Giving fiscal powers to panchayats to make them autonomous will be the focus of a two-day workshop to be attended by representatives from the Centre and the states from Monday with the government flagging the "urgent need to vest them with adequate tax and non-tax powers".
The workshop, to be inaugurated by Union Minister of Panchayati Raj, Rural Development and Drinking Water and Sanitation Birender Singh, will discuss "Fiscal Decentralisation and the Role of State Finance Commissions".
Chairpersons and members of all the functional State Finance Commissions, Secretaries of Panchayati Raj and Finance Departments from states and eminent national and international experts on fiscal decentralisation and devolution to local governments have been invited to the conference.
Former Members of the Union Finance Commissions have also been invited to share ideas and experiences of the national and international best practices and promote cross learning across the states, an official statement said.
The 73rd and 74th Amendments to the Constitution have provided constitutional status to Panchayats, Municipalities to function as local self-government institutions.
The Constitution also provides for states to devolve, through legislation, functions to these institutions as illustrated in the Eleventh and Twelfth Schedules of the Constitution for rural and urban local bodies, respectively.
The statement said that while the states have generally assigned most of these functions to panchayati raj institutions, the corresponding devolution of funds and functionaries remains a critical issue.
Since the own source revenues of the local bodies being very small, they largely depend on the devolution of funds from the central and the state governments and Finance Commissions, the government said.
Flagging that there is an "urgent need to vest the Panchayats, with adequate tax and non-tax powers", the government said that at the same time it also needs to be ensure that the fiscal powers given are effectively exercised since generating own revenue is the best way to increase autonomy, credibility and accountability of the Panchayats.
"Fiscal decentralisation, therefore, needs to be viewed as a comprehensive system of strengthening the financial resource base of the Panchayats so that the assignment of expenditure functions is matched with devolution of funds," the statement said.
The workshop is also likely to discuss the changes that are required in the functioning of State Finance Commissions to meet new challenges.
(REOPENS DEL20)
To address the issue of finances of panchayats, the Constitution provides for setting up of a State Finance Commission (SFC) every five years to review the financial position of panchayats and recommend criteria for distribution of financial resources between the state and the panchayats as also other measures to improve financial base of panchayats.
Thus, the SFCs have vital role to play in the scheme of decentralisation, while arbitrating on the claims to the resources by the local governments and the state governments and ensuring greater stability and predictability to the transfer mechanism.
There has also been growing concern about the smooth functioning and capacity of the SFCs.
"Several SFCs themselves are not adequately staffed and lack the required infrastructure and resources. The database on various aspects of panchayats' functioning is inadequate for the SFCs to take informed decisions and make recommendations accordingly.
"The States have the basic responsibility of enhancing the credibility of the SFCs. The SFCs, therefore, need to be strengthened and their work and reporting streamlined in many ways including some standardisation in their method and approaches," the statement said.
Referring to a report of the 14th Finance Commission, which was submitted in December 2014, the government observed that since there is wide variation in assignment of functions, funds and functionaries across states, it is not feasible for the Finance Commission to carry out a detailed assessment of finances of local bodies in each state nor has such a role been assigned to it under the terms of reference of the Constitution.
The Constitution envisages that the needs of local bodies within the state shall be assessed in detail by the SFC, which will recommend the required transfer of resources from the state to them. Therefore, it is appropriate that the needs of local governments are assessed in detail by the SFC.
The government noted that the 14th Finance Commission has also observed that despite the passage of time, SFCs in many states continue to work with a lot of disadvantages.
"The 14th Finance Commission also recommended that states should facilitate effective working of SFCs, through timely constitution, proper administrative support and adequate resources and timely placement of the SFC reports before state legislatures, with action taken notes and timelines for completing actions," the statement said.
The workshop beginning Monday is expected to discuss in detail the steps needed to make SFCs more effective.
