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Prof. M.Gopinath Reddy and Mr.Bishnu Prasad
Mohapatra
Centre for Economic and Social Studies,
Hyderabad - 500 016
Decentra...
Outline of the Presentation
 Introduction
 Objectives, Methodology and Database
 Panchayats in Andhra Pradesh and Odish...
INTRODUCTION
 Decentralised Self-Governing Institutions have been playing a
significant role in the matters of poverty al...
Continuing…..
 Decentralised self-governing institutions, otherwise known as
panchayats, are emerged as the key instituti...
Objectives, Methodology and Data Base
 This Paper tries to understand the status of the fiscal devolution
to Panchayats i...
Panchayats in Andhra Pradesh and Odisha
Year/Period Status of Panchayats in AP
Pre-
Independenc
e Period
During the Britis...
Continuing…..
Year/Period Status of Panchayats in Odisha
Pre-
Independence
Period
During the British rule, various provisi...
The Status of Fiscal Devolution to Panchayats in AP and Odisha
Indicators Andhra Pradesh Odisha
Power Devolution
including...
Institutionalisation of the SFCs in AP and Odisha
Institutionalisation
of SFCs
Andhra Pradesh Odisha
Fist State Finance
Co...
Continuing….
Third State Finance
Commission
1. The Commission Constituted
in 2003 but could not submit
its report.
2. The ...
A Critical Comparison between AP and Odisha
 Own Source of Revenue: It is observed that both the States have not
devolved...
Continuing……
 Same institutions with different functioning: The Functioning
of the SFCs in both the States has provided t...
Continuing….
 Tapping of Local Resources: Panchayats in both the
states have failed to utilise the available natural
reso...
Conclusion
 The case of the functioning of the decentralised
governance in both the states are quite rich and there is a
...
Continuing…..
 In the context of own revenue, tax decentralisation and sharing of
the state taxes as per the recommendati...
THANK YOU ALL!
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Ppt -kila conference,november,2014

The paper presented at the third international conference on Gandhi, Gram Swaraj and Democratic Decentralisation organised by the Kerala Institute of Local Administration(KILA), Kerala, India from 27th to 29th November, 2014.

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Ppt -kila conference,november,2014

  1. 1. Prof. M.Gopinath Reddy and Mr.Bishnu Prasad Mohapatra Centre for Economic and Social Studies, Hyderabad - 500 016 Decentralised Governance and Devolution of Funds to the Panchayats in India-A Critical Analysis of Two States
  2. 2. Outline of the Presentation  Introduction  Objectives, Methodology and Database  Panchayats in Andhra Pradesh and Odisha  Status of Fiscal Devolution to Panchayats in AP and Odisha  Institutionalisation of the SFCs in AP and Odisha  Major Findings-A Critical Comparison between two States  Conclusion
  3. 3. INTRODUCTION  Decentralised Self-Governing Institutions have been playing a significant role in the matters of poverty alleviation and rural development in India.  It is believed that decentralisation can help mobilise resources, introduce locally and regionally diverse solutions and promote equitable growth by bringing the poor into mainstream development.  Decentralisation is a complex and multifaceted concept that involves the shifting of fiscal, political and administrative tasks to lower level governments(Asfaw et. al,2004)  Decentralisation can have significant repercussions for resource mobilisation and allocation and ultimately for macroeconomic stability, service delivery and equality(Litvack et.al, nd)
  4. 4. Continuing…..  Decentralised self-governing institutions, otherwise known as panchayats, are emerged as the key institutions of planning and programme implementation in many Indian states including AP and Odisha.  Devolution of powers including fiscal powers have been conceived as an important sub-set of the process of democratic decentralisation.  It is believed that the issue of devolution of powers and funds is crucial because without substantial powers and funds, decentralised institutions are bound to fail.(Manor, 2002).  However, it is observed that in the current pace of development, the functioning of Panchayats in many states in India, including AP and Odisha encountered fiscal challenges.  Despite the enactment of the 73rd amendment act and state panchayat acts, the state of panchayat finances still in nascent stage.  Considering these issues, this paper tries to understand the current trends of fiscal devolution to Panchayats in AP and Odisha.
  5. 5. Objectives, Methodology and Data Base  This Paper tries to understand the status of the fiscal devolution to Panchayats in Andhra Pradesh(undivided) and Odisha.  The paper also reviews the evolution of the Panchayats and legal provisions associated with the fiscal devolutions in AP and Odisha.  It also focuses on the recommendations of the SFCs in these two states and highlights how the recommendations of the SFCs have been diluted in various ways.  The paper reviews the secondary data and captured the ground realities in order to deduce findings and arrive at conclusion.  Particularly state specific data on Panchayat Finance have been captured to provide a comparative picture between the two states.
  6. 6. Panchayats in Andhra Pradesh and Odisha Year/Period Status of Panchayats in AP Pre- Independenc e Period During the British Rule, there were elected district councils with some significant powers, which was continued till the independence. 1956 Andhra Pradesh was Created as Separate Province. The state of Panchayats also received new impetus. 1959 The state panchayati raj act was enacted. 1964 The village panchayats entrusted new powers and responsibilities including the review of the accounts of the village panchayats. 1980 The Panchayats in AP underwent several structural changes. 1987 The system of Mandal Praja Parishads and Zilla Praja Parishads were institutionalised. 1994 The AP Panchayati Raj acts were enacted as per 73rd amendment. Present Scenario Latest Round of Elections for the PRIs held in 2013 after a gap of 3 years.
  7. 7. Continuing….. Year/Period Status of Panchayats in Odisha Pre- Independence Period During the British rule, various provisions were added through the Government of India Acts. The Government of India Act, 1935 had made a provision for the creation of Odisha as a separate province on 1st April, 1936. 1948 The Orissa Gram Panchayat Act of 1948 was the first comprehensive legal framework. 1964 The Orissa Gram Panchayat Act was amended with devolving more powers to the Gram Panchayats in the state. 1967 The government of Odisha abolished the Zilla Praishards and set up the District Development Council. 1992 The State Pancahayati Raj Act enacted and elections for the PRIs held. 1997 The State Pancahayati Raj Act further enacted and elections for the PRIs held as per the 73rd amendment act. Present Scenario Power devolutions to the Panchayats and elections for the Panchayats are emerged as important features of the democratic decentralisation.
  8. 8. The Status of Fiscal Devolution to Panchayats in AP and Odisha Indicators Andhra Pradesh Odisha Power Devolution including Fiscal Powers 1. Power Devolution to Panchayats shows the transfer of 29 subjects. 2. 29 subjects have broken into activities 1. Power devolution process initiated but not completed. 2. Out of 29 subjects, only 21 subjects under 11 departments are transferred. Fiscal Transfers The process of transfer of funds from the central and State Government to the Panchayats is based on rigid bureaucratic system. 1. This also true in the case of Odisha. 2. Emergence of parallel institutions such as DRDAs have also diluted the fiscal decentralisation. Assignment of Revenue Powers 1. Revenue powers are assigned to GPs where as supervisory powers have given to the upper tiers. 2. More revenue powers have transferred to GPs which shows better per capita revenue(Rs.83.4 in 2007-08) 1. Assign of revenue powers to the Panchayats are in the nascent stage. 2. The per capita revenue during 2007-08 was Rs.3.1 against the national average of Rs. 34.1.
  9. 9. Institutionalisation of the SFCs in AP and Odisha Institutionalisation of SFCs Andhra Pradesh Odisha Fist State Finance Commission 1. The Commission was constituted in 1995. 2. The Commission recommended for the devolution of 39.24% of the state revenue to the local bodies with 70% to the PRIs. 3. The recommendations were not accepted by the State Govt. 1. The Commission was constituted in 1996 as per the State Finance Commission Act, 1993. 2. The Commission was submitted its report in 1998. 3. No concrete decisions were taken up on the recommendations. Second State Finance Commission 1. The Commission was recommended the devolution of Rs. 1793.94 crores which is 10.39% of state revenue. 2. It was suggested the devolution of 50% to GPs, 30% to the MPs and 20% to ZPs. 3. Additional revenue for Panchayats also suggested 1. It was constituted in 2003 for the period of 2005-10. 2. The State Govt. partially accepted the recommendations. 3. The State Govt. also placed the demand before the 12th Finance Commission(India) for consideration.
  10. 10. Continuing…. Third State Finance Commission 1. The Commission Constituted in 2003 but could not submit its report. 2. The commission was reconstituted . 3. The Govt. of AP had constituted a committee to examine the recommendations of the commission’s report. 1. It was constituted in 2008 for the period of 2010-15. 2. The Commission in its report enphasised assignment of more taxes and duties to the Panchayats. 3. The commission had suggested the devolution of Rs. 3360.64 crore for PRIs out of which Rs.907.45 crores provided by the State and Rs. 2756.02 crores was provided by the 13th FC(India). Fourth State Finance Commission Still not done both for AP and Telengana. 1. Constituted in 2013 and the commission is functioning.
  11. 11. A Critical Comparison between AP and Odisha  Own Source of Revenue: It is observed that both the States have not devolved the necessary tax and non-tax revenue to the Panchayats. However, in the case of AP the percentage of own revenue of Panchayats is quite improved than Odisha which shows that the Panchayats own revenue was 1.38%(2005-08) of the State’s own revenue while in Odisha it was just 0.12%.  Revenue Spending: In terms of their total per capita spending, both the states have showed steady progress, though the case of AP is quite different than Odisha. During 2007-08, it is observed that the per capita expenditure of the Panchayats in Odisha rising sharply from Rs.37(2000-01) to Rs.544.1 in 2007-08 while in the case of AP it has been declined from Rs.792.9 to Rs.345.6.  Mismatches in devolution agenda: Mismatches between the different indicators of devolution such as Funds, Functions and Functionaries have created challenge for the Panchayats in both the states. Particularly in the case of Odisha, the mismatches are quite wide than AP.
  12. 12. Continuing……  Same institutions with different functioning: The Functioning of the SFCs in both the States has provided two different picture. While in the case of Odisha, the constitution of the SFCs since the second finance commission has become a regular affair, but it is not found in the case of AP. The Govt. of Odisha has partly accepted the recommendations of the SFCs, which is also observed in the case of AP.  Control over Expenditure Decision making: Control over expenditure decision making in both the cases are managed by the bureaucrats. The so called fiscal reforms to strengthen the finances of the Panchayats have encountered challenges. The emergence of the CSSs have enhanced the per capita spending of Panchayats but also created hurdle on expenditure decision making.
  13. 13. Continuing….  Tapping of Local Resources: Panchayats in both the states have failed to utilise the available natural resources such as common lands and common water bodies for raising revenue despite the available of such resources. Such situation has also affected the finances of the Panchayats.
  14. 14. Conclusion  The case of the functioning of the decentralised governance in both the states are quite rich and there is a need of further policy reforms on this initiative.  The unfinished power devolution agenda should be taken up seriously particularly in the case of Odisha. There is a need of making balance among the three indicators of devolution.  The recommendations of the SFCs should taken up seriously and instead of counting the success of the SFCs through mere fiscal allocation, there is a need of considering all the policy recommendations of the SFCs.  In the case of Andhra Pradesh, the state Govt. should take the recommendations of the SFCs in letter and spirit.  Appropriate steps should be taken up to raise the own revenue of the PRIs.  The recommendations of the SFCs also to be made mandatory on the respective State Governments as in the
  15. 15. Continuing…..  In the context of own revenue, tax decentralisation and sharing of the state taxes as per the recommendations of the SFCs should be given priority.  Allocation of funds from the state and central governments sources should not be based on rigid bureaucratic procedure.  The Panchayats should have upper hand in deciding own plan and expenditure of funds. The implementation pattern should not be based on any guideline or government order.  Ownership on CPRs such as Common Lands, Grazing Lands, Forests, Orchards and ponds should be transferred to the Panchayats and legal matters/disputes on the issues of encroachment should be decided by the Panchayats at the Gram Sabhas.  The legal frameworks of the PRIs should focus the finances of the Panchayats adequately.
  16. 16. THANK YOU ALL!

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