THIRUVANANTHAPURAM: With Keralam feeling the strain of rampant urbanisation and unsettling demographic transition, the State Finance Commission has proposed amendments to the devolution equation. In its third report submitted to the governor on Monday, the commission also proposed measures to strengthen local bodies and exploring means to increase tax and non-tax revenue.
With recommendations for local self-governments to increase their revenue, the report says that considering the fiscal scenario, there is less chances of increased financial assistance in the coming years.
An array of new factors including population density and the proportion of elderly people should be taken into account in determining the devolution of funds, it said. “Local self-governments have the leeway to boost tax and non-tax revenue. But this is a luxury that the state government no longer enjoys. Local bodies can look to various levies such as property tax to achieve this. This will also help them avail more loans,” sources said.
“Similarly, some local bodies can explore the scope of issuing bonds. The financial instrument won’t be limited by the state’s borrowing threshold. If required, local bodies can band together and take loans to implement mega projects. There are umpteen avenues for them to explore,” they said.
Local bodies are not making sufficient efforts to tap corporate CSR funds, the commission said, calling for major changes to their governance structure.
The fiscal scenario of local self-governments in the state has been pressured by the recommendations of the 16th Finance Commission, the report said. The central commission has allotted 83.45% of grants to municipalities and corporations while rural local bodies — which cater to 77% of the country’s population — have been given just 16.55% of the funds, it observed.
