No improvement in governance is possible unless information is freely and publicly available on fund flows and the outcomes targeted. Not every citizen has the time to use the Right to Information channel, and in any case they need prior knowledge of what government is attempting in the first place.
The routine business of governance at the local rather than at state level is what mostly determines the quality of our daily lives. Whether we wake up to the aroma of blocked sewage, or get our daily quota of potable water, or have police protection, or have to navigate our way through footpaths strewn with food remnants squashed into plastic bags, is all a function of fund flows and expenditure efficiency at our very own local level.
Local governments have received a statutory fund flow from the Centre every year since 1995, in amounts set for five-yearly periods by a succession of nationally appointed Finance Commissions. This funding must be routed through state governments, as per the Constitution. State governments become pass-through agents for this flow, and have no incentive to transmit what they receive quickly. If failure to provide certification of onward transmission blocks release of subsequent instalments, state governments are not the immediate losers, and have no incentive to comply.
Faced with the clear need to restructure incentives, the Thirteenth Finance Commission, which addressed the period 2010-15, broke the local grant into a two-part flow. A basic flow in two tranches (July and January) was made payable each year by the Centre to local governments, designed as a wholly unconditional entitlement. A performance grant was added on, also due each year in two tranches, but subject to nine conditionalities. One of them requires that states supply certified evidence of a mechanism for electronic onward transmission of funds to local governments within five days of receipt.
The performance grant was designed to flow only from 2011-12, with 2010-11 left as a gap year in which states could put together the necessary procedures that would qualify them for the grant.
The administrative guidelines sent to states, through which these provisions were formally notified, added on the transmission requirement for the basic grant as well, with penal interest for any delay beyond five days. Another add-on was that the state should hold local elections on time. These conditions apply only after the first tranche in July 2010, which went to all states without exception, but needed to be satisfied for all tranches starting with the one due in January 2011.
So then, are all states getting the basic grant? Citizens have a right to know what has actually been received by local bodies of the state in which they happen to be located, from a statutory provision which must either flow, or if not, point explicitly to an unfulfilled conditionality.
The natural place to look for such information would be the websites of the relevant Central ministries. The Panchayati Raj Ministry website does display the Finance Commission guidelines, but provides no clue to its implementation. The Urban Development Ministry website is somewhat better. It has recently put up a list of 13 states qualifying for the performance grant for 2011-12, but no pointer to which conditionalities remain unmet in states not on the list. Without that, the interested citizen does not know what must be done, going forward. Most of all, there is no information on whether the basic grant is flowing to all states.
There is however a remote link in the Ministry of Finance website, which lists all releases to states from the Centre in excruciating detail. From there it is possible in principle, though extremely tedious, to stitch together those states which got the basic grant, and residually, those which did not, for whatever reason.
So here is what seems to have happened with the basic grant in 2010-11. Five states failed to get the panchayat tranche due in January 2011, and seven states failed to get the urban tranche. In 2011-12, these numbers have grown to six and eight respectively. This is just the basic grant, for which the requirements are minimal.
The performance grant becomes payable in 2011-12, but no releases have happened so far. The Urban Development Ministry website list of 13 states recommended for the performance grant (no equivalent information is supplied by the Panchayat Ministry) has some surprise inclusions. Andhra Pradesh makes it, despite its reputation for impeding decentralisation, as does Uttar Pradesh, not a state known for good governance. How does one explain this? All it needs is a dedicated public servant in a key position to comply with the conditionalities.
Some of them are not easy to fulfil. One of them, for example, is that all million-plus cities in the state publish in the state gazette a fire response and mitigation plan. Difficult to push through, but after the horrific hospital fire in Kolkata, surely something worth installing for its own sake, independently of the grant riding on it. The qualifying condition is just that the fire plan should be published, not that it should be followed through. Inserting that would have placed too onerous a monitoring requirement at the Central end. But when information of this kind is made accessible to ordinary citizens, they in turn can do the monitoring needed, and the incentive system becomes enabled. West Bengal is not among the 13 states listed for the urban performance grant this year, nor is Tamil Nadu, a state which normally leads the governance league tables.
Any funding incentive works only if the amount promised is worth the effort required to earn it. The basic grant was around Rs 70 per capita in 2010-11, surely enough for the minimal conditionalities involved, and structured to grow in absolute amounts in the years to come. The performance grant starting next year will amount to two-thirds of the basic grant, and is harder to reach for, but still well worth the effort.
The writer is an honorary visiting professor at ISI Delhi
