West Bengal is looking at World Bank aid to strengthen its three-tier Panchayati Raj system, an institution that has largely kept the Left Front government going for the last three decades.
Ahead of the 2011 Assembly elections, the state government has signed a loan agreement of $ 200 million, amounting to Rs 920 crore, with the World Bank for a project on Institutional Strengthening of Gram Panchayats (ISGP).
The World Bank will provide Rs 920 crore credit over five years through International Development Association (IDA) for this project, which will be implemented by the department of panchayats and rural development, government of West Bengal.
The project is designed to support the state government's efforts to increasingly devolve functions and funds to the three tiers of Panchayati Raj institutions with the aim of improving the effectiveness of basic services to the rural people.
The total cost of ISGP project is $ 235 million (at the conversion rate of Rs 46 per $ it amounts to Rs 1,081 crore ) over five years. Out of this, $ 200 million (equivalent to Rs 920 crore) will be funded from the World Bank (IDA) credit and $ 35 million (equivalent to Rs 161 crore) will be the state's contribution as part of the counterpart financing arrangements.
This IDA credit is soft in nature as it does not have any interest charges, but there will be a service charge at the rate of 0.75 per cent. The credit has a moratorium of 10 years, and has to be repaid by the state government over a period of 25 years starting from 2020.
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The project is expected to continue till December, 2015.
In view of the World Bank, West Bengal is one of the few states in India, where all Gram Panchayats are subject to an effective annual financial audit under the scrutiny of Auditor-General, according to a press release by the West Bengal government.
“The project will add substantially to the resources available to Gram Panchayats through supporting an annual, performance-based block grant to 1,000 Gram Panchyats in nine districts,” according to the press release.
These districts include, Burdwan, Howrah, Nadia, Cooch Behar, Birbhum, Paschim Medinipur, Purba Medinipur, Bankura and Dakshin Dinajpur.
In order to access the grant, Gram Panchayats will be required to meet a set of minimum conditions and performance criteria like planning and budgeting, project execution and service delivery, accounting, financial reporting and audit, as well as community participation, transparency and accountability.