Poor accounting keeps small towns small: Study

A recent survey of 24 small towns by an NGO, PRIA, has found account-keeping in these towns in tatters. This is the main reason for the low level of development of these towns, the survey concludes.

For example, in Raxaul in Bihar's Champaran district, you can walk into the neighbouring Nepalese town of Birganj without any check.

The town, which depends on Birganj for healthcare and educational needs, has a municipality which is totally dependent on the state government for funds. What's worse is that it has no official to keep record of the money it gets, or spends.

The situation in 23 other towns is no different, the survey report says. The study, spanning Bihar, Rajasthan, Madhya Pradesh, Chhattisgarh, Haryana and Himachal Pradesh, finds that the small towns have stagnated, thanks to total dependence on state governments. And whatever funds are available cannot be put to fruitful use as there is no proper accounting of income and expenditure.

While some towns have no official to keep accounts, others depend on untrained staff. In one case, one person maintains accounts of four towns.

Sanjukta Ray, the author of the study says, "The stories of Raxaul, Kanchipur, Sasaram, Madhubani are interchangeable. None of these have bothered to appoint a person to account for the money that comes into their coffers. Unless you do the accounting, the money you get is futile. It will never be used for socio-economic development."

"The absence of accounting reforms in small towns, coupled with total dependence on states for funds, has meant that development in these towns has stagnated," says Ray.

The study has found that in some cases, the same person acts as the executive officer, engineer, accountant and sanitary inspector. This, says Ray, is not the only problem. "One person often does accounting for three to four towns at the same time," she says, giving examples of Motipur and Kanti in Muzaffarpur district of Bihar.

The study found that contrary to the self-sufficient municipalities envisaged by the 74th Amendment, most of these towns were badly starved of funds, and with no source of revenue, totally dependent on state governments. The highest dependence is in Rajasthan.

Except Haryana, all states show a higher than 50 per cent dependence on grants, which are meant to cover the running expenses of the municipal bodies. These grants can be spent freely, contrary to specific-purpose capital grants.

The tax income of all the towns surveyed by this study is alarmingly low. The maximum per capita tax the municipal bodies under the study collect is around Rs 160 in Himachal Pradesh and the lowest in Rajasthan (Rs 11).

Equally small towns in other states, e.g., Phaltan municipality of Maharashtra, whose population is only 55,000, collects Rs 394 per capita. The study attributes the low collections to the absence of official will.

"Lack of funds leads towns into a vicious circle," says Ray. "Since they have no money, they depend on states and do nothing to raise funds as they expect the state government to bail them out every time," she says.