Centre calls for practical fiscal decentralization to strengthen local bodies

The Centre today called for practical fiscal decentralisation by State Finance Commissions while distributing resources between the state governments and local bodies. The Minister of State for Panchayati Raj Shri Nihal Chand said that in the 14th Finance Commission more than 2 lakh crore rupees have been earmarked for Gram Panchayats during 2015-20. He was speaking here after inaugurating a workshop on fiscal decentralisation.

Shri Nihal Chand said that the primary emphasis will be on provision of basic services like rural infrastructure, sewage, sanitation and water supply. He said, the Finance Commission has recommended distribution of grants to states for local bodies using 2011 population data with weight of 90% and area with weight of 10%. He said there are over 2.6 lakh panchayats in India.

The Commission has recommended grants in two parts; a basic grant, and a performance grant, for duly constituted Gram Panchayats and municipalities. The ratio of basic to performance grant is 90:10 with respect to Panchayats and 80:20 with respect to Municipalities.

In the Workshop, 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 decentralization and devolution to local governments exchanged ideas and also highlighted the concerns regarding the effective implementation of the recommendations of 14th Finance Commission.

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. While the States have generally assigned most of these functions to PRIs, the corresponding devolution of funds and functionaries remains a critical issue. 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.