Lok Satta

Tuesday, 03 March 2015 08:20

LokSatta Party laments opportunity lost to empower local self-government bodies by 14th Finance Commission


New Delhi: The LokSatta Party applauds the government for accepting the 14th Finance Commission’s recommendation to grant states a higher share (of 10% more) of the Centre’s divisible resources. The commission, headed by YV Reddy, had suggested that the Center pass on 42% of net tax receipts to the states. Accordingly, in 2015-16 states will receive Rs 5.79 lakh crore of the Centre’s expected gross tax receipts of Rs 15.67 lakh crore. The share of states will rise 51.55 per cent compared to the 2014-15 estimate of Rs 3.82 lakh crore.

However, the government has almost overlooked the opportunity to empower the lowest tier of local governments by allocating only a token amount, which discourages the aim to go far in the direction of strengthening local governments by devolution of adequate resources as suggested by LSP to the Finance Commission in its presentation to the Commission.

The 14th Finance Commission has worked out the total size of the grant to be Rs 2,87,436 crore for the period 2015-20, constituting an assistance of Rs 488 per capita per annum at an aggregate level. Of this, the grant recommended to panchayats is Rs 2,00,292.2 crore and that to municipalities is Rs 87,143.8 crore.

Expressing dissatisfaction, Jayaprakash Narayan, founder of LokSatta Party tweeted: “FC erred in proposing only Rs 488 per capita to local government. LokSatta advocated Rs 1,000 per capita. A great opportunity to build 3rd tier lost. When more tax money is spent locally, voters will reshape priorities & public money will not be wasted on corruption & freebies (sic).”

Narayan, however, applauded the government over its devolution move saying: “14th FC’s report is right in proposing 42% of central net taxes to states. FC’s devolution is always better than grants & discretion. GoI deserves a pat for ready acceptance of such a massive increase in fiscal devolution. Most services are with states & they need money. FC’s report recognises need for flexibility in designing programs. ‘One shoe fits all’ approach is no good. Devolution promotes federalism (sic).”

In its presentation made to the Finance Commission, LSP had urged the Commission to move in the direction of substantial per capita grants to the lowest tier of local governments a village panchayat for rural areas, and an elected ward committee for urban areas. “If Rs 1,000 per capita (based on 1971 population) is made available to local governments and if it is distributed in a state proportionate to present population in each local government, a good beginning would have been made in treating local governments as third tier of federalism.

The population of India in 1971 was 54.81 crore, and consequently Rs 54,810 crore would be required to devolve directly to local governments as part of Finance Commission devolution this scheme of things.

The full presentation can be found here: http://ap.loksatta.org/documents/LSPto14thFinanceCommission.pdf