Panchayats as self-governing organizations
Problems that Panchayats are facing:
- The State government’s inability to provide funding on schedule requires them to fulfil various targets and finish panchayat work by either borrowing enormous sums of money or using private resources.
- State governments: they still have a great deal of discretionary power and sway over panchayats through the local bureaucracy.
- Gram panchayats continue to be financially reliant on grants from the State and the Centre for both discretionary and non-discretionary uses.
- Their own sources of income, both taxable and nontaxable: They make up a very small amount of the panchayat’s total assets.
- For instance, in Telangana, a panchayat’s own earnings accounts for less than 25% of its total revenue.
- Panchayat discretionary grant access is still reliant on political and administrative ties.
- Local development is halted by an excessive delay in transferring approved funds to panchayat accounts.
- The local bureaucracy’s delays in allocating funding have put pressure on sarpanches, forcing some of them to commit suicide.
- Local bureaucracy is another way that state governments tie local governments.
- Public works project approval frequently needs both administrative and technical approval (from the engineering department).
- politicians and bureaucrats at higher levels interfering in the government programme beneficiary selection process and further restricting the authority of sarpanches.
- Sarpanches’ capacity to exert administrative control over local workers is likewise constrained.
- Recruitment for village watchmen and sweepers—local officials who report to the panchayat—occurs at the district or block level in various States.
- Sarpanch lacks the authority to fire these employees at the local level.
- Sarpanchs, in contrast to other elected officials, are subject to removal from their positions.
- Numerous states have implemented Gram Panchayat Acts that enable district-level administrators, primarily district Collectors, to take action against sarpanches who engage in official misconduct.
- For instance, District Collectors have the authority to suspend and remove serving Sarpanches under Section 37 of the Telangana Gram Panchayat Act.
Devolution of Panchayat finances:
- Creation of own revenues: Several State Panchayati Raj Acts that have been derived from the Central Act include provisions for taxation and collection.
- The outcome of the Ministry’s actions was the implementation of participatory planning and budgeting.
- Just 1% of panchayat revenue comes from taxes; the remainder comes from grants from the State and Central government.
- 15% comes from the States and 80% comes from the Centre.
Key Own revenue streams (OSRs) where panchayats can generate the most revenue:
- Property-tax
- tax on land income
- additional stamp duty surcharge
- tolls and professional taxes
- promotion
- User fees for lighting, water, and sanitary facilities.
How to maximise your revenue:
- Create a tax-friendly atmosphere by putting in place suitable financial regulations.
- Choosing the bases for taxes and non-taxes
- Calculating their prices
- putting in place procedures for regular updates
- Specifying the areas of exemption
- Adopting legislation for efficient tax administration and enforcement in order to collect
- The income from investment sales, hire charges and receipts, fees, and rent are all included in the collection of non-tax revenue.
The function of Gram Sabha:
- By utilising local resources for income generation, gram sabhas play a vital role in promoting self-sufficiency and sustainable development at the grassroots level.
- They can be involved in the conception, formulation, and execution of projects that generate income, ranging from small-scale businesses to agriculture and tourism.
- They have the power to levy taxes, fees, and levies, with the proceeds going towards social welfare initiatives, public works initiatives, and local development projects.
- Gram Sabha preserve community trust and accountability by promoting inclusive involvement and transparent financial administration.
- Encouraging villages to achieve resilience and economic independence.
What actions are necessary?
- Gram sabhas should encourage entrepreneurship and cultivate collaborations with external stakeholders in order to improve the efficacy of their efforts to generate cash.
- Gram panchayats are not allowed to collect taxes in a number of States, and district and intermediate panchayats are not given the ability to do so in a large number of other States.
- The district panchayats receive a meagre 5% of their taxes, the intermediate panchayats 7%, and the gram panchayats 89% of their own taxes.
- To guarantee fair distribution, OSR must be defined for each of the three tier panchayats.
The allotment to local bodies in rural areas:
- There were ₹4,380 crore and ₹8,000 crore in the tenth and eleventh CFCs, respectively.
- There was a significant increase in the 14th and 15th CFCs, with ₹2,00,202 and ₹2,80,733 crore allocated, respectively.
- In 2018–19, ₹3,12,075 lakh in taxes were collected; by 2021–2022, that amount had dropped to ₹2,71,386 lakh.
- During the same time period, ₹2,33,863 lakh and ₹2,09,864 lakh in non-tax revenue were collected.
Way Ahead:
- The public and elected officials must be made aware of the importance of revenue raising for the advancement of panchayats as autonomous organisations.
- It is necessary to reduce the dependency syndrome on grants so that eventually panchayats can rely on their own resources to exist.
- Such a condition of affairs can be attained by panchayats when committed efforts are made at all levels of government, including the condition and federal levels.
- For decentralisation to be truly effective, sarpanchs must possess financial or administrative autonomy.
