of Each Level of Government (
Share)
12
Expenditure by Local Bodies
  • Rural local bodies 0.98 of GDP
  • Urban local bodies- 0.56 of GDP

13
Municipal Spending
  • 3.0 to 3.5 of combined spending
  • 0.6 to 0.7 of GDP of all States
  • 35 to 40 lower than the norms

14
Revenue source of Municipalities
  • Internal Sources
  • Taxes
  • Non- Taxes
  • External Sources
  • Borrowings
  • Fiscal Transfers- Revenue Sharing, Grants

15
Internal revenues of Municipalities
  • Direct Tax revenue
  • Property tax
  • Duty on Transfer of Property
  • Property related service taxes- water tax,
    drainage tax, conservancy tax, lighting tax, fire
    tax etc
  • Profession tax
  • Advertisement tax
  • Entertainment tax
  • Environment tax
  • Passenger and goods tax
  • Tax on vehicles
  • Tax/toll on animals
  • Boat tax
  • Pilgrim tax
  • Timber tax
  • Indirect Tax
  • - Octroi

16
Own revenues of Municipalities
  • Non-tax revenue
  • Parking fees
  • Market fees
  • Toll on bridges / vehicles
  • Fee for fire services
  • Water rate

17
Contribution of Own Revenue in Total Expenditure
of PRIs
18
State Finance Commission
  • Recommendations can be grouped into
  • Global sharing of revenue from state to local
  • Assignment of taxes to local bodies
  • Grants-in-aid from state to local bodies
  • Others

19
Global share by SFCs
  • State Acceptance
  • Total Revenue of state
  • Andhra Pradesh (I) 39.2 No
  • Andhra Pradesh (II) 10.4 No
  • Assam 2.0 Yes
  • Goa 36.0 No
  • Own Revenue of State
  • JK (I) 13.5 No
  • M.P. (I) 11.6 Modified
  • Own Tax revenue
  • Kerala (II) 3.5 Not known
  • Rajasthan (I) 2.18 Yes
  • Rajasthan (II) 2.25 Yes
  • T.N. 8.0 Yes
  • U.P. (I) 10.0 Yes
  • U.P. (II) 12.5 Yes
  • W.B. 16.0 Yes

20
Amendment in Article 280
  • 280 (3)(bb) recommend measures needed to augment
    the Consolidated Fund of a State to supplement
    the resources of the Panchayats and
    Municipalities in the State
  • 280 (3)(c) recommendations to be based on the
    recommendations made by the Finance Commission of
    the State

21
10th Finance Commission(1995-00)
  • No mandate in its ToR for local bodies
  • Sue Moto Cognizance of the Amendments
  • Rs 4381cr for panchayats _at_ Rs 100 per capita
  • Rs 1000 cr for Municipalities
  • Distribution based on inter State slum population

22
11th Finance Commission (2000-05)
  • Rs 8000 crore for panchayats
  • Rs 2000 crore for municipalities
  • Accounts, data base and audit be the first charge
  • Remaining amounts for the core services
  • Article 280 (3)(C) be deleted

23
EFC cited four reasons
  • (i) Non-synchronization of the period of the
    recommendations of the SFCs and the Central
    Finance Commission
  • (ii) Lack of clarity in respect of the
    assignment of powers, authority and
    responsibilities of municipalities
  • (iii) Absence of a time frame within which the
    state governments are required to take action on
    the recommendations of the SFCs
  • (iv) Non-availability of the reports of the SFCs.

24
EFC criteria for allocation
  • Criteria Weight
  • population, 1991 40
  • geographical area 1991 10
  • Revenue effort of local bodies 10
  • Distance 20
  • Index of decentralization 20

25
Index of Decentralization
  • Enactment of state municipal legislation in
    conformity with the Constitution (seventy-fourth)
    Amendment Act, 1992.
  • Intervention/restriction in the functioning of
    municipalities.
  • De-jure assignment of functions to municipalities
    vis-à-vis the twelfth schedule of the
    Constitution of India.
  • De-facto assignment of functions to
    municipalities by way of rules, notifications,
    and orders of state government.
  • De-jure assignment of taxation powers to
    municipalities.
  • Exercise of taxation powers by municipalities.
  • Constitution of the finance commission of states
    and submission of action taken repots.
  • Action taken on the major recommendations of the
    finance commission of states.
  • Election to the municipalities.
  • Constitution of district planning committees.

26
12th Finance Commission (2005-10)
  • Sequentially the third Finance Commission
  • ToR consolidated reproduction of 280 (3)(bb)(c)
  • SFC must identify issues for Union Government
  • Approach- Equalization of basic services
  • Rs 20000 cr to panchayats for drinking water
    supply, sanitation
  • Rs 5000 crore to municipalities for solid waste
    mgt

27
Inter se Allocation
28
Grants by 3 FCs (Rs crore)
29
Issues
  • Grants to go up- No matching contribution
  • Releases in May and November
  • State to make allocation
  • Most SFC Reports are silent
  • Monitoring by State for utilization of funds
  • Monitoring at Central level for compliance

30
Thank You!
Write a Comment
User Comments (0)
About PowerShow.com