HYDERABAD: Between the financial years, 2014-15 and 2017-18, Adilabad’s Indervelly mandal could not earn a single rupee of its own. Its own revenues were recorded as NIL. Meanwhile, the Warangal mandal could generate a meagre Rs 8,000 in the same three years. Fun fact: this is how much the Mandal Parishad President makes in a single month.
These are just two handpicked cases. When it comes to generating revenues of their own, the State’s 535 mandal parishads going to polls this year, have consistently performed miserably. Mandals, by law, are not authorised to receive funds from Centre and the State has only been reducing their share of funds in its annual budget. The condition of State’s zilla parishads (ZPs) are also not very different. In the absence of any funds, mandals and ZPs have been unable to deliver any services to the public, whatsoever. And if something is not done soon, they will continue to remain just shelters for the politically unemployed in the State politics.
In India’s centralised system of governance, Telangana has always lobbied for more power in the hands of individual States. But when it comes to its own smaller units, the mandals and ZPs seem to have remained powerless and penniless. The most important aspect of wielding power is having a disposable income. But the flow of funds from the line departments to Panchayat Raj Institutions, which remains their central source of income, is delayed due to various reasons.
Thus, the politicians are demanding for at least a portion of the funds meant for mandals, ministers, MLAs and MLCs be spent through the PRIs. The experts have suggested a replica of Kerala’s Panchayat Window system, in which the panchayat-wise allocations will be made in the State budget itself.
When the State government constituted the State Finance Commission (SFC), the Centre for Economic and Social Studies (CESS) conducted a random survey on the financial situation of five erstwhile ZPs, ten mandals and 20 Gram Panchayats in the state. The CESS submitted a draft report and it is yet to submit the final report.
According to the findings of the CESS study: “Finance is the key to making the Panchayat Raj Institutions (PRIs) effective, accountable and transparent. In case of Telangana, the revenue resources are statutorily assigned to the Panchayats under the State PR Act and other legal provisions. In the recent period, the State government enacted the State Panchayat Raj Act, 2018, which has suggested various ways of improving the own revenues of PRIs.
The Act also vested powers in the hands of Mandal Parishad presidents and ZP chairpersons, financially. The Act suggested strengthening of own revenues by PRIs. The PRIs are involved in augmenting their own revenues through various sources.”
NO TAX, NO POWER
The finances of ZPs are mainly own revenues, transfer from Central government and State government and grants-in-aid from the government. But, the ZPs of the State have nominal power when it comes to levying and collecting taxes from various sources.
Only they have the power to collect non-tax revenues from various sources available at their disposal. With regard to non-tax revenues of the ZPs, they have vested power to raise revenue through collecting fees. The CESS study was conducted in Adilabad, Karimnagar, Warangal, Nalgonda and Ranga Reddy. The finding is that the own revenue of Adilabad ZP is relatively better than others because of income from seigniorage fees and rents. The own revenue of Ranga Reddy ZP is quite poor because the only source it has is the rent of the meeting hall.
The percentage of own revenues of five ZPs, when compared to the total revenues, is nominal. Adilabad (5.14 per cent), Karimnagar (0.87 per cent), Warangal (0.72 per cent), Nalgonda (5.06 per cent) and Ranga Reddy (0.01 per cent). However, the establishment and capital expenditure of ZPs has been increasing. The ZPs also receive assigned revenues, which are not directly collected by PRIs but by the State government to ensure greater ease and efficiency of collection.
In the case of five ZPs, it was observed that two major categories of revenues are part of assigned revenues—stamp duty and seigniorage grants. But, with regard to Central funds, the ZPs are not receiving anything as of now. Transfer of funds to ZPs under the 13th Finance Commission was better. But the 14th Finance Commission recommended transfer of funds directly to the Gram Panchayats and not to ZPs or mandals. Thus, the financial situation of ZPs and mandals has been considerably weakened.
FINANCES OF MANDALS
Finances of mandals, like ZPs, are mainly based on own revenues, transfer from the Central and State governments and grants-in-aid by the governments. However, in the ten mandals, selected from Adilabad, Karimnagar, Warangal, Nalgonda and Ranga Reddy districts, put the total own revenues at just `8,000. Only, Warangal mandal earned `8,000 through own revenues from 2014-15 to 2017-18. The remaining nine mandals had no income through own resources.
PANCHAYATS FARE BETTER
Gram Panchayats are better than zilla parishads and mandals in matters of collecting revenue, as they are vested with powers to levy taxes like property tax and taxes on local markets. The study observed that the house tax contributed significantly to the own revenues of Gram Panchayats. “The house tax collection has increased steadily from the year 2014, after the formation of Telangana,” Prof M Gopinath Reddy, who was involved in the study, said. Prof Gopinath Reddy also suggested that there should be a provision of transferring Central funds to PRI in the 15th Finance Commission.
Prof Reddy observed that the Gram Panchayat’s revenue in the state had considerably increased due to the proper collection of house taxes. “There is a provision in the 14th Finance Commission of performance grant to Gram Panchayats. Those Panchayats which collected house taxes promptly will be given 10 per cent performance grant.
Thus, the demand collection of house taxes touched as high as 80 to 85 per cent in almost all the villages in Telangana. The house tax collections by Gram Panchayats were just 30 per cent a decade ago. The own revenues of Gram Panchayats witnessed a quantum leap from 10 per cent to a maximum of 25 per cent. With more revenue, the Panchayats are able to provide services like street lights, water and sanitation. So, people are coming forward to pay taxes now,” Reddy observed.
Though the finances of Gram Panchayats have improved considerably, they are lagging behind in planning. The concept of Gram Panchayat Development Plan (GPDP) had started two years ago, but is not being implemented in its true spirit. The Panchayats are planning as per their requirements. But, the line departments, which have their own planning, are not releasing funds and cooperating with the Gram Panchayats. “The GPDP should be synchronised with mandals and ZPs. But, it is not being done,” Gopinath Reddy suggested.
RECOMMENDATIONS
There is no provision of funds for ZPs and Mandals under the 14th Finance Commission. Considering this scenario, the State Finance Commission (SFC) should consider at least 20 per cent of the total transfer to the Mandals and 10 per cent to the ZPs. The State’s grants to ZPs and mandals should be based on area and population, with special grants for areas under PESA. The State government should also consider backwardness when it is devolving funds. The government should concentrate on marginalised groups within the jurisdiction of the PRI. The number of mandal Parishad Presidents (MPPs) within a Zilla Parishad and Gram Panchayats within the mandals should also be considered while devolving funds to these tiers.
“The PRIs which have adequate sources for tapping own revenues such as market complexes, shops, weekly markets among other sources, should provide special assistance for maintenance of these assets for a certain period. Further, those who do not have such assets or have fewer assets should be encouraged to create such assets under schemes like NREGS and NRLM,” recommended the CESS study.
WHAT CAG SAYS
As per the Comptroller and Auditor General (CAG) findings, there was a decrease in the release of grants by the State government during 2016-17 compared to 2015-16 to local bodies. According to CAG, non-release of certain grants like the general component of State Finance Commission grants, under ‘Assistance to Best Gram Panchayats’ and others.
There has been a consistent decline in the transfer of funds by the State government to Panchayat Raj Institutions. The decline in the transfers during 2017-18 and 2018-19 budget years is attributed to the implementation of GST, which encompassed some of the taxes like Value Added Tax (VAT), Central Sales Tax (CST), Octroi and Entry Tax, taxes on lottery, betting and gambling and Entertainment Tax, which are otherwise transferred to local bodies.