Panchayats to get 1.24% of taxes

12TH FINANCE COMMISSION REPORT/ LOCAL BODIES

The Centre has accepted the 12th Finance Commission's recommendation to augment the resources of municipalities and panchayats through grants-in-aid of Rs 25,000 crore from the consolidated funds of states for the period 2005-0.

The amount will be equivalent to 1.24 per cent of the sharable tax revenues and 0.9 per cent of gross revenue receipts of the Centre as estimated by the commission.

The amount of Rs 25,000 crore may be divided into a 80:20 ratio between panchayats and municipalities. Panchayati Raj Institutions (PRI)) will be given Rs 20,000 crore and municipalities will get Rs 5,000 crore, which are a substantial increase over the levels recommended by the previous commissions.

UNDERUTILISATION

The commission has taken note of the shortfall in the release of grants to states due to under-utilisation of funds and the inability of states or local bodies to raise matching contributions.

The commission emphasises the importance of states raising their own resources but does not impose such a conditionality.

It is of the view that local bodies should not be deprived of funds by the central government, "as these grants are in the nature of a correction of vertical imbalance between the Centre and states".

UTILITIES

Rural water supply programmes have accounted for Rs 45,000 crore over several years. The commission has taken cognisance of the fact that no operations and maintenance provisions were provided for in the previous schemes.

Therefore, the PRIs are encouraged to take control of assets relating to water supply. They must recover at least 50 per cent of recurring costs through user charges.

The commission also recommends half of the grants for local bodies be earmarked for solid waste management through public-private partnership.

High priority expenditure should be given to Geographical Information Systems (GIS) for mapping property in urban areas. This will lead to a shift towards a modern system of financial management, keeping in view the 73rd and 74th constitutional amendments.

THE GAINERS

The panchayats in Uttar Pradesh will get the highest allocation of up to Rs 2,928 crore or 14.640 per cent of the total allocation, followed by Maharashtra with Rs 1,983 crore or 9.915 per cent of the total allocation during the period 2005-10.

Sikkim has the lowest allocation at 0.065 per cent, amounting to Rs 13 crore, with other north-eastern states following suit as per the recommendations of the commission.

The municipalities in Maharashtra and Gujarat stand to gain the maximum share of allocation with 15.2 per cent or Rs 791 crore and 8.2 per cent or Rs 414 crore during 2005-10.