Most of the state finance commissions set up by provision of article
243 Y seemed to start with a
handicap. Most state governments did not have the political will to transfer or
share it’s domain of power with a supposedly lower level of governance. With
the Courts keeping a close eye on implementation on Local Body reforms these
finance commissions were formed by in all states. The reluctance can be judged
by time delay between passing of 74th
amendment and the date of formation of these commissions. Nearly all
states set finance commission to the effect by early 1995.
Most of the
information like revenue collected as
taxes, tolls, fees
from property (House),
Ferry, Street-light, Shops, Rickshaws,
Bi-cycle, Hats etc.
and the expenditure
on salary of
staff,stationery, postage, rent,
electricity charges, etc.
was available partially but
since no standard format for data
maintenance existed, it became difficult to compile such information .
Further, lack of
uniformity in the maintenance of Accounts and the lack of regular audit of
Accounts, also lead to complexities of available local finance data.
The
initial recommendation was of all State
Finance Commissions was
that
following of minimum level of data to be maintained by the Local Bodies .
Assessment and collection
inputs for various
taxes and non-tax revenues, Annual Accounts Register,
Cash Book, Posting etc were either
missing or clinically and critically fudged with. Register of other assets and liabilities, List of
Roads, Wells, Lights, Drains,
Sewerage and Water Supply,
Buildings (Schools, etc.) presented a
different picture of domains of these Urban Local Bodies on paper than the
realities.
The
foremost recommendations of the First Commissions were a fixed
percentage of share of State Taxes had to be transferred to local bodies
. Sharing of Motor Vehicle Tax with Urban local bodies was recommended by all
State Finance Commissions. The
devolution of fiscal powers to the
local bodies
in Water Supply,
Sanitation/Sewerage, Solid Waste collection and disposal, Primary Education covering Primary Schools , Primary health
covering Public Health Sub-Center , roads and culverts and Housing were further recommended. The first
state commissions seem to have focused on defining the status of the local
bodies ,areas of concern and establish
fields where power could be shared . The means therein for devolution seemed to
be too time consuming and secondary step to the Commissions. The staffing needs
of these local bodies were paid much attention at times leading to the some neglect on core issue of
delegation of financial powers to local bodies.
The recommendations of Zakaria committee seemed to help the second state finance commissions . Some credit must be accoladed to Zakaria committee and there forth to the Government of India in setting up of
minimum Per Capita Norms for operation and maintenance of Urban local Bodies. It ensured that water
supply in nearly all Urban areas was
transferred to Municipal Bodies .
Recommendation
to sharing of individual tax and non tax
revenue were also made. The State had to
share a certain percentage of the net proceeds of State’s own tax
revenue to ULBs(to the maximum of 4%). Some
share of net proceeds of States were
earmarked for the incentives to these local bodies for mobilizing
revenue from their own sources (nearly 0.5% to 1%).
Share
of Entertainment Tax and Mineral Royalty
(in case of PR bodies) were common recommendations of all Second State Finance
Commissions. that the State Government may consider transfer of entire proceeds
of entertainment tax to the Urban Local Bodies.
Most
State Commission were also of the view
that entire funds may be transferred as untied grants. These funds recommended as untied grants could be utilized by the respective Urban Local
Bodies on maintenance and improvement in
basic civic services, up gradation of basic
infrastructure, computerization.
Even
in revenue raising areas, specially obligatory taxes, the ULBs did not have
full autonomy. They were dependent
on Government in respect of the rates of
the tax and the date from which it was to be levied. Even revision in rates was
not in their domain. All state commissions noted that financial autonomy was necessary functional independence.
The third
finance commissions fell into east trap of
the troubled state and central government
relationship. It stems from the the fact that the primary recommendation of most
State Finance Commission was plea for
higher quantum of Central Finance Commission grants to local bodies .
It
seems to had become necessary considering the precarious financial health of
many states. It also may be due to the lowered priority being given to local governance in new millennium than the 1990s. The demands
of State regards devolution from Center is expected to become fervent citing
further pleas of new State finance Commissions based on 243 I and 243 Y. Some
commissions went to extent of stating that the investment requirements for creation of infrastructure
and other facilities should be met from various Central Government Programs (centrally
sponsored schemes JNNURM) and international
agencies like the World Bank, Asian Development Bank, etc.
A revelation was that that smaller ULBs (like class III and class IV) had generated more
internal income as compared to larger ULBs in the findings of most reports. In the total income of best operating ULBs (2004-05), internal income was
only one fourth . This indicated that
ULBs were mostly dependent on the external income. Some state commissions
stated that 30% of MLAs Constituency Development Fund falling in urban areas should
be earmarked for improving core civic services.
All
the three commission of all states are of the view that the poor quality of
services rendered by the ULBs was due to not only by a constraint of resources
but also due to poor staffing and poor quality of management, among other reasons.
The resource potentials of ULBs did not match with
their
functional responsibilities, leading to near absolute fiscal dependence on State Government. Most of the
ULBs were financially weak, generated less resources considering the work they
are expected to do, and hence were heavily grant dependent.
All
state commissions have stated in the 15 years of functioning have felt the need
of sharing of higher percentage of state
revenue with local bodies . The poor staffing issue has remained more or less
similar through out.
“Status
of Implementation of Second SFC Recommendations
of in respect of ULBs” as listed in the
the third SFC report of nearly all states recognizes the fact that “All the
activities listed in the twelfth schedule of the Constitution have not been transferred to the ULBs along
with budget,
staff
and logistic support.
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