Kerala Panchayat Finance Commission Report 1985

REPORT OF THE

PANCHAYAT FINANCE COMMISSION OCTOBER 1985

CHAIRMAN Shri. K. AVUKADERKUTTY NAHA DEPUTY CHIEF MINISTER, KERALA

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REPORT OF THE

PANCHAYAT FINANCE COMMISSION 1985 Chairman Shri K. Avukaderkutty Naha, Deputy Chief Minister, Kerala.

Members Shri. T.V. Swaminathan, Commissioner and Secretary to Government, Local Administration and Social Welfare Department. Shri. S. Varadachary, Secretary to Government, Planning and Economic Affairs Department. Shri Sundaresan,

Director of Panchayats.

Shri K. George Mathew, Additional Secretary, Finance Department. Member-Secretary Shri M. Subbayyan. Officers: Shri K. Bhanuvikraman Nair, (retired Director of Panchayats), Additional Secretary. Shri K.A. Ommer, Joint Secretary Shri K.G. Sukumara Pillai, Financial Assistant Shri V. Sadanandan, Section Officer Shri S. Narayanan Nair, Section Officer

Shri C. Vikraman Nair,

Taluk Panchayat Officer Smt. R. Valli Ammal, Fair Copy Supervisor.

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CONTENTS Introductory Note I Village Panchayats in Kerala Origin and Growth II Taxes reserved for utilisation by or for local bodies III Taxes levied by the Panchayats in Kerala IV Non-Tax Revenue V Grants VI New measures for augmenting the Resources of Panchayats VII Expenditure VIII Financial viability and norms for regrouping of Panchayats IX Miscellaneous X Summing up Summary of Recommendations Appendix I to X LIST OF APPENDICES I Government order constituting the Panchayath Finance Commission and Terms of reference (1) G.O.(MS) No. 149/83/LA&SWD dated 27-9-1983 (2) G.O.(MS) No. 89/85/LA&SWD dated 23-4-1985 II Authorisation to the Commission to call for information/records from Departments, Boards etc. G.O(MS) No. 324/84/LA&SWD dated 22-12-1984

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III Permission to the representatives of Service Organisations and Employees of Panchayat Department etc., for presentation of memorandum and discussion with Commission G.O.(MS) No. 304/84/LA&SWD dated 21-11-1984 IV Duties and functions of Panchayats V Statement showing the area, population etc., of Panchayats in the State. VI Statement of total receipts of Panchayats under various items and percentage of receipt of each to gross income during the years 1979-80 to1983-84 VII Statement showing district-wise collection of Building Tax during the period from 1979-80 to 1983-84 VIII Government order appointing Commissioner and Secretary to Government, Local Administration and Social Welfare Department as Ex-Officio Member of Panchayat Finance Commission (G.O.MS. No. 192/84/LA&SWD dated 23-8-1984) IX Statement showing sanctioned posts and name of Staff X Circular instructions for supply of factual information and details to the Commission by Departments including Secretariat and Public Sector undertakings (Circular No. 19106/C2/84/LA&SWD dated 22-10-1984)

PREFACE I have great pleasure in presenting the report of the Panchayat Finance Commission. Even though our State has an impressive record of having a well established system of Panchayats there was no attempt in the past to analyse the problems of Panchayat finances. The present Commission is an attempt towards that direction and I am happy that I was called upon to head this Commission. Although I knew that the task was burdensome I quite happily accepted the assignment as I has the opportunity to serve the State for a long period as Minister in charge of Panchayts. In this context I would like to record my deep sense of appreciation to the Members of the Commission for their learned and valuable contributions in formulating the recommendations of the Commission. Shri. Arun Kumar, Secretary to Government ,

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Local Administration Department who attended the meetings of the Commission on our invitation has also made valuable contributions to the work. I place on record the exemplarary services rendered by Shri. M Subbayyan, Member Secretary to the Commission, Shri. K Bhanuvikraman Nair, Additional Secretary, Shri.K.A Ommer, Joint Secretary and Shri K.G. sukumara Pillai, Finnancial Assistant. Other Officers and staff have also come up at all times to our requirements and expectations in finalising the report in time. I would also like to express my gratitude to the Director, Deputy Directors of Panchayats, District Panchayat Officers and other field Officers of the Department of Panchayats for having successfully arranged the Meetings at various district headquarters convened for collection of evidence and for other purposes. Thanks are also due to the District Collectors for making available the Conference halls for holding the meetings. I am grateful to the Officers and staff of the Department of Local Administration secretariat for the active co-operation extended to us. I am also thankful to the Presidents, former Presidents, Members of Panchayats ad representatives of Public, Servcice Organisations, Kerala Panchayat association and Executive Officers of Panchayats for their active cooperation and valuable suggestions. The Commission was very much benefited by the comparative study of Panchayat Finances conducted by our Officers in the neighbouring States of Karnataka, Tamil Nadu and Andhra Pradesh. The National Institute of Rural Development, Hyderabad had also provided useful details on local body finances. I am grateful to the Secretaries to Government and other Officials of the Department of Rural development in the above States as well as to the experts of NIRD for their co-operation. I take this opportunity to express my gratitude to Shri., C. M. Sundaram, Minister for Local administration for the valuable support extended tot he commission. K. AVUKADERKUTTY NAHA, Chairman, Panchayat Finance Commission. INTRODUCTORY NOTE While presenting the budget for 1983-84 the Minister for Finance announced that Government are contemplating constitution of a Panchayat Finance Commission. Following this, Government issued orders in G.O. (MS) 149/83/LA&SWD dated 27th September, 1983 (vide Appendix I ) constituting a Panchayat Finance Commission with Shri K. Avukaderkutty Naha, M.L.A (now Deputy Chief Minister of Kerala) as Chairman with the following terms of reference: (i) Assessment of the existing Panchayat services and amenities and their cost. (ii) Assessment of the cost of Panchayat services and amenities as satisfactory standards.

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(iii) Assessment of the gap between the existing resources and cost of services and amenities at satisfactory standards. (iv) Assessment of the degree of exploitation of the existing local taxes by the Panchayats and possibilities of improving them. (v) Examination of the present Panchayat taxation structure and suggestions for augmenting the resources of Panchayats. (vi) Examination of the possibilities for the raising of non-tax revenues. (vii) Suggestions for the basis of Government grants (both statutory and non- statutory) to Panchayats. (viii) Assessment of arrears due to Government from the Panchayats as on 31-3-1983 and suggestions on measures to be taken to clear these arrears and also to ensure that arrears do not accumulate in future. Later in G.O. (MS) No. 89/85/LA&SWD dated 23rd April, 1985 (Appendix I) Government have ordered that following items will also be included in the terms of reference of the Commission. (i) Study on uneconomic Panchayats which are not able to meet even the establishment expenditure, let alone, other developmental activities and suggestions for making them viable or for amalgamating with other viable Panchayats. (ii) Examination of the existing norms regarding the Panchayat and suggestions, if any, for their regrouping in consonance with the financial capacity of the Panchayats. Though orders constituting the Commission was issued on 27-9-1983. Office could start functioning in full swing only from April 1984 as it took time to locate an office building, to appoint necessary staff on deputation basis etc. The first meeting of the Commission, held on 21-3-1984 in the chamber of the Deputy Chief Minister, decided to issue a General Questionnaire to the Presidents of Panchayats and the public and a Data questionnaire to the Panchayat Executive Officers. The second meeting of the commission held in its office at Kumarapuram (Trivandrum) on 17-4-1984 approved the drafts of the above two questionnaire. The two questionnaire were got printed and issued to all concerned during May-June 1984. Meanwhile Shri. M. Subbayan, formerly Director of Panchayats and since working a s Managing Director of the Kerala State Development Corporation for Scheduled Castes and Scheduled Tribes, Trichur was appointed as Member Secretary to the commission. Shri Subbayyan assumed charge on 15-5-1984, Shri K. Bhanuvikraman Nair who was Secretary to the Commission till them, appointed as Additional Secretary consequent on appointment of Shri Subbayyan.

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Though replies to the questionnaire were required to be furnished on or before the end of August 1984 the time limit was adhered to by the executive Officers numbering less than 50 only. Similarly the response from the Presidents to the General Questionnaire was also not encouraging. Though the time limit was since extended upto the end of September 1984 the response was luke warm. With a view to expedite replies to the detailed questionnaire conferences of Executive Officers were held at various district headquarters. Despite sustained efforts replies to the data questionnaire from all Panchayats were received only by the end of January 1985. Soon after receipt of replies to questionnaire compilation was started. Case study of 50 typical Panchayats in the State selected on the basis of income, location, backwardness etc., was also undertaken from September 1984 onwards. In November 1984 office was shifted from Kumarapuram to Sasthamangalam in Trivandrum. Being the first attempt by our Government to analysc and find out means for improving the finances of Panchayats extreme care was taken to elicit the views of maximum number of Panchayat functionaries and other public men associated with local body affaires. To ensure this, the Commission held sittings at various district headquarters from February 1985 onwards. The Commission received several suggestions both written and oral during the course of collection of evidence. The suggestions covered a variety of topics relating to the different facets of Panchayat administration. Some of the suggestions were of such a nature that would entail additional expenditure to Panchayats. A number of creative and original suggestions were also received during the sittings. The Commission has carefully considered all suggestions and shades of opinions while formulating its views on various subjects enumerated in the terms of reference. The Commission could not, however, give due consideration to certain suggestions having a bearing on re-organisation of Panchayat administration in the State as we had to confine within the frame of the terms of reference issued by the Government. Eventhough the data questionnaire was drafted so carefully and comprehensively and forwarded to the Executive Officers with detailed guidelines and instructions a good many of the replies were either incomplete, or imperfect and in certain instances details were furnished in a slip-shod style. Much time was lost in sorting out the details in such cases. The officials of the Commission had visited the neighbouring States viz. Karnataka, Tamil Nadu and Andra Pradesh and conducted comparative studies of local body finances of those States. The studies were found very useful in making our recommendations for improving the finances of Panchavats in our State. The Commission finalised their report during the sittings held in the months of August, September and October 1985.

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CHAPTER I VILLAGE PANCHAYATS IN KERALA ORIGIN AND GROWTH 1.1 Local Bodies are regarded as "nursery of democracy"; It is a precious training ground for the local people in public administration as well as in politics which enables them to participate in national politics in a more effective and purposeful way. It is also a ground for the local people to solve their own problems and to do things by themselves. They can execute schemes for their own betterment with the aid of such resources as are made available to them by the State Government or which they are able to raise by their own efforts. The fact that only with the help of local self Government it will be possible top provide the basic amenities in rural areas in the manner in which the people living in those areas want them has been recognised by the founding fathers of our Constitution and this has found expression in Article 40 of the Constitution of India which enjoins that "the state shall take steps to organise Village Panchayats and endow them with such powers and authority as may be necessary to enable them to function as units of self Government". 1.2 The period that immediately followed the enactment of the Constitution of India witnessed the establishment of more and more Village Panchayats in rural areas by bringing into force legislations in the States assigning more duties and functions to Panchayats. New legislations viz. T-C Panchayat Act, 1950 in T-C State and Madras Village Panchayats Act, 1950 in Madras State etc. were in pursuance to the above movement for establishing democratic units of administration at village level in order to provide civic amenities and services to the local people. 1.3 The Kerala State with an area of 38863 Sq. km. was formed on 1st November, 1956 by merging erstwhile States of Travancore-Cochin and the district of Malabar and the Kasargode areas of former Madras State. The system of Panchayat for a village or a group of villages has been in existence in Kerala even before its formation in 1956. It would be quite interesting in this context to have a birds eye-view on the Local Self Government Administration that prevailed in the erstwhile States of Travancore-Cochin and Malabar area (Part of madras State). The ensuing paras will give an idea of the position prior to the formation of Kerala State. 1.4 In the former Travancore region the system of Local Self Government existed in urban areas only. Later, in August, 1925 it was extended to rural areas by a regulation called 'Village Panchayat Regulation VII of 1100 M.E.' passed in Karkatakom 1100 (ie. in August 1925). In pursuance to this Act only seven Village Panchayats were constituted, Cleaning of streets, construction, maintenance of wells and tanks for supply of drinking water to public, opening and maintenance of burial and burning grounds, maintenance and control of local roads and ferries, supervision of primary education etc. were the main functions entrusted to the Village Panchayats as per above Act. A special feature of this Act was that it delegated certain judicial functions to the Panchayats. The Village Panchayats were vested with the power of taxation. Main sources of income were

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land cess, profession tax, licence fees, vehicle tax and contributions from Government. Later in 1940, another Act under the title "Village Union Act", was passed and it envisaged almost the same functions and duties as the village Panchayats though the Village Unions enjoyed only less powers than the Panchayats. The Act of 1940 took away the judicial functions exercised by the Panchayats under the Village Panchayat Regulation of 1925. The Village Union also collected taxes and licence fees. Besides they got Government contributions, equal to the amount collected by them by way of taxes, fee etc. Thus there were two categories of Panchayats in the Travancore area-One category under the Village Panchayat Act of 1925 and the other under the Village Union Act of 1940 at the time of integration of Travancore and Cochin States in July 1949. Total number of Panchayats then existed were seven Village Panchayats and 195 Village Unions covering a population of 28 lakhs. 1.5 In Cochin area Village Panchayats were established as early in 1914 under the Cochin Village Panchayat Act, 1089 M.E.(1914). As a first step under the above enactment, five Panchayats (ie. one for each taluk then existed) were constituted in the Cochin State. By the year 1934 Panchayats were formed in the entire rural areas of the Cochin State increasing the number from 5 to 87. Important activities of Panchayats were construction and maintenance of minor irrigation works, village roads, canals, supply of drinking water, sanitation, control over vaccination and registration of vital statistics and supervision of elementary education etc. Panchayats in Cochin State were not levying taxes of any kind their income was confined to receipts from usufructs, trees etc. which was not of much significance. However, the Panchayats carried out their civic duties by means of liberal grants from Government. The Panchayats did not have any machinery to execute works and the staff for the execution of several works in the Panchayat area were directly engaged and paid by Government. Certain Panchayats were vested with judicial powers of Village Courts. Later, the Village Courts were separated from the Panchayats and placed under the control of Judicial Department of the Cochin State. There were 100 Panchayats in the Cochin State at the time of integration with Travancore in July 1949. 1.6 Eventhough Travancore and Cochin were integrated in July 1949 the pattern of Panchayats that existed in the erstwhile states continued to function under the relevant Act of each State till 15-8-1951 when the unified Act called "Travancore-Cochin Village Panchayat Act, 1950" came into force. Panchayats in T-C State were regrouped under the new Act and 550 Panchayats were constituted. The first Panchayat elections to the Village Panchayats in T-C State were held in 1953 and these Panchayats started functioning from 15th August, 1953. 1.7 Consequent on the promulgation of the above new Act and the Rules made thereunder sphere of activities of Panchayats widened and they were entrusted with responsibilities: (i) to construct, repair and maintain all the roads other than those under the Public Works Department;

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(ii) to preserve all poramboke paths, lanes and canals useful for purpose of communication, cattle grazing grounds etc. (iii) to carry out petty Irrigation works; (iv) to light all public roads and public places; (v) to provide public latrines, urinals; (vi) to open and maintain burial and burning grounds etc. (vii) Opening and maintenance of Public Markets, Public Slaughter houses etc. (viii) Control of Dangerous and Offensive Traces; (ix) Planting and preservation of road side trees; (x) Registration of births and deaths. 1.8 As mentioned earlier, taxation was not in existence in the Panchayas of Cochin unlike Travancore, With the introduction of the unified Act of 1950 collection of taxes by all Panchayats in the T-C area was started during the year 1953-54. The items of taxation included Profession Tax, House Tax, Vehicle Tax, Licence Fees. However these were all discretionary taxes. Based on annual income, Panchayats in T-C area are classified into three grades. Panchayats having an annual income of Rs. 15,000 and above are classified as Grade I and those below Rs.15,000 but above Rs. 5,000 as Grade II and the remaining Panchayats were grouped under Grade III. Consequent on the States Reorganisation, Panchayats in five taluks in the former T-C area viz. Thovala, Agastheeswaram, Shencottah, Vilavancode and Kalkulam were added to the Madras State. 1.9 In the Malabar district and Kasargode area, which were parts of erstwhile Madras State, Village Panchayats were functioning under the "Madras Village Panchayat Act, 1950" Which came into force from 1st April, 1951; Under this Act every Village or hamlet with a population of 500 and above will have a Panchayat. Villages with a population of less than 500 were made part of an adjoining Panchayat or grouped with other contiguous villages and a single Panchayat formed for the group. Panchayats having a population above 5000 and with income exceeding Rs.10,000 were classified under Class I and all the others under Class II. The duties and fundtions of the Panchayats under this Act were almost similar to those contained in the T-C Act, 1950 (explained in pre-para No. 1.7). Further certain judicial functions vested with Village Courts and Panchayat Courts under the Madras Village Courts Act, 1888 were also attended to by the Village Panchayats. The main sources of revenue of the Panchayats were share of land cess, and duty on transfer of property. Further house tax, profession tax and vehicle tax were levied compulsorily. Under the Madras act, Panchayats were not eligible for any statutory grants. But Government paid ex gratie grant to Panchayats. Entire Malabar area was not covered by Panchayats. Such areas which were not covered by Panchayats were

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under the administrative jurisdiction of the Malabar District Board. The District Board carried out all the statutory functions of Panchayats in respects of the non-Panchayat area. Eventhough activities of District Boards were mainly concerned with non Panchayat areas they have been empowered to carry out the affairs relating to Education, Medical and Public Health in Panchayat areas also. The District Boards derived their income from Profession Tax, Entertainment Tax, Education Cess, Land Cess, Surcharge on Stamp duty, Licence fees and Grant-in-aid by Government. As a result of the States Recorganisation, Malabar District and Kasargod areas were added to T-C State to form Kerala State on 1-11-1956. Consequently 364 Class II and 35 Class I Panchayats in the Malabar and Kasargode area were transferred to the Kerala State thus making a total of 892 Panchayats in the newly formed State of Kerala. The District Boards continued to exist even after the States Reorganisation in 1956 till Kerala Panchayat Act, 1960 was brought into effect from January,1962. Panchayats after formation of Kerala State 1.10 In 1958, the Ministry headed by Shri E.M.S. Namboodiripad brought in a draft Panchayat Bill for the purpose of adopting a uniform law throughout the Kerala State. But because of dissolution of Legislature in 1959, the Bill could not be passed by the Assembly. It was only in 1960, after formation of a new Ministry headed by Shri. Pattom Thanu Pillai, a uniform Panchayat Act was passed to cover the entire State of Kerala. But this unified Act called "The Kerala Panchayat Act, 1960" came into force only from 1st January 1962. The present Panchayat system in Kerala is based on the above Act. This Act envisages to provide for a unified and decentralised system of administration of village affairs throughout the State through Panchayats by organising them as units of Local Self Government at Village level. Functions and duties assigned to Panchayats are those which are contemplated under Section 57 of the above Act which is extracted in Appendix IV. Above Act empowers Government to declare any village or group of adjacent villages or portions thereof to be Panchayat area. For the purpose of the Act, each Panchayat is to consist of such number of members to be notified by the Director in accordance with the prescribed scale. A Panchayat having a population upto 10,000 is to have 8 members. Panchayats with population exceeding 10,000 will have 8 members for the first 10,000 of the population and one additional member for every 4500 of the population in excess of 10,000 subject to a maximum of 15 members. In every Panchayat, one seat is reserved for Scheduled Castes and Scheduled Tribes and one for women. Elections of members to Panchayats are held on the basis of adult franchise by the system of secret ballot. The members of the Panchayat will elect a President and a Vice President from among themselves. Elections to the Panchayat council, were however, postponed pending finalisation of delimitation of the areas under each Panchayat in the State. Having completed the process of a delimitation, the first Panchayat election in Kerala State was held by the end of 1963. The new Panchayats came into existence on the first of January, 1964. There were 922 Panchayats in the State on the above date.

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Organisational set up of Panchayats 1.11 Section 33 of the Kerala Panchayat Act, 1960 provides for appointment of a whole time Executive Officer who should be a Government Servent. Other Officers and personnel in the service of the Panchayart shall work under him. Personnel other than the Executive Officers have been brought under a common service for each district. The recruitment to Panchayat Common Service has been entrusted to the Kerala Public Service Commission. However, selection to Part-time posts, to each district is made by a committee consisting of the Secretary to Government, Local Administration, Director of Panchayats and a Representative of the Kerala Panchayat Association of the district concerned. District Panchayat Officer is the convener of the Committee. Existing position of Panchayats 1.12. The new Panchayat Councils which came into power on January, 1st 1964, continued to be in power until 1979 as elections were postponed from time to time for some reason or other. The councils which were elected in 1979, completed their statutory period of five years in 1984, have ceased to exist. These Pancayats are now placed under the control of Special Officers appointed by the Government. The powers and duties of the Panchayat Councils are now being exercised by the above Special Officers as per Section 55(4) of the Kerala Panchayat Act. Population of Kerala-Panchayat Level Picture 1.13 Kerala is ahead of all States in the matter of density of population. Density is as high as 558 per sq. km. in rural areas as against all India Average of 161. The total population of Kerala according to the 1981 census is 254.54 lakhs. Of this, 217.89 lakhs are in rural areas in the State and it constitutes 85.6% of the total population of Kerala. There are 1001 Panchayats in Kerala. There are 1001 Panchayats in Kerala. The list showing name, grade, population, area etc. of Panchayats is furnished in Appendix V. Table given below gives districtwise position of Panchayats.

TABLE Showing the number of Panchayats in each district indicating The most populous and least populous Panchayat in each District as per 1981 census

District 1. Kasargode 2. Cannanore 3. Wynad

Most Number of Panchayat panchayats Name 37 Bedadka 85 Payyannur 25 Meppadi

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populous Least Panchayat Population Name 35,485 Belur 53,992 Malapattam 48,514 Vengappally

populous Population 7,614 7,283 7,336

4. Kozhikode 77 5. Malappuram 95 6. Palghat 91 7. Trichur 98 8. Ernakulam 86 9. Idukki 51 10. Kottayam 73 11. Alleppey 69 12 Pathanamthitta 55 13 Quilon 75

Quilandy 51,301 Vengara 49,258 Ottappalam 37,541 Koorkancherry 44,028 Eloor 52,528 Munnar 78,833 Mundakkayam 43,034 Punnapra 40,422 Pandalam 35,391 Kottarakara 53,349

14 Trivandrum

Parassala

84 1001

40,867

Kayanna Chungathara Nelliampathy Vettilappara Pothanicad Vattavada Thalanad Perumbalam Thumpamon Munore Island Kallikkad

10,561 9,212 8,871 9,107 8,878 3,554 8,182 8,614 7,574 9,938 10,978

The Kerala Panchayat Act does not stipulate a minimum population for the formation of a Panchayat. The average population of a Panchayat in the State comes 22,103. Trichur district with 98 Panchayats has the largest number of Panchayats in a district followed by Malappuram District (95). Wynad, the least population district in the State, has also the lowest number of Panchayats (25). 30 Panchayats in the State have a population of less than 10000. All Panchayats in Trivandrum and Kozhikode districts have a population of 10000 and over. 834 out of the 1001 Panchayats have a population ranging between 10000 and 30000. Panchayats with a population of 30000 and over comes to 137 of which 6 have above 50000. Munnar Panchayat in Idukki District having a population of 78833 is the most populous Panchayat in the State. Idukki district also has the distinction of having a Panchayat viz. Vattavada with the least population in the State with only 3554 persons. The other 5 Panchayats in the State having a population of 50000 and above are Payyannur (53992) in Cannanore District, Quilandy (51301) in Kozhikode District, Eloor (52528) in Ernakulam District, Kottamkara (53349) and Kilikolloor (50734) in Quilon District. Area-wise, Valapattanam Panchayat in Cannanore district is the smallest Panchayat in Kerala (2.04 sq. km.) with a population of 8080. But Karumkulam Panchayat in Trivandrum District with an area of 2.43 sq. km. and population of 22,412 has registered the highest density among panchayats in Kerala. 1.14 Panchayats in Kerala are classified into four categories according to their annual income excluding non-statutory grants and contributions. The classification of Panchayats as on 31-3-1984 is as follows:Classification

Annual Income

No. of Panchayats under each category 350

1. Special Grade, More than Rs. 1.75 lakhs Panchayats 2. Grade I Panchayats More than Rs. 1 lakh and upto 435 Rs. 1.75 lakhs 3. Grade II Panchayats More than Rs. 50000 and upto 206 13

Rs. 1 lakh 4. Grade III Panchayats Upto Rs. 50000

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Grouping of Panchayats is done once in three years. Last regrouping of Panchayats was done in May, 1983 on the basis of average income for the years 1979-80, 1980-81 and 1981-82 vide G.O. (MS) 52/83/LA &SWD dated 10-5-1983 and proceedings No. E135949/82 dated 22-12-1984 of the Director of Panchayats. Panchayat Raj and Kerala 1.15. The Balwant Rai Mehta Study Team Report on Community projects and National Service emphasised the need for decentralisation of responsibility and power and recommended a three-tier system of local self government with Village Panchayat at the lowest level and Panchayat Samithi at intermediate level (Block) and Zilla Parishad at the district level. By the above recommendation the Panchayat Samithi was to be in charge of all development activities in the Block and the Zilla Parishad was expected to coordinate, supervise and advise the Panchayat Samithis. As far as the composition of these bodies was concerned, the Study Team recommended a system of indirect elections whereby the Presidents of the lower body could become ex officio members of the next higher body. The National Development Council in their meeting held in January, 1958 agreed to the idea of giving developmental responsibility to the people's representatives below the state level. It, however, took the view that the manner in which the principle was to be applied was a matter for the states to consider. In short, each state was free to have its own legislation and to set up Panchayat Raj Institutions of its own choice suited to the local genius, conditions, environment and needs and requirements. While enacting the Kerala Panchayat Act, 1960 due regard was given to the idea of sharing of powers and responsibilities to Panchayats as envisaged by the Mehta Study Team. But three tier system of Panchayat Raj Administration as suggested by the Balwant Rai Mehta Committe has not been introduced in Kerala though most of the other states in India have a three tier pattern. The Panchayats in Kerala are empowered to attend civic functions only. Plan implementation work under rural development programmes is not being assigned to Panchayats but to Community Development Blocks under the administrative control of Development Department. In other words, the rural development programmes and Panchayat functions (civic functions and related welfare measures) are executed by two separate departments in Kerala. Resources 1.16. The Panchayats in the State are utilising major chunk of their resources (after making provision for establishment cost) for construction and maintenance of roads (Communications) sanitation, street lighting and water supply. The main sources of income of Panchayats in Kerala are:(a) Compulsory taxes

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1. Building Tax 2. Profession Tax 3. Vehicle Tax on non-motor vehicles 4. Entertainment Tax and Additional entertainment tax 5. Show tax and surcharge on show tax (b) Optional Taxes 1. service Taxes 2. Surcharge on building tax 3. Land Cess (c) Non-tax revenue 1. Licence fees 2. Income from Panchayat properties (including income from markets) 3. Miscellaneous receipts (Receipt from interest etc.) (d) Assigned Revenue (Statutory Grants) 1. Basic Tax (Land Revenue collected by the Revenue Department and assigned to Panchayats) 2. Surcharge on stamp duty on transfer of immovable property (collected by the registration Department and assigned to Panchayats) 3. Vehicle Tax Compensation (share of Motor vehicle tax collected by the M.V. Department and assigned to local bodies). (e) Non-Statutory Grants (Discretionary Grants) for various specified purposes. (f) Loans and Advances from Government for specific purposes. (g) Loans from Kerala state Rural Development Board for creating remunerative assets.

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CHAPTER II TAXES RESERVED FOR UTILISATION BY OR FOR LOCAL BODIES 2.1. The Acts and Rules which have come into force in the various States of India in order to regulate the functions of Panchayats contained long list of functions entrusted to the Panchayats, which have been classified as obligatory and discretionary. Even though the Panchayats were called upon to discharge such a long list of mandatory and discretionary functions they were not adequately equipped with the financial resources required for it. There has been a general demand from the early days of freedom that the local bodies should have a definite and assured source of tax revenue and that this should be secured by the inclusion in the Constitution of a separate list of taxes which could be levied exclusively by and for the local bodies. Such a demand was based on the fact that under the Scheduled Taxes Rules framed under the Government of India Act, 1919, the following taxes were to be utilised by or for local authorities:1. Toll; 2. Tax on land or land values; 3. Tax on buildings; 4. Tax on vehicles or boats; 5. Tax on animals; 6. Tax on menials and domestic servants; 7. Octroi; 8. Terminal tax; 9. Tax on trades, profession and callings; 10. Tax on private markets; 11. Tax imposed in return for services rendered such as; (a) Water rate; (b) Lighting rate; (c) Scavenging, Sanitary or sewage rate; (d) Drainage tax. 2.2. But the Constitutional status enjoyed by the local taxes in the Government of India Act, 1919 was lost when the Government of India Act, 1935 came into force. It repealed the Scheduled Taxes Rules and provided for three lists viz., the Federal list, the Provincial list and the Concurrent list. The Constitution of India has closely followed the above three lists which came to be known as the Union list, the State list and the Concurrent list. There is no separate list for local bodies. However local Government is

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included in the State list. The relevant entry in State list under the Seventh Schedule of the Constitution of India reads as follows:Item No. 5.- "Local Government, that is to say, the constitution and powers of Municipal Corporations, Improvement Trusts, District Boards, Mining Settlement Authorities and other local authorities for the purpose of Local Self Government or Village Administration". The local bodies in India thus derive their power of taxation from the powers delegated to it by the State legislatures through various enactments. 2.3. The Government of India was responsive to the problems of local body finances right from the beginning of independence as could be seen from the attempts made by them to find out the solutions through studies undertaken by various Commissions and Committees. The terms of reference of the Local Finance Enquiry Committee (1951), appointed by the Government of India required it to examine whether the existing resources are adequate for the performance of the functions assigned to the local bodies and to consider whether and if so, what further sources of revenue should be provided". The Local Finance Enquiry Committee 1951 had in its report recommended one tax from the Union list and twelve taxes from the State list should be reserved for utilisation by or for local bodies. They are:Union List (1) Item No. 89 Terminal taxes on goods or passengers carried by railway, sea or air, State List (1) Item No. 49 Taxes on lands and buildings (2) Item No. 50 Taxes on mineral rights subject to any limitation imposed by Parliament by law relating to mineral development. (3) Item No. 52 Taxes on the entry of goods into a local area for consumption, use or sale therein. (4) Item No. 53 Taxes on the consumption on sale of electricity.

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(5) Item No. 55 Taxes on advertisements other than advertisements published in the newspapers. (6) Item No. 56 Taxes on goods and passengers carried by road or inland water ways. (7) Item No. 57 Taxes on vehicles (other than those mechanically propelled) (8) Item No. 58 Taxes on animals and boats. (9) Item No. 59 Tolls (10) Item No. 60 Taxes on professions, trades, callings and employments. (11) Item No. 61 Capitation taxes. (12) Item No. 62 Taxes on entertainments including amusements. The Committee had also suggested that the State, while investing local bodies with wider responsibilities, must also place at their disposal adequate funds to supplement their revenue. 2.4. Another Commission, viz., "Taxation Enquiry Commission (1953-54)" headed by Shri John Mathai, had also recommended some of the above mentioned items for reservation by local bodies. The taxes recommended to be reserved for exclusive utilisation of local bodies by the above Taxation Enquiry Commission were: (1) Taxes on lands and buildings; (2) Taxes on the entry of goods into the area of a local authority for consumption, use or sale therein, popularly known as octroi;

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(3) Taxes on vehicles other than those mechanically propelled; (4) Taxes on animals and boats; (5) Taxes on professions, trades, callings and employments; (6) Taxes on advertisements other than advertisements published in the newspapers; (7) Theatre/show tax; and (8) Duty on transfer of property. But no statutory action was taken by the Government of India on these recommendations. However in our State, all the items of taxes recommended by the Taxation Enquiry Commission have been made available to the local bodies except item No. (2) as levy of such a tax does not exist in our State. None of our neighbouring States have transferred so much of items of local taxes to the extent as the State of Kerala have done eg. Profession Tax in Karnataka is levied and appropriated in full by the State Government. Similarly Entertainment Tax in Karnataka, Tamil Nadu and Andhra Pradesh is levied by the State Government and assigned only a portion of the proceeds to Panchayats whereas in Kerala Entertainment Tax is levied by them as their own revenue. 2.5. In certain States, some taxes are obligatory and others are optional. In Assam, Jammu and Kashmir, Manipur, Meghalaya, Orissa, Rajasthan, Sikkim, Tripura and Uttar Pradesh all taxes are optional for Grama Panchayats. In the remaining States, one or more taxes are compulsory in addition to the optional taxes available to them. The recent tendency, however, on the part of those State Governments where all taxes are optional, is to make some taxes compulsory. The idea of making a few items of tax compulsory is gradually gaining momentum in recent times. 2.6. The Kerala Panchayat Act, 1960, which came into force from 1st January, 1962 and Kerala Local Authorities Entertainment Tax Act, 1961 brought into effect from 1st April 1962 and Kerala Additional Tax on Entertainments and surcharge on Show Tax Act, 1963 introduced from 1-5-1963 empower every Panchayat in Kerala to levy in its area, the following taxes:

(a) Compulsory taxes (1) Building Tax (2) Profession Tax (3) Vehicle Tax (other than those vehicles coming under the purview of M.V. Act).

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(4) Entertainment Tax (including Additional Tax on Entertainment) (5) Show Tax (including Surcharge on Show Tax) (b) Optional Taxes (1) Service Tax (2) Surcharge on Building Tax (3) Land Cess (c) Assigned Revenue Proceeds from the following items of taxes collected by the State Government are passed on to Panchayats (after deducting collection charges at 3%) in the form of statutory grants. (1) Basic Tax Grant (Land Revenue collected by the Revenue Department) (2) Surcharge on Stamp Duty on Transfer of Immovable Properties (collected by the Registration Department) at the time of Registration of documents. (3) Similarly a portion of the proceeds out of the vehicle tax collected by the State Government under M.V. Act and Rules is transferred to the Panchayats under Section 19 of Kerala Motor Vehicles Taxation Act, 1976. Details of receipts from the above sources for the five year period from 1979-80 to 198384 have been furnished Appendix VI. Detailed analysis of each of the above sources of income to the Panchayats together with our recommendations are given in the ensuing chapters.

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CHAPTER III TAXES LEVIED BY THE PANCHAYATS IN KERALA 1. BUILDING TAX 3.1. Tax on building is a compulsory tax levied under Section 68 of the Kerala Panchayat Act, 1960 which came into force on 1st January, 1962. The original provision empowered the Panchayat to levy tax on building (other than those exempted by the provision of K.P. Act, 1960) at such percentage of the net annual rental value on the building as may be fixed by the Panchayat by resolution subject to a minimum of 4% and maximum of 10%. The minimum rate was since enhanced to 6% with effect from 1-4-1978. The maximum rate however continues to be without change for more than three decades. (The th Travancore-Cochin Panchayat Act which came into force on 15 August 1951 provides for levy of Building Tax at a minimum of 4% and maximum 10% and this maximum rates still continues in the Kerala Panchayat Act). The Building Tax levied annually is to be paid in two equal half yearly instalments within 30 days of the commencement of each half year. 3.2. According to Kerala Panchayat (Building Tax) Rules, 1963, net annual rental value of buildings is determined by the Executive Authority once in five years on the basis of gross annual rent at which buildings are reasonably let out, less a deduction of 10% of annual rent towards allowances for repairs or any other account whatever. In the case of Government buildings or any other buildings for which annual rental value cannot be determined by the Executive Authority the annual rental value is calculated at 6% of the total estimated present cost of construction of the building together with the value of the appurtenant land after allowing depreciation of an amount not less than 10% of the cost of building. The assessee, if aggrieved by the assessment can file a revision petition before the Executive Authority. Appeal, if any, against the orders on revision petition will in the first instance lie to the Panchayat. Persons who are still aggrieved by the order or other action taken by the Panchayat can appeal to the Deputy Director of Panchayats, Government have the revisionary powers under the Act. 3.3. Building Tax is the largest single source of tax revenue of Panchayats in the State. *The decadal growth of collection of Building Tax during the period from 1974-75 to 1983-84 is furnished in the Table given below:TABLE Growth of collection of Building Tax during the 10 year period from 1974-75 to 1983-84 Year

Receipt (Rs. in lakhs)

Percentage annual growth

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of

Percentage of growth from the base year 1974-75

1974-75 1975-76 1976-77 1977-78 1978-79 1979-80 1980-81 1981-82 1982-83 1983-84

168.41 182.16 176.89 182.54 293.92 311.77 317.29 356.21 401.33 608.92

.. 8.16 (-) 2.89 3.19 61.02 6.07 1.77 12.27 12.67 51.73

.. 8.16 5.04 8.39 74.53 85.13 88.40 111.51 138.31 261.57

From the above table it may be seen that the receipts during 1974-75 which was Rs. 168.41 lakhs rose to Rs. 608.92 lakhs during 1983-84. The decadal growth is 261.57%. 3.4. As mentioned earlier, the minimum rate of Building Tax was enhanced from 4% to 6% with effect from 1-4-1978. This enhancement has fetched an increase in receipt to the tune of Rs. 111.38 lakhs during 1978-79 compared to the preceding year (1977-78). The annual growth rate from 1979-80 to 1982-83 on an average is 8.20%. The spurt (51.73% increase over 1982-83) in receipt during 1983-84 is due to the impact of quinquennial revision brought into effect from 1983-84 onwards. In other words enhancement of the minimum rate of tax from 4% to 6% with effect from 1-4-1978 and quinquennial revision from 1-4-1983 are two main factors behind the leap in receipt noticed during the decade 1974-75 to 1983-84. We have observed that the above increase in receipts does not commensurate with the increase in expenditure towards establishment and maintenance of services such as roads, street lighting, water supply etc. In fact income from Building Tax is not even sufficient to meet 54% of the establishment cost. Though Building Tax is the major source from which the Panchayats can tap the maximum revenue by exercising the statutory powers vested with them, there is hardly any earnest efforts on their part to collect it atleast on a scale to cover the cost of establishment. 3.5. The following are the factors that have led the Panchayats to a situation in which they could not exploit the maximum income from Building Tax. 1. Defects in the existing system of assessment of Building Tax. 2. Exemption of buildings from the purview of tax in underserved cases. 3. Reluctance on the part of the Panchayats to fix the rate of tax suitably (within the limits prescribed) to meet their needs. 3.6. We are of the view that if effective, remedial measures are adopted substantial revenue can be earned from Building Tax alone. The recommendations contained in the ensuing sections are mainly confined to the rectification of the loop-holes in the existing system of levy of Building Tax.

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Method of assessment of Building Tax 3.7. According to Section 68 of the Kerala Panchayat Act, 1960 Building Tax has to be assessed on rental value basis and in cases where it is not possible, on capital value of the building. The system of assessing Building Tax on the basis of annual rental value of building is in vogue as early from 1951 when the Travancore-Cochin Panchayat Act, 1950 came into force. During the course of collection of evidence and in reply to the questionaire issued by the Commission certain representatives of Panchayats have expressed apprehensions about the efficacy of assessing Building Tax, on the basis of rental value of buildings. However, they have not pinpointed on any particular defect in the method except saying that it is not yielding the desired results and that it may be substituted by the system of assessment based on capital value of buildings. Even though the idea of levying Building Tax on the basis of its capital value has been a subject of debate among those concerned with local body finances the various Commissions and Committees of experts which have gone into the problem seem to have favoured determination of tax on rental value basis. The Taxation Enquiry Commission (1953-54) constituted by the Government of India have expressed their opinion in the following words. "The levy of the tax on the basis of actual or reasonable rent is a levy on the actual or potential income from the property and to that extent is a more equitable method of taxation than one based on capital value. We recommend that the annual value based on the rent at which properties are reasonably be expected to be let, as at present interpreted in practice, should be the normal basis for the levy of property tax, subject to the basis of capital value being adopted in special cases of the type already noticed". The Local Finance Enquiry Committee 1951 which made an indepth study on the subject had also suggested that there should be no change from the well-tried basis of rent to the more or less uncertain basis of capital value. 3.8. Assessment of Building Tax on the basis of rental value seems to be more realistic and logical since the tax levied is directly related to the income likely to be obtained from the property whereas tax based on capital value seldom have relation to it. With the unprecedented hike in the cost of building materials and land value in recent times assessment of building tax in terms of capital value is not likely to reflect the rent at which the property can be reasonably let. While cost of construction of buildings may be more in Panchayats in rural areas due to difficulties in obtaining raw materials, cost of transportation etc., it will be comparatively less in Panchayats of an urban nature. But income by way of rent from buildings in urban Panchayats will always be higher than those in Panchayats in rural areas. Even in the same Panchayat rent for buildings with the same capital value may vary from place to place depending on the location, conveniences and other positive factors of the building. In such a context if tax is assessed on the basis of capital value, the buildings in rural Panchayats may be liable to be taxed at a higher rate while it will be less in urban Panchayats on account of the difference in capital cost as mentioned above. An inevitable consequence of this anomolous position is that the owner of a building having a low rental value but higher capital value will be liable to pay more tax than the owner of a building the capital cost of which is less but fetching more rent.

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3.9. Apart from the above, there are other considerations weighing in favour of assessing tax on rental basis. Assessment of tax, based on capital value requires a certain degree of technical expertise on the part of assessment officers. This will necessitate appointment of special staff having technical qualification. Appointment of technically qualified staff exclusively for the purpose of assessment (valuation of capital cost) will create problems administrative and otherwise because of the fact that their services are required only for a limited period once in five years. In the circumstances explained above, the Commission does not consider it advisable to switch on to the practice of assessment on capital value basis. The system of assessment of building tax on rental value basis as per existing provision may continue without any change. Quinquennial Assessment by an officer outside from the Panchayat 3.10. A point on which the Commission found unanimity of opinion among those who have furnished evidence (both written and oral) is that the existing system of assessment of Building Tax in Panchayats is inadequate and to a great extent defective in several respects. One of the major pitfalls, they pointed out, is that rental value is usually assessed at nominal rates due to extraneous reasons and this is mostly responsible for a low tax return. Unless the rental value which forms the basis of Building Tax is fixed on a reasonable basis there will not be any increase in the revenue even if tax is realised at the maximum rate. According to the provisions in Kerala Panchayat Act & Building Rules revision of Building Tax assessment is done once in five years by the Executive Authority of the Panchayat concerned. The Executive Officer, though working in the Panchayat and drawing his salary from Panchayat funds, is an employee of the State Government unlike other employees in the Panchayat. His authority and responsibility flow direct from the statute and are not derived from the elected council. However, in actual practice it is found that the Executive Authority cannot be too rigid in the matter of assessment of Building Tax strictly in accordance with the rules and regulations laid down in relevant statutes. A majority of buildings in the Panchayat areas are owner occupied buildings, the Executive Officer has to exercise his discretion in arriving at the reasonable rental value of buildings. It is in the exercise of this discretionary power that the Officer is often subjected to local pulls and pressures not to mention threats on rare occasions. Possibility of corruption among assessment officers in isolated cases cannot also be ruled out altogether. The cumulative effect of these aberrations arising out of the constant contact of the assessment officer with the public of the locality along with a number of other attendant factors render his assessment unrealistic and underpitched resulting in substantial loss of income from the most lucrative source of revenue to the Panchayats. 3.11. The evidence before the Commission is strongly in favour of engaging an Officer from outside the Panchayat for assessment of Building Tax. The various Commissions and Committees on local body finances have also emphasised the need for having independent and centralised valuation agencies to undertake the work of assessment of Building Tax with a view to secure fearless, impartial, uniform assessment by persons who are independent of the suffrage of the persons whom they assess. Having regard to the foregoing factors, the Commission is inclined to suggest that the work of tax revision

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be entrusted to Officers outside the Panchayat. The Commission however, does not consider it as a panacea for all the troubles prevalent in the field of assessment of Building Tax. However, we hope that with the assessment of tax by an independent Officer, tax base can be strengthened by which Panchayats will be able to earn more revenue than the present level. 3.12. The Commission recommends that an Officer of the Department of Panchayats not below the rank of a Taluk Panchayat Officer may appointed as Tax Revision Officer in charge of quinquennial assessment of Building Tax in all the Panchayats of a Taluk. Before his appointment advance action for preparation of list of houses, numbering etc., shall be taken by the Executive Officers of the concerned Panchayats and completed within three months preceding the commencement of the work of the Tax Revision Officer. The latter will complete the revision work of all the Panchayats in the taluk within 3 to 6 months in the maximum. The expenditure towards the salary of the Tax Revision Officer will be apportioned among the Panchayats concerned in such proportion as may be fixed by the Department of Panchayats. In between the quinquennial revisions Executive Officers may be authorised to assess Building Tax on new additions as per the existing provisions with the approval of the Taluk Panchayat Officer who will ensure that the assessment made by the Executive Officer is in confirmity with the standards adopted by the Tax Revision Officer. Necessary enabling provisions may be incorporated in the Kerala Panchayats (Building Tax) Rules, 1963 to bring into effect the above recommendation. Appeal and Revision 3.13. Section 144 of the Kerala Panchayat Act provides for appeal on the order or action taken by the Executive Officer. The appeal, in the first instance shall lie to the Panchayat. Influence and pressures play a dominant role in this stage also. The Panchayat council, being an elected body, in their enthusiasm to keep the public in good humour and to ensure continued popularity, may often reduce the original assessments beyond any reasonable limits. Stray cases of enhancements for extraneous reasons also cannot be ruled out. In the rules there in no limit upto which reduction of the enhanced amount can be made by the Panchayats on appeal. Absence of such a provision has given rise to indiscriminate reductions on appeal. Unless the power for reduction of the enhanced amount of tax is kept at a reasonable level, the benefits derived from assessment made by outside officer will be lost at the stage of appeal. The Taxation Enquiry Commission (1953-54) which considered the question of appeals on assessment of properties went to the extent of suggesting that no revisional or appellate functions should be vested in Municipal Councillors. The Commission, however, does not want to make serious inroads into the appellate jurisdiction of democratically elected representatives. But at the same time it is advisable to insist on fixing a maximum percentage beyond which the enhanced tax should not be reduced. In Tamil Nadu reduction on appeal has been restricted to 10% of the enhanced amount. In Andhra Pradesh it is 25% of the additional levy. Taking into account the above aspects and considering the state of affairs in our State, the Commission recommends that the maximum reduction that can be effected by the Panchayat should be restricted to 20% of the enhancement (ie. 1/5th difference

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between the revised tax and the existing tax) assessed by the Tax Revision Officer. The powers of Deputy Director for reduction may be restricted to a maximum of 33 and 1/3rd per cent i.e. 1/3rd of the quantum of enhancement made by the Tax Revision Officer. Apart from ensuring uniformity in appellate decisions such a restrictive clause will eliminate chances of abuse of power by appellate authorities. Suitable amendments may be incorporated in the relevant Act and Rules to give effect to the above recommendation. Exemption of Buildings for purpose of assessment of Building Tax 3.14. Apart from factors like under-valuation and under assessment of buildings etc., which contributed to the low return of income from Building Tax, a growing tendency is noticed in the matter of granting large scale exemptions of households from levy of Building Tax. The Kerala Panchayat Act, 1960 has specifically categorised the types of buildings that can be exempted from levy of tax. 'Huts' as defined in sub clause 14 of Section 2 of the Kerala Panchayat Act are totally exempted from the purview of levy of Building Tax by Panchayats. Besides, certain other categories of buildings used for religious, charitable and educational purpose as specified under Section 72 of the Act are also exempted from paying Building Tax. The Panchayats in the State have not been following any uniform standard in regard to granting exemption for 'huts' as criterion adopted for exemption of 'huts' varies from Panchayat to Panchayat. Case study of selected Panchayats has revealed that the percentage of exemption (to the total number) has been alarmingly high in certain Panchayats. The number of houses exempted in Anchal Panchayat comes to 61%. Similarly it is 59% in Muttom (Near Thodupuzha) 55% in Mundakkayam, 54% in Krishnapuram (Near Kayamkulam) and more than 50% in Njarakkal. Position in respect of a few Panchayats is indicated in the following Table. TABLE Panchayats which have exempted more than 50% of buildings from levy of Building Tax (noticed during case study) Sl. No. 1 2 3 4 5 6 7 8 9 10

Name District Trivandrum Trivandrum Quilon Quilon Quilon Kottayam Kottayam Idukki Ernakulam Malappuram

of Name of Total No. of Exempted Panchayat houses Anjengo 3585 2196 Uzhamalakkal 4079 2785 Anchal 7286 4444 Krishnapuram 4889 2649 Sakthikulangara 8673 4663 Kallara 2765 1393 Mundakkayam 9362 5133 Muttom 3206 1889 Njarakkal 5076 2562 Irimbiliyam 3768 2114

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Percentage exemption 61 68 61 54 54 50 55 59 50 56

of

11 12

Kozhikode Wynad

Kayanna Manantoddy

2480 7980

1383 4286

56 53

Reasons for such large scale exemption of building under the guise 'huts' seems to be due to the indiscriminate stretching of the definition of the term 'hut' in the Act which is too elastic to be interpreted according to the local condition prevailing in each Panchayat. What is required is a more concrete definition of the term 'hut' in relation to what little rental value it can fetch. 3.15. The Taxation Enquiry Commission 1953-54 has viewed the problem of exemption thus: "The justification for exemption below a certain level rests on two-grounds. Firstly, when the value of the property is below the very low minimum fixed, it represents, on the part of the owner or occupier a standard of income or living which deserves exemption. The second and more valid ground is the disproportionate administrative cost, at the lowest level, the yield may not be even equal to the cost of collection". The Taxation Enquiry Commission has therefore recommended that, below a specified minimum which should be so fixed as to cover only the lowest rental values, properties might, though not as an invariable rule, be exempted from the property tax, provided the owner does not own any other building or land assessed to the tax and is not liable to pay profession tax or income tax. It is also observed that such exemptions would be particularly justified if they were reinforced by the existence of administrative considerations mentioned. The Local Finance Enquiry Committee 1951 has however, gone to the extent of expressing the opinion that there should be no exemption from the property tax merely on the ground of the annual values being below a particular monetary limit and that such exemptions, wherever they exist, should be abolished. 3.16. It is a fact universally recognised that exemption of huts having very low rental value is intended to act as a belief to the poor towards whom the local bodies have a positive duty to be generous in the mater of levying tax. But we cannot overlook the fact that a sizable number of house owners in many Panchayats take undue advantage of this leniency clause in the Act and manage themselves to get exempted from payment of Building Tax while owners of similar 'huts' in other Panchayats are assessed for Building Tax. Statistical comparison of this anomaly with supporting comparative statements is not attempted here as it involved collection of details from the field at an extensive scale. However, instances of large scale exemption noticed during case study of selected Panchayats and opinions expressed during the course of collection of evidence about the prevalance of the state of affairs mentioned above, reinforce the need for making this exemption clause more specific and sharp. 3.17. The definition of 'hut' as it exists in the Kerala Panchayat Act, is meant to serve the purpose of a guideline to the assessment authorities in general. Having convinced that there is absolutely no uniformity among Panchayats in following the definition of 'hut' in so far as it relates to the question of exemption, the Commission considers that buildings with rental value below a certain level should only be exempted from the purview of Building Tax.

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3.18. The Commission would therefore recommend that only those huts (as defined in sub clause 14 of Section 2 of the Kerala Panchayat Act) whose gross annual rental value is Rs. 240 and below alone need be exempted from the purview of levy of Building Tax. Section 2 (14) may be suitably amended for the purpose. No buildings other than those specifically exempted under Section 72 of the Kerala Panchayat Act, 1960 should be exempted from the purview of levy of Building Tax. Rate of Tax 3.19. Section 68 of the Kerala Panchayat Act, 1960 empowers the Panchayats to levy tax on buildings at such percentage of the annual rental value of the building as may be fixed by the Panchayat by resolution subject to a minimum of 6% and maximum of 10%. The idea behind laying down minimum and maximum rate for levy of Building Tax at the discretion of local bodies is intended to provide them freedom to fix the rate at the appropriate level by which they can expect a reasonable return from Building Tax to meet the expenditure on their evergrowing needs. This is, however, not to imply that there shall be strict co-relation between the receipts on account of Building Tax and the expenditure required to discharge the obligatory functions. Statistical details available with the Commission indicate that out of 1001 Panchayats in the State 703 Panchayats (more than 70% of the total) are levying Building Tax at the minimum percentage of 6% only. Table below shows the number of Panchayats levying Building Tax at different rates. TABLE Rate at which Building Tax is levied 6% 7% 7.5% 8% 9% 10% Total

Number of Panchayats 703 94 4 155 12 33 1001

3.20. It may be seen that vast majority of Panchayats are reluctant to enhance the rate above the minimum eventhough statute conferes absolute powers to the Panchayats to fix rate of tax at appropriate level in the minimum and maximum prescribed, after taking into account local needs. In Trivandrum, Quilon, Pathanamthitta and Kottayam there is not a single Panchayat which is levying Building Tax above 8%. In contract to the above, 13 out of a total 25 Panchayats in Wynad District, tax is being levied at the maximum rate of 10%. Only two Panchayats in Wynad District are collecting at the minimum rate of 6% . During case study it was noticed that generally the major Panchayats are averse to raise the percentage in contrast to poor Panchayats. For example Mulloorkara (Trichur District) Thennala and Cherukavu (Malappuram District)which can be considered as poor Panchayats are realising Building Tax at 8% while major Panchayats like Narakkal,

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Eloor, Kalamassery (Ernakulam District), Ulloor, Vattiyoorkavu, Balaramapuram, Chirayinkil (Trivandrum District), Karunagappally, Kottarakkara, Kundara, Eravipuram (Quilon District), Adoor (Pathanamthitta District) Aroor (Alleppey District) Ollur, Ollukkara, (Trichur District) Ottappalam, Alathur (Palghat District) Feroke, (Kozhikode District), Payyannur, Taliparamba (Cannanore District)etc., which have urban characteristics are not keen to raise Building Tax above minimum rate of 6% even after a lapse of more than 6 years since its introduction in 1978-79 though they are in need of additional resources for providing basic amenities to local people, not to speak of a 2 to 3 fold increase in their establishment cost itself over a period of six years. 3.21. The general trend of opinion found among the representatives of Panchayats during collection of evidence is that the Panchayats are badly in need of financial assistance from Government to discharge their obligatory functions. When asked the reason why they could not raise additional resources by increasing the rate of Building Tax above the minimum level (of course within the permissible limit) it was explained that there are several compelling factors in fixing the Building Tax at the minimum rate. One of the reasons pointed out is that the public will not tolerate a particular Panchayat to enhance the rate beyond the minimum while neighboring Panchayats are not doing so. The other, and perhaps the more important reason which the Commission could perceive was that unlike the State Government the Panchayats are in close contact with the people. Further, there seems to exist something like a keen competition among Panchayats to keep the rate of tax as low as possible in order to win popularity. Thus, need are being sacrificed for the same at extraneous considerations of the representatives are not however opposed to the idea of enhancing the minimum rate by Government by making appropriate amendment to the existing provision in the Kerala Panchayat Act as the element of compulsion arising from Government side will absolve the Panchayat Councild from being responsible for the hike in percentage of tax. It is to be recalled in this context that it was the reluctance of Panchayats to move beyond the minimum rate of Building Tax from 4% for nearly 15 years that prompted Government in 1978 to enhance the minimum rate from 4% to 6% which fetched an additional income to the tune of Rs. 111.38 lakhs at a single stroke during 1978-79. Hence it is clear that the Panchayats want the unpleasant task of enhancement of the rate of Building Tax to be done by Government. 3.22. The Commission considers that Building Tax, if properly harnessed, will yield substantial resources. Commission therefore recommends that the existing minimum and maximum rate may be revised as follows:-

Grade of Panchayats Grade II & Grade III Panchayats Grade I Panchayat Special Grade Panchayat

Minimum 8% 8% 10%

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Maximum 12% 15% 15%

2. PROFESSION TAX 3.23. Article 276 of the Constitution of India authorises a state or other local authority in a State to levy tax on profession. Panchayats in Kerala have been empowered to levy Profession Tax under Section 69 of Kerala Panchayat Act, 1960 and the Kerala Panchayat (Profession Tax) Rules, 1963 framed thereunder. It is levied every half year on (i) every company which transacts business in the Panchayat area for not less than 60 days in the aggregate in that half year; and (ii) every person who in that half year(a) exercise a profession, art or calling or tansacts business or holds any appointment, public or private.(i) within such Panchayat area for not less than 60 days in, the aggregate; or (ii) outside such Panchayat area but who presides within that Panchayat for not less than sixty days in the aggregate or (b) resides in such Panchayat area for not less than sixty days in the aggregate and is in receipt of any pension or income from investments. 3.24. The profession Tax shall be levied by the Panchayat at such rates as may be fixed by the Panchayat at the rate not exceeding the maximum rates prescribed by the Government , under Rule 3 of Kerala Panchayat (Profession Tax) Rules, 1963. The classes into which companies, and persons are divided for the purpose of assessment to Profession Tax and the maximum half yearly tax leviable on each class etc. as per above rule are as follows:Class I. II. III. IV. V. VI. VII. VIII. IX. X.

More than More than " " " " " " " "

Half yearly Income Rs. 15,000 12,000 but not more than 9,000 " 6,000 " 4,800 " 3,000 " 1,800 " 1,200 " 600 " 300 "

Maximum half yearly tax Rs. Rs. 125.00 15,000 100.00 12,000 75.00 9,000 50.00 6,000 25.00 4,800 12.00 3,000 6.00 1,800 4.00 1,200 2.00 600 1.00

Last two classes have since been deleted by Government by Notification No. G.O. MS. 97/85/LA&SWD dated 9-5-1985. As such only those whose aggregate half yearly income is above Rs. 1200 alone need pay Profession Tax. The maximum half yearly rate of Profession Tax has been limited to Rs. 125 in consistent with proviso to Article 276(2) of 30

the Constitution of India in which maximum of Profession Tax has been limited to Rs. 250 per year. 3.25. Profession Tax is not a tax on income but tax on profession, trade, calling or employment for which State Government or local bodies have neen empowered to levy such tax by the Constitution of India subject of course within the maximum limit of Rs. 250 per annum. However, the basis of taxation is income derived from profession or business transacted within a Panchayat area. Receipts under Profession Tax 3.26. District-wise receipts of Panchayats under Profession Tax during five years from 1979-80 to 1983-84 are furnished in the Table at next page. TABLE Statement Showing District-wise Collection of Profession Tax During the Period From 1979-80 to 1983-84 Name District Trivandrum Quilon Pathanamthitta Alleppey Kottayam Idukki Ernakulam Trichur Palghat Malappuram Kozhikode Wyand Cannanore Kasargod Grand Total

Receipts in lakhs of Rs. Total from of No.of 1979-80 to Panchayats 1979-80 1980-81 1981-82 1982-83 1983-84 1983-84 84 75 55 69 73 51 86 98 91 95 77 25 85 37 1001

10.04 17.46 A 12.95 13.29 10.19 17.90 14.89 14.69 9.26 17.70 A 16.84 A 155.21

12.10 15.84 8.31 11.05 16.67 11.55 20.91 18.05 16.85 11.01 15.22 5.11 14.33 5.22 182.22

15.48 19.93 11.95 13.72 19.99 14.42 25.29 23.19 20.21 13.83 18.71 6.78 16.88 6.18 226.56

19.01 25.07 13.66 16.41 24.55 16.27 32.91 27.43 23.66 16.90 17.78 7.32 20.62 7.59 269.18

20.13 27.66 14.39 18.05 23.95 16.11 35.17 35.65 27.29 20.49 23.95 8.28 22.65 8.26 302.03

76.76 105.96 48.31 72.18 98.45 68.54 132.18 119.21 102.70 71.49 93.36 27.49 91.32 27.25 1135.20

A. Figures relating to Pathanamthitta, Wyand and Kasargod for 1979-80 have been included in the respective districts from which the new districts were carved out. Receipts during 1983-84 accounts for 24.07 percent of gross receipts of Panchayats in the State vide Appendix VI. Among the districts Ernakulam tops in collection and in that district Kalammassery Panchayat had netted the highest collection in the State towards 31

Profession Tax during the five-year period from 1979-80 to 1993-84. Though Trivandrum is the second largest district in the State in rural population it stands only at eighth place in the matter of collection of profession Tax. Trichur , Quilon and Palghat Districts which have less rural population compared to Trivandrum District occupy second third and fourth position respectively in collection of Profession Tax. Vattavada Panchayat in Iddukki District, which is the least populous Panchayat in the State, has recorded the lowest return from Profession Tax during the above five-year period. Though the total receipts under Profession Tax have recorded an increase by 95% between 1979-80 to 1983-84 it is squarely attributable to the increase in emoluments of the salaried classes of employees of both Government and industrial sectors from whom the lion's share of Profession Tax is levied by the Panchayat in the State. Compared to the years preceding 1979-80, the five-year period from 1979-80 to 1983- 84 has witnessed a steep rise in the wholesale price index cost of living index, resulting in substantial increase in D.A./ Variable D.A. For the State Government employees alone, 20 installments of D.A.have been granted during the above period. This aspect is highlighted in order to show that Panchayats in the State are almost exclusively dependent on the salaried class of employees of all sectors in the matter of collection of profess on Tax. This observation is not without regard to the fact that certain Panchayats are levying this tax at nominal rates from persons engaged in trades and callings other than salaried groups. 3.27. Though Agriculture is a profession liable to be taxed under Profession Tax Act majority of the Panchayats in the State are reluctant to levy it form agriculturist. Pursuit of agriculturists. as a calling has been upheld in court decisions. Kerala being a predominantly agrarian society is earning sizable income form cash crops and other seasonal crops. But Profession Tax collection in the Panchayats located in Agricultural area where there is high degree of income potential from agriculture produce / cash crops is fare from satisfactory. Trend of receipts in those Panchayats indicates that the agriculturists / Planters have been totally left form the purview of levy of Profession Tax. A few examples of Panchayats located in Plantation areas of the State showing receipts under Profession Tax are given below.

(Rs in lakhs) Area K.M.

inSq.

Population

Wynad District 1.

Mananthody

80.10

31150 32

(Rs. in Profession collected 1982-83 0.65

lakhs) Tax 198384 0.43

2. Vythiri Idduki District 3 Kumily Trivandurm District 4 Peringammala 5 Vithura

47.84

13573

0.29

0.30

816.72

34918

0.43

0.45

217.95 131.59

27542 22574

0.30 0.34

0.27 0.32

This shows that Panchayats have not been making an earnest approach in realising Profession Tax form highly affluent agriculturist. With the abnormal hike, in the price of agricultural produce in recent times coupled with many fold increase in land value there is not justification in totally neglecting this lucrative source of tax income. The Commission does not consider it necessary to add or modify the existing rules for levy of Profession Tax on agricultural income. What is required is enforcement of rules in their true spirit. Government may issue suitable instruction in this regard. Deduction of Profession Tax at source 3.28. Another reason for downward trend in collection in the High ranges may be due to difficult in idendifying the workers form whom tax is due. During a case study conducted in Vandiperiyar Panchayt ( Idduki District) It was explained by the Executive Officer that large number of seasonal workers engaged by the planters are not paying Profession Tax. Though their income is taxable under the rules. They escape form being assessed since they move from one factory to another within the same panchayat area according to job opportunity available there. When the Panchayat make demand from a particular factory the worker might have gone elsewhere. Consequently collection of Profession tax during 1983-84 has come down even the receipt during 1981- 82 vide details given below. Year 1981-82 1982-83 1983-84

ReceiptsRs. 55,100 64,800 51,900

Similar difficulty is experienced in other areas also where labour classes are concentrated Few cases are given below:

Name of panchayat Quilon District 1 2 Pathanamthitta District

Receipts in Rs during 1982-83 1983-84 Kilikollur Kottarakara

65,300 2,01,600

33

62,600 1,95,200

3 Alleppey District 4 Kottayam 5 6 Cannor District 7

Adoor

1,11,900

Ambalapuzha

57,800

51,000

Ettumanoor Kumaranallorr

66,000 58,400

54,000 51,200

Chirakkal

40,800

19,300

3.29. Making the employer responsible for the realisation and remittance of Profession Tax, as in the case of Income tax seems to be the only possible remedy for this. During evidence collection Panchayt Presidents and others have unanimously demanded to incorporate a provision in the Act for collection of Profession Tax at source. In Karnataka State , this tax is deducted form the salary of the employees by the Disbursing Officer. In Andhra Pradesh too there is provision in the Grama Panchayt Act, making the employer responsible for collection and remittance of dues in respect of employees working under them. Extracts of relevant provision in the respective Acts quoted below: (Section 4 of the Karnataka Tax on Profession Trades, Calling and Employment Act, 1976) "Employer's liability to deduct and pay tax on behalf of employees:-The tax payable under this Act by any person earning a salary or wage shall be deducted by his employer form the salary or wage shall be deducted by his employer from the salary or wage payable to such person before such salary or wage is paid to him, and such employer, shall, irrespective or whether such deduction has been made or not when the salary or wage is paid to such person be liable to pay tax on behalf of all such persons. Provided that, if the employer is an officer of Government, the State government may notwithstanding anything contained in this Act, prescribe by rules the manner in which employer shall discharge the said "liability" ( Extract of section 72 (9) of the Andhra Pradesh Grama Panchayat Act, 1964): "The Gram Panchayat may, but notice require employer or the head or secretary or Manager of any public or private office, hotel, boarding house or club or of a firm or company to recover every month during the period beginning form the Ist August, and ending with 31 Ist March of each year, form the salaries of all such persons employed by such employer or by such Office hotel, boarding house club, form or company the Profession Tax due form such persons at the rate of one eight of the tax payable for the year and remit the same to the Grama Panchayt within seven days form the date of such "recovery" 3.30. Commission would recommend that a suitable provision for deduction of Profession tax at source be incorporated in our Act, so that the present difficulties in collecting tax demanded may be mitigated.

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Emoluments for the purpose of assessement of Profession Tax 3.31. Certain other points which were highlighted during the course of collection of evidence as well as in various memoranda received by the Commission are:(1) Assessment of Profession Tax in the case of salaried employeed must be on the basis of basis pay instead of aggregate income. (2) Classses (Income slab) prescribed for assessment to Profession Tax may be revised in such a way as to afford. Some relieg to employees form Payment of tax at higher rates. (3) Enhancement of the Existing maximum limit of Rs. 250 prescribed by the Constitution. 3.32. Point No.(1) is on account of the fact that in Panchayat Profession tax is assessed on the basis of aggregate income ( total emoluments) of employees whereas in Municipalities and Municipal Corporations it is assessed on the basis of basic pay only. According to the relevant provision of Kerala Municipalities Act and Kerala Municipal Corporation Act aggregate income shall not include allowances of various kinds sepcified therein. But in Kerala Panchayat act and Profession tax rules "agreated "has not been defined in clear terms. However sub- section (3) under section 69 of the Act stated that " a person shall be chagreable under the class appropriate to his aggregate income from all sources Statutes prescribed for Panchayts, Municipalities and Municipal Corporations are not same but different form one another There are differences in the matter of rated of tax, range of half yearly income for which tax is levied etc. Prescribed in the above statues. Even rates adopted in Municipalities and Municipal Corporations arte different., It is to be assumed that statute relating to Profession Tax for Panchayats is prescribed taking into account the limited sources of income available to Panchayts to raise funds for discharging its mandatory functions. As such, argument for adopting a lesser rate in Panchayat area as is being adopted in Municipal area cannot be conceded. The basis f levy of Profession tax by Panchayats Municipalities and Corporations adopting different yardstick has been the subject of litigation by employees, working in Panchayat areas, The Honorable High Court of Kerala had, on several occasions, upheld hat levy of Profession Tax on employees working in Panchayat area on the basis of total emoluments viz aggregate income, is in order. The observation made by the honuorable high court of Kerala While disposing of a batch of unity petitions filed by the Toshiba Anand Workers Association and other hallenging the assessment of Profession Tax on " aggregate income" mad by the Executive Officers, Nedumbassery, Kalamassery Eloor, Arror,etc.Panchayts in Ernakulam nad Alleppey Districts are extracted below. (vide O.P No. 1799/83 decided on 2/1/1985) "Panchayats Municipalities and Municipal Corporations are, no doubt part of the Structure of local self- Government, Article 276 of the Constitution no doubt, refers to Profession Tax leviable by Panchayts, Municipalities and other local authorities subject to a maximum of Rs. 250 per year Article 40 of the Constitution expresses special concern for Panchayats as instruments of local self- government in the rural set up of the

35

county. It says that the State shall take steps to organise Village Panchayats and endow them with such power as may be necessary to enable them to functions as units of self government. Any successful projects of self- government must necessarily depend for its success on the resources and powers at the command of the instrument of local selfgovernment. Of the three statues, Kerala Panchayats Act was enacted first and the other statues were enacted later. In enacting the latter statues legislature introduced a provision to state that aggregate income does not include special allowance such a provision was not introduced in the Kerala Panchayats Act. One of the objects of the Legislature was evidently to assure financial resources for Panchayats in the State. So far as the rate of tax is concerned, the Constitution itself provides maximum of Rs. 250 per year. Any scheme of tax must operate subject to this maximum. It was evidently in the light of these circumstances and to effectuate is anxiety to assure resources for Panchayts that the Legislature refrained from introducing any provision of exclusion regarding allowances in the Kerala Panchayat Act. In other words. Legislature wanted that income assessable for the purpose of Profession tax should not be allowed to be curtailed. Panchayat on the one hand and Municipalities and Municipal Corporations on the other cannot be regarded as equal institutions. They are institutions of different kinds. If these institutions of different kinds are treated differently, particularly in the light of Article 40 of the Constitutions and need to provide strong financial base for the Panchayats, it cannot be said that there is hostile discrimination. This is not a case of equals being tested unequally. This is case of unequal being treated unequally . It could even be said that this is an attempt to reduce the inequality between institutions so that the institutions could subserve public good". "It is difficult to find anything vague or unreasonable about the concept of aggregate income found in the statute and the rules. Expression aggregate income. Has not been defined in any technical way. Therefore. it must receive its natural meaning, being total income from various sources: 3.33. For the reasons mentioned in the foregoing paras, the Commission is not inclined to suggest any modifications to the existing practice assessment of Profession tax on " aggregate income " by the Panchayats in the State Revision of Income slabs 3.34. As regards 2nd point the Commission has received representations from several organisations of employees complain that the existing classification of income slabs are so irrational and arbitrary that a annual increase of a rupee in emoluments of an employee often results in payment of the next higher rate of tax, which in certain cases is double the rate applicable to him earlier. They have, therefore demanded some relief from the steep increase in Profession Tax, consequent on increase in emoluments. Further the employees have pointed out that the existing slabs were prescribed in 193 and need review and revision taking into accounts the changes in pay and allowances occurred in the last two decades. Other arguments in favour of revision of slabs are summarized as follows:-

36

1) Existing slabs have not been fixed in such a way as to levy tax proportionate to the income of employees. 2) Employees drawing salary on a monthly average of Rs. 501 and Rs. 800 have to pay same rate of tax ie, Rs. 12 per half year, Similarly those drawing Rs. 1001 and Rs. 1500 on an average per month have to pay at the same rate of Rs. 50 per half year in spite of substantial variations in their half yearly income. 3) Another glaring disparity pointed out is that while those having a monthly income of Rs.800 need pay only Rs. 12 per half year, others with a monthly income of Rs. 801 have to pay Rs. 25 per half year ie, at more than twice the rate payable by the employees falling under the former class simply because of the increase in emoluments by one rupee. 3.35. Computation principle adopted in the 1963 Rules of levy of Profession Tax form persons falling under different income group appears to be as follows:-

I II III IV V

VI VII VIII IX X

Half yearly Income Rate Above15000 125 Above Rs. 12000 but not above 100 15000 Above Rs. 9000 but not above 75 12000 Above Rs 6000 but not above 9000 50 Above Rs 4800 but not above 6000 25

Above Rs. 3000 but not above 12 4800 Above Rs 1800 but above 3000 6 Above Rs. 1200 but not above 4 1800 Above Rs, 600 but not above 1200 2 Above Rs. 300 but not above 600 1

Basis of rate 1/120th of the minimum of slab ie,83 paise per Rs. 100.

1/200th (approximate of the minimum of slab ie,50 paise per Rs. 100. 1/250 of the minimum of slab ie, 40 paise per Rs. 100 1/300th of the minimum of slab ie, 33 paise per Rs. 100.

Existing rates of tax range from 33 paise to 83 paise for an income of every 100 rupees. Percentage wise the rate works out to 1/3^% to 5/6% of the income. 3.36. The Commission considers that the inequality in the rate of levy of Profession Tax from different categories has to be reduced to a reasonable level. With this end in view, we would suggest that a uniform rate of half percent of aggregate income ie, 50 paise for every hundred rupees of income per half year may be adopted as the basis of levy of Profession tax. However for the sake of assessment and accounting it would be better to classify the income slabs in multiples of thousand and tax levied at half percent of the minimum of the slab. This will bring down the gap between two consecutive slabs to 37

Rs.5 instead of the existing jump form one slab to another, which is said to be the main cause of grievance of the employees on the present classification of income slabs. This method will ensure that the maximum Profession Tax payable by a tax payer in a year not to exceed half percent of his annual income 3.37. As a policy Profession Tax need not be collected form person who belong to very low-income groups. The 1963 rules itself have exempted those whose half yearly income was below Rs. 300 ( ie Rs. 50 P.M) Considering the steep rise in the cost of living during the last two decades this limit has to be enhanced. Government has recently exempted those whose half yearly income is below Rs. 1200 form the purview of levy of Profession Tax. The Commission considers that the exemption limit may be further enhanced so as to exempt those whose half yearly income is below Rs. 2000. Accordingly, we suggest a revised table below in respect of half yearly income from Rs 2000 and above Revised table for Calculation of Profession Tax Present rate 1 Rs. 25,000 and above 125 II Rs, 24000 and above but Rs 25000 125 below III Rs.23000 Do Rs 24.000 125 IV Rs. 22000 Do Rs.23,000 125 V Rs.21,000 Do Rs.22,000 125 VI Rs. 20,00 Do Rs.21,000 125 VII Rs.19,000 Do Rs. 20,000 125 VIII Rs.18,000 Do Rs.19,000 125 IX Rs.17,000 Do Rs.18,,000 125 X Rs.16,000 Do Rs.17,000 125 XI Rs.15,000 Do Rs.16,000 100&125 XII Rs.14,000 Do Rs.15,000 100 XIII Rs.13,000 Do Rs.14,000 100 XIV Rs.12,000 Do Rs.13,000 75&100 XV Rs.11,000 Do Rs.12,000 75 XVI Rs.10,000 Do Rs.11,000 75 XVII Rs.9,000 Do Rs.10,000 50&75 XIII Rs.8,000 Do Rs9,000 50 XIV Rs.7,000 Do Rs.8,000 50 XX Rs.6,000 Do Rs7,000 25&50 XXI Rs.5,000 Do Rs.6,000 25 XXII Rs.4,000 Do Rs5,000 12&25 XXIII Rs.3,000 Do Rs.4,000 6&12 Class Half yearly income

38

Revised recommended 125 120 115 110 105 100 95 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15

rate

XXIV Rs.2,000

Do

Rs.3,000 6

10

Assessment of Profession Tax on the basis of turnover of business 3.38. In the Case of a company or person transacting business, half yearly income for the purpose of assessment of profession Tax is required to be determined on the basis of profits and grains as assessed to income tax or Agricultural Income Tax or both and where the amount of such profits and gains is not ascertainable in the above manner, income is to be calculated on the basis of percentage of turnover of business as laid down under Rule 6 of Kerala Panchayts (Profession Tax) Rules, 1963 3.39. As already pointed, Profession Tax is not a tax on income but a tax on Profession/trade. It is for the purpose of assessment of tax at different rates, income is reckoned. This being a tax on profession, there is no harm in levying Profession Tax even on the basis of Turnover without wasting time for ascertaining profits and gains determined by the Income Tax/ Sales Tax authorities. 3.40. Present Procedure for calculation of half yearly income in respect of cases mentioned under para 3.38 has to be simplified. The Commission would therefore recommend that in the case of a company or person transacting business, Profession Tax for each half year may be levied at the maximum rate of Rs. 125 if the estimated annual turnover of business for that year is Rs, 5 lakh and above. (For this purpose turnover of previous year may be provisionally reckoned as basis) If the estimated annual turnover is below Rs. 5 lakh half- yearly income may be calculated at 5 % of estimated annual turnover and tax levied for the income so worked out for each half year at the rate recommend under para 3.37 at the rate in the table, On the above basis we recommends the following table of tax for levy of Profession Tax in the case of a company or person whose income has to be determined on the basis of annual turnovers of business Table for Assessment of Profession Tax on the basis of Business Turnover Half yearly tax prosed 05 % of Basis adopted for arriving half yearly Annual Turnover Income shown under Income col.(3) Rs. 5 laksh above Rs 125 Half yearly income is arrived at 5% of rs. 5 lakshs (ie 25.000 Rs. 4 laksh and above Rs.100 Half Yearly income is 5% of Rs. 4 laksh (ie but less than 5 laksh arrived at Rs. 20,000) Rs. 3 lakhs and above Rs. 75 do. 5% of Rs. 3 lakhs (ie. but less than 4 lakhs Rs. 15,000) Rs. 2 lakhs and above Rs. 50 do. 5% of Rs. 2 lakhs (ie. but less than 3 lakhs Rs. 10,000) Rs. 1 lakhs and above Rs. 25 do. 5% of Rs. 1 lakhs (ie. but less than 2 lakhs Rs. 5,000)

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Turnover of Rs. Rs. 20 80,000 and above but less than Rs. 1 lakh Rs. 60,000 and above Rs. 15 but less than Rs. 80,000 Less than Rs. 60, 000 Rs. 10

do.

5% of Rs. 80,000 (ie. Rs. 4,000)

do.

5% of Rs. 60,000 (ie. Rs. 3,000)

Minimum

Levy of Profession Tax at flat rate on certain Profession 3.41. In regard to certain categories of Profession, tax may be levied at a flat rate as is being done in State like Karnataka, instead of calculating income on the basis of estimated annual turnover. This is intended to simplify the existing procedure of assessment of Profession Tax in respect of certain categories of Professions. Accordingly we recommend flat rate of Profession Tax for the following professions. Profession Half Yearly rate proposed 1 Licensees of Foreign Liquor shops/ Arrack shops/Toddy Rs.125.00 shops, Proprietors of Bar attached Hotels, Petrol/Diesel Pump station dealers Distributors of L.P.Gas, Film (Motion picture) studio owners, Owners of cine theatres (lessee in case theatre is leased out) Scheduled Banks and all Banking institutions tansacting money lending business, located in Panchayat. 2 Owners of private transport vehicles, Trucks, Buses, Rs.50 per vehicle subject to Luxury coaches, tourist buses, Tempo vans, Truckers etc., the condition that the total used for transport of passengers or goods as per permit amount payable by the under Motor Vehicles Act/Rules owner for all the vehicles should not exceed Rs. 250 in a year. 3 Owners of Taxi car (including tourist Taxis) Jeeps and Rs. 25 per vehicle subject to Jeep Taxis, Autorickshaws, used for transport of the maximum limit passengers and goods as per permit under Motor Vehicles specified above. Act/Rules.

Enhancement of Maximum limit of Profession Tax 3.42. Under Article 276 of the Constitution of India, the maximum tax on profession, trades or callings, that can be levied by State Government or local bodies is limited to Rs. 250 per year. The Local Finance Enquiry Committee 1951, and the Committee of Ministers of Local Administration have recommended the raising of the Upper limit from

40

Rs. 250 to Rs.1,000. Various State Governments have also moved the Government of India to enhance the ceiling. So far, the Constitutional provision in this regard has not been amended with the result that the local bodies are not in a position to levy Profession Tax beyond Rs. 250 in a year from individuals or institution with huge income. 3.42. The Commission would therefore urge the State Government to move the Government of India to get the ceiling enhanced to Rs.1,000 per annum. In case the ceiling is enhanced the revised table recommended by the Commission under para 3.37 may be modified in respect of income slabs exceeding Rs. 25,000 by incorporating suitable slabs. 3. VEHICLE TAX 3.44. Under Section 70 of the Keraka Panchayat Act, Vehicle Tax on vehicles (other than those taxed under the Kerala Motor Vehicle Taxation Act, 1976) shall be levied by the Panchayats at the rates not exceeding those shown in the following Table (vide Rule 3 of Kerala Panchayat (Vehicle Tax) rules, 1963). TABLE Maximum Half yearly tax Rs. For every Motor Boat or steam launch plying for hire and carrying 30.00 more than six passengers Do. Steam or motor tug 50.00 Do. Barge or other vessel attached or attachable to a steam or 25.00 motor tug Do. Other Motor boat or steam launch 15.00 Do. Cabin boat 2.50 Do. Valloms of a capacity of 4 tons and above 2.00 Do. Valloms of a capacity above 2 tons and below 4 tons 1.00 Do. Cart or carriage drawn by horses 6.00 Do. Carriage drawn by other animals 4.00 Do. Hand cart or push cart 2.00 Do. Bicycle, tricycle, cycle rickshaw or rickhaw 2.00 3.45. Receipts under Vehicle Tax during the period from 1979-80 to 1983-84 are as follows:Year 1979-80 1980-81

Receipts (Rs. in lakhs) 7.63 6.60 41

1981-82 1982-83 1983-84

6.84 6.82 6.63

District-wise distribution of Receipts is as follows:- (Rs. in lakhs) District Trivandrum Quilon Pathanamthitta Alleppey Kottayam Idukki Ernakulam Trichur Palghat Malappuram Kozhikode Wynad Cannanore Kasargode Total

1979-80 0.39 1.03 ** 1.48 0.58 0.12 0.74 1.92 0.65 0.21 0.24 ** 0.27 ** 7.63

1980-81 0.33 0.73 0.50 1.07 0.59 0.12 0.69 1.23 0.64 0.22 0.16 0.06 0.19 0.07 6.60

1981-82 0.42 0.78 0.57 1.15 0.56 0.11 0.59 1.26 0.64 0.25 0.17 0.07 0.19 0.08 6.84

1982-83 0.40 0.77 0.59 1.09 0.54 0.12 0.58 1.32 0.67 0.25 0.15 0.07 0.18 0.09 6.82

1983-84 0.36 0.72 0.53 1.02 0.66 0.10 0.54 1.32 0.66 0.24 0.17 0.06 0.17 0.08 6.63

3.46. The trend of collection during the above five year period is not appreciable. Average annual receipts is around Rs. 7 lakhs only. In fact, there was downward trend in collection after 1979-80. While the collection in 1979-80 was Rs. 7.63 lakhs it has come down to Rs. 6.63 lakhs during 1983-84. Out of 1001 Panchayats Vehicle Tax is not being levied in 74 Panchayats eventhough it is a compulsory tax. Major portion of Vehicle Tax is collected from Panchayats in Trichur and Alleppey Districts and it accounts for more than 1/3rd of the total receipts in the State. Statistics collected from Panchayats indicate that majority of Panchayats collect only nominal amounts ranging from Rs.100 to Rs.200 per annum under Vehicle Tax. Most of the Panchayats are not keen in levying tax on bicycles presumably due to the fact that the rat of tax is very low (Rs. 2 per half year) and the receipt is often disproportionate to the expenses incurred for collection. Case study of certain selected Panchayats has revealed that Panchayats are not at all interested in collecting tax on vehicles plying in water. Njarakkal Panchayat in Ernakulam District having a long stretch of coastal area and situated adjacent to the Cochin Port is not levying any Vehicle Tax on mechanised boats or other types of fishing boats or valloms eventhough tax shall be levied on such vehicles as per Rule 3 under Kerala Panchayat Vehicle Tax Rules, 1963. Karumkulam and Anjengo Panchayats in Trivandrum District and Sakthikulangara Panchayat in Quilon district where also large number of mechanise fishing boats and country boats are used for fishing and other purposes, no Vehicle Tax on the vessels is being realised. In reply to a query, the Executive Officers have stated

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that there is no specific mention in the Rules about levy of tax on mechanised fishing boats. But the rules in this regard are very clear. The explanation given under Section 70 of the Kerala Panchayat Act mentions that vehicle will include boat and vallam. Table under Rule 3 of the Vehicle Tax Rules, 1963 specifies a rate of Rs.15 for half year as tax for "other motor boats or steam launch". In view of the above specific provision the Panchayats should have levied Vehicle tax from mechanized fishing boats and country boats. 3.47. In our view, it is on account of the reluctance of certain Panchayats in invoking mandatory powers vested on them that Vehicle Tax is not being collected by them. The Director of Panchayats do not show lack of interest and administrative indifference in collecting obligatory items of taxes. 3.48. According to Rule 4 of Kerala Panchayats (Vehicle Tax) Rules, 1963, a person having possession, custody or control of taxable vehicles becomes liable to the payment of Vehicle Tax only if the vehicle is kept or used within the Panchayat area for an aggregate period of not less than sixty days in that particular half year. If such aggregate perios is less than sixty days but more than thirty days only half yearly tax shall be levied. However if such aggregate period does not exceed 30 days no tax shall be leviable for the half year. Stipulation of minimum Number of days during which vehicle must have been in use or kept within the Panchayat area, as a pre-condition for levy of vehicle tax will be an obstacle for assessment of tax. As the vehicles will move from one Panchayat to other according to requirements of the persons who hired or used it, it will be a difficult task for the Executive Officer to assess the Vehicle Tax after verifying the number of days during which vehicles were available in the Panchayat in a particular half year. This difficulty may perhaps be another reason for poor collection of Vehicle Tax in certain Panchayats. Besides, a large number of mechanized fishing boats from Tamil Nadu and Karnataka (Mangalore coast) are coming to Kerala coast for seasonal operations. Rules, as it exists at present, offer opportunities for evasion of tax. Existing rules in this regard may therefore be amended deleting the condition regarding the minimum number of days for which the vehicle has to be kept or used for the levy of tax. License from any one of the local bodies in Kerala is sufficient. 3.49. In regard to taxable vehicles under the rules we would like to have a fresh look at the system of levying tax on bicycles. It has been said that cycle is the common man's vehicle. The maximum tax levied by Panchayats for a bicycle during a half year is Rs. 2. Very often it is found that receipts from cycle tax is disproportionate to the expenses incurred for its collection. The Commission would therefore recommend cycles including cycle-rickshaws/rickshaws, may be exempted from the purview of Vehicle Tax. 3.50. As regards the prevailing rates of tax payable for every half year we are of the view that the rates require revision as these were fixed two decades and two years ago in 1963. Further no minimum rates but only maximum are prescribed under the rules. A comparative assessment of the drop in money value during the period between 1963 and 1985 shows that value of a rupee in 1985 has been reduced to 1/5th of its original value. Besides this, collection charges and other related expenses have also gone up manyfold.

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In order to compensate the loss on account of the erosion in money value and to bring the receipts at least on a par with the administrative expenses, we recommend minimum rate for each category as follows:Half yearly tax Category Existing rate Minimum rate (Maximum) Rs. proposed Rs. 1. For every motor boat or steam launch plying 30.00 60.00 for hire and carrying more than six passengers 2. Do. Steam or motor tug 50.00 100.00 3. Do. Barge or other vessel attached 25.00 50.00 to/attachable to a steam or motor tug. 4. Do. Other motor boat or steam launch 15.00 30.00 including mechanized fishing boats 5. Do. Cabin boat 2.50 10.00 6. Do. Vallom of a capacity of 4 tons and above 2.00 10.00 including machine fitted valloms 7. Do. Vallom of capacity above 2 tons and 1.00 5.00 below 4 tons (including machine fitted) 8. Do. Cart or carriage drawn by horses 6.00 10.00 9. Do. Carriage drawn by other animals 4.00 10.00 10. Do. Hand cart or push cart 2.00 5.00 11. Do. Bicycles, tricycle, cycle rickshaw or 2.00 Nil rickshaw. 3.51. Under Rule 10 (2) of the Vehcle Tax Rules, 1963 a fee of 24 paise shall be leviable by the Panchayats for affixing number to the vehicles for which license is granted. We would recommend that this fee may be dispensed with as the proposed revised rates would over all such sundry expenses.

4. ENTERTAINMENT TAX 3.52. Entry 62 of List 11 of the Seventh Schedule to the Constitution of India empowers the State Governments to levy a tax on entertainments. Among the southern States the State of Kerala alone has delegated the powers to levy Entertainment Tax to the local

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authorities. In Karnataka entertainment Tax is collected by the State Government (Department of Commercial Taxes) and 90% is assigned to the concerned local bodies. In Tamil Nadu Entertainment Tax is colleted by the State Government and only 60% is assigned to local bodies and this 60% apportioned between the concerned Gram Panchayats and Panchayat Union at District level. In Andhra Pradesh too Entertainment Tax is collected by the State Government and 90% of the proceeds assigned to concerned local bodies. Local Bodies in Kerala derive their power of taxation on entertainments under the Kerala Local Authoritie Entertainments Tax Act, 1961 (Act 20 of 1961) which came into force with effect from 1-4-1962. Later on, in May, 1963 the State Government imposed an Additional Tax on Entertainments the proceeds of which, after allowing a margin to the local bodies towards collection charges (two percent of proceeds), are appropriated by the Government. The State Government continued to appropriate the Additional Tax on Entertainments till 31-7-1975. From 1-8-1975 onwards the entire receipts from Additional Entertainment Tax were assigned to the local bodies. Thus at present receipts from the Entertainment Tax and Additional Entertainment Tax are the income due to local bodies. 3.53. Under Section 3 of the Kerala Local Authorities Entertainment Tax Act, 1961, Local Authorities are empowered to levy a tax at a rate not less than fifteen percent and not more than thirty percent on each price of admission to any entertainment. In the case of dramatic and circus performance in Panchayat areas are Rs. 25 and 15 respectively, on each performance as per Section 6A of Act. In addition to Entertainment Tax, Additional Entertainment Tax at the rate of 60% of the entertainment tax is collected. Thus, for every one rupee ticket of admission 24 paise is towards Entertainment Tax and Additional Entertainment Tax together (ie. Entertainment Tax 15 paise+Additional Entertainment Tax 9 paise) and the balance 76 paise is exhibitor"s share on the case of theatres where Entertainment Tax is levied at the minimum ie. 15%. If the levy is made at the maximum rate of 30%, total tax component will be 48 paise and exhibitor will get 52 paise on every one rupee ticket. Though the percentage at which Entertinment Tax and Additional Entertainment Tax and Additional Entertainment Tax are collected 25/1089/MC varies from Panchayat, Entertainment Tax has come to preval as one of the major source of tax revenues of Panchayats, next to Building Tax. Entertainment Tax constitutes 27% in 1982-83 and 24% in 1983-84 of the gross income from tax sources. In fact in certain Panchayats receipt from Entertainment Tax outstrips Building Tax. As at the end of 1983-84 there are 1102 cinema theatres spread over 719 Panchayats in the State. The remaining 282 Panchayats do not have cinema theatres.

Receipts from Entertainment Tax and Additional Entertainment Tax 3.54. Table below indicates the district-wise receipts from Entertainment Tax and Additional Entertainment Tax in the Panchayats during the period from 1979-80 to 198384

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TABLE Statement Showing Collection of Entertainment Tax and Additional Entertainment tax \ During the Years from 1979-80 to 1983-84 Sl. Name No District

of No. of Theatres 19791981- 1982- 1983- No. of Theatres 1980-81 in 1979-80 80 82 83 84 during 1983-84 Perm- TemPerm- TemTotal (Rs. in. lakhs) Total anent porary anent porary 1. Trivandrum 20 59 79 10.99 10.50 12.17 12.75 14.95 16 80 96 2. Quilon 32 96 128 22.74 26.04 28.93 30.41 34.04 28 95 123 3. Pathanamthitta ... A ... ... 5.59 5.43 5.8 6.36 8 45 53 4. Alleppey 15 71 86 9.36 8.79 10.38 11.11 11.41 11 72 83 5. Kottayam 16 52 68 8.10 10.66 12.13 14.36 15.67 17 59 76 6. Idukki 14 33 47 6.70 8.83 8.20 7.20 8.64 16 47 63 7. Ernakulam 17 69 86 16.30 18.28 19.16 19.42 21.94 23 76 99 8. Trichur 23 85 108 20.01 28.52 32.81 37.66 46.67 28 105 133 9. Palghat 28 54 82 20.84 25.79 29.09 33.23 36.49 29 68 97 10. Malappuram 6 40 46 15.04 17.39 21.57 25.57 30.49 10 62 72 11. Kozhikode 12 68 80 24.53 18.92 22.76 24.58 30.00 12 60 72 12. Wynad ... A ... ... 12.03 13.03 13.48 15.28 6 27 33 13. Cannanore 9 68 77 23.30 16.27 20.46 21.86 23.95 12 71 83 14. Kasargode ... A ... .... 5.60 6.55 6.62 7.68 2 17 19 Total 192 695 887 177.91 213.21 242.67 264.06 303.57 218 884 1102 A. These districts were not in existence during 1979-80. The details relating to these districts are included in the districts from which the new districts were carved out. 3.55. While the theatres in all the 7 districts north of Eranakulam district have yielded sizable income from Entertainment Tax and Additional Entertainment Tax to the Panchayats, theatres located in the Panchayats of Trivandrum, Pathanamthitta, Alleppey and Idukki districts were very poor in the collection of the above tax. It is noticed that from 96 theatres in Trivandrum District, receipt was Rs. 14.95 lakhs only during 198384. At the same time in Wynad District where there are only 33 theatres ie.1/3rd of the number in Trivandrum District Tax received by the Panchayats during the above year was Rs. 15.28 lakhs which was more than the amount colleced in Trivandrum District. If we make a comparison with Palghat District it may be seen that in Palghat District where there is only one theatre more than the number in Trivandrum District, tax collected (Rs. 36.49 lakhs) during 1983-84 was more than 21/2 times of tax received by the Panchayats in Trivandrum District. It has therefore to be doubted that large scale evasion of Entertainment Tax and Additional Entertainment Tax is going on in Trivandrum District without being detected.

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3.56 Despite the above evasion the total receipts in the Panchayats in the State from Entertainment Tax and Additional Entertainment Tax has increased from 177.91 lakhs in 1970-80 to Rs. 303.57 lakhs in 1983-84 the increase during the five year period amounts to 125.66 lakhs which indicate a growth of 70% compared to receipts in 1979-80. The overall increase in receipt would prima facie appear to be somewhat satisfactory. But viewed from the point of view of increase in the No. of theatres, increase in the cost of tickets, increase in the No. of audience and general improvement of socioeconomic conditions in the rural life during the five year period since 1979-80, it is doubtful whether increase in receipts to the above extent is adequately reflecting the real growth in income that would have actually accrued. 3.57. Cinema as an entertainment, is becoming more and more popular among the rural population in Kerala. The No. of theatres in the Panchayats which was 887 in 1979-80 has increased to 1102 in 1983-84. The fact that more and more theatres are coming up in rural areas indicates that investment in cinema theatres is a profitable venture in rural areas. Naturally income from Entertainment Tax and Additional Entertainment Tax ought to have registered significant growth rate with the increase in the No. of theatres and daily shows. But the details of receipts under Entertainment Tax and Additional Entertainment Tax available with the Commission give a different picture. Generally there are 2 shows daily in theatres. On Saturdays, Sundays and other festival days No. of shows will be 3 or more. Assuming that the number of shows are two every day and gross collection for each show is Rs. 100 only, the receipts at minimum rate on account of Entertainment Tax and Additional Entertainment Tax (ie. at 24 paise on every one rupee) for 2 shows should have been Rs. 48 per day. But an analysis of the receipts during the years 1982-83 and 1983-84 indicates that average daily receipts towards Entertainments Tax and Additional Entertainment Tax was below Rs. 48 in the case of 300 theatres in Panchayats. This means that the gross collection for a show was below Rs. 100 in theatres of those Panchayats. Usually exhibitor's share will be between 40 to 50% of the net receipt after payment of all taxes (Entertainment Tax Additional Entertainment Tax and Show Tax). Therefore, for a gross receipt of Rs. 200 for two shows daily the exhibitor's share will be normally leass than Rs. 75 which will not be adequate to meet the wages of employees, current charges and other allied expenses of exhibitor. Therefore it is to be presumed that unless the average daily gross collection is above Rs. 200 (even Rs. 200 is a loss) no exhibitor will carry on the business incurring loss. The above analysis invariably uravel the truth that the daily collection will be much more than what is reflected in the accounts rendered to the Panchayats for the purpose of payment of entertainment tax. 3.58. The system as it exists today offers ample opportunities for evasion of tax by all conceivable means and several malpractices resulting in huge loss of tax revenue to Panchayats. It is true that malpractices like sale of bogus, duplicate, unsealed, unnumbered and used tickets are rampant in theatres. During collection of evidence the attention of the Commission was drawn to he widespread prevalence of double D.C.Rs. (Daily Collection Reports) maintained by theatre owners (Exhibitions). It is alleged that one D.C.R. is maintained for rendering accounts to the distributor and another D.C.R. for the purpose of payment of tax to Panchayats with the sole intention of misappropriating

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major portion of the tax due to Panchayats by showing false accounts of sale of tickets. Though there is provision to check the theatres daily by an Officer duly authorised by the Panchayats with a view to detect malpractices, if any, in practice it is found to be impossible for the employees so authorized to conduct the checking in its true spirit, honestly and impartially. Representatives of employees of Panchayats have explained before the Commission that the checking staff could not carry out their work in the proper manner since most of the theatre owners are persons wielding considerable social and political influence in the locality who will not hesitate to wreak vengeance on the inspecting staff. Surprise inspection by Executive Officers will be a risky operation unless there is sufficient protection by police authorities. Levy of Entertainment Tax and Additional Entertainment Tax on seating capacity basis 3.59. The trend of opinion found during the course of collection of evidence is that the existing system of collection of Entertainment Tax should be replaced with a more effective method that will minimise, if not wholly eliminate, the nefarious practices through which evasion and mal-practices are perpetuated. There was unanimity of opinion among all those who have furnished evidence to the Commission, that levying of tax on the basis of seating capacity (gorss collection capacity) per show, will prevent the evasion to a great extent besides assuring a fixed percentage of income to the Panchayats. Collection of Entertainment Tax on the basis of gross collection capacity of seats is successfully practiced in Andhra Pradesh, where Entertainment Tax is levied from theatres in Gram Panchayats at 20 per cent on the gross collection capacity per show. The Commission would recommend to introduce such a system in Kerala too as expediously as possible as to precent the erosion of revenue that is legitimately due to the Panchayats. 3.60. Incidentally the Commission would like to draw attention of Government to the announcement made in the Budget Speech 1981-82 regarding introduction of a system of collection of Entertainment Tax at a fixed percentage of the gross collection based on scating capacity in the theaters. But this has not yet been implemented. It is understood that a Draft Bill was since introduced in the legislature. The more the delay in introducing the proposed system, the more will be the loss of revenue to Panchayats. Hence the Commission reiterate the need for early implementation of the new system of assessment of Entertainment Tax on gross collection based on seating capacity Minimum amount to be levied as Entertainment Tax 3.61. In the meantime the Commission would make the following suggestions with a view to avoid evasion of Entertainment tax to some extent. (1) Minimum Entertainment Taxi including Additional Entertainment Tax per show may be fixed as Rs.35 (2) In the case of theatres where at present rate of Entertainment Tax and Additional Entertainment Tax together is more than 35% Minimum tax per show shall be fixed at an

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amount equal to total rate (percentage) of taxes (Entertainment Tax+Additional Entertainment Tax) ie. Rs. 40 if total tax is 40% and Rs.45 if it is 45% and and so on. Merging of Additional enterainment Tax with Entertainment Tax with Entertainmnt Tax 3.62. As already mentioned, there are 2 categories of tax viz. Entertainment Tax, and Additional Entertainment Tax. Entertainment Tax, from its very inception was meant as a revenue to local bodies whereas Additional Entertainment Tax was introduced subsequently as an additional source of income to the State Government. But power of levy of Additional Entertainment Tax was since transferred to local bodies and at present the proceeds from both are appropriated by local bodies. Since income from both items are now appropriated by local bodies. Since income from both items are now appropriated by the same body, the Commission does not consider it necessary to levy the two items separately as separate accounting of the two components does not serve any special purpose now. Entertainment Tax and Additional Entertainment Tax may therefore be merged and levied as a singe items, by suitably refixing the rate and incorporating necessary amendments to the relevant Acts and Rules. This combined tax may be termed as entertainment Tax. * Disttict-wise details of receipts of Panchayats under 'Building Tax' for the years 197980 to 1983-84 have been furnished under Appendix VII. ** figures relating to Pathanamthitta, Wynad and Kasargode districts for 1979-80 have been included in the respective districts from which the new districts were carved out. Enhancement of Minimum rate of Tax 3.63. As per the existing rules minimum Entertainment Tax is 15% of the ost of ticket and Additional Entertainment Tax is 60% of the Entertainment Tax making the total to 24% of the cost of ticket. Studies undertaken by the Commission have revealed that out of 719 Panchayats having theatres 269 Panchayats are levying tax only at the above rate which is the minimum prescribed under the rules. Only very few Panchayats numbering about 14 are collecting Entertainment Tax at the maximum rate of 30 percent. At the maximum rate the total tax payable will be 48 per cent (Entertainment Tax 30% + Additional Entertainment Tax 18%) of the price of the ticket. 3.64. In pre Para No. 3.62 we have suggested to merge the two components viz. Entertainment Tax and Additional Entertainment Tax and to levy it as a single item of tax. We would suggest to fix the minimum rate for single tax at 25% as against the prevailing rate of 24%.

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5. SHOW TAX 3.65. Show tax is levied by Panchayats under authority conferred under subsection 5(i) of Section 66 of Kerala Panchayats Act, 1960. The rates of Show Tax prescribed under Kerala Panchayat (Show tax) Rules 1962 are as follows:Rate of tax per show 1 3 3

1. Cinematograph exhibitions 2. Dance, Dramatic or Circus performance 3. Other shows

In addition to show tax, surcharge at the rate of 25% of the rate of Show Tax shall be levied on every show under the Kerala Additional Tax on Entertainments and Surcharge on Show Tax Act, 1963. As explained under "Entertainment Tax", was originally mean for Panchayat and 'surcharge' for State Government. But with effect from 1-8-1975 onwards power to levy and appropriate both the taxes are vested with the Panchayats. 3.66. Table showing the receipts under show Tax including surcharge on Show Tax during the period from 1979-80 to 1983-84 is given below: TABLE Statement showing Receipts under Show Tax

Name of District 1. Trivandrum 2. Quilon 3. Pathanamthitta 4. Alleppey 5. Kottayam 6. Idukki 7. Ernakulam 8. Trichur 9. Palghat 10. Malappuram 11. Kozhikode 12. Wynad 13. Cannanore 14. Kasargode Total

1979-80 0.81 1.19 A 0.79 0.62 0.32 0.83 1.52 0.82 0.51 0.76 A 0.86 A 9.03

1980-81 0.89 1.14 0.44 0.64 0.65 0.37 1.00 1.19 0.94 0.63 0.62 0.29 0.67 0.17 9.64

(Rs. in lakhs) 1981-82 1982-83 0.95 1.00 1.18 1.24 0.49 0.55 0.72 0.80 0.66 0.68 0.38 0.38 1.02 1.00 1.35 1.43 1.01 1.05 0.66 0.79 0.74 0.80 0.30 0.32 0.79 0.90 0.18 0.19 10.43 11.13

1983-84 0.97 1.21 0.50 0.71 0.68 0.39 0.97 1.47 1.06 0.84 0.83 0.32 0.89 0.20 11.04

3.67. The rates of Show Tax are fixed in 1962 ie. about 23 years back. The Commission have received have received representations during collection of evidence. and other-wise urging the need for revising the rate of show tax. They have pointed out that the tax 50

levied, from an area having a high tax potential, which at the same time does not cast any burden on the tax payer, is too low. The President of the Kerala Panchayat Association has demanded revision of show tax on cinema shows from R.1 to Rs. 10. It is only just and reasonable that the rate prescribed 23 years back is revised in such a way as to compensate the erosion in money value and also in consideration of other factors. Accordingly the Commission would recommend to revise the rate as follows:-

1. Cinematographic Exhibition 2. Other shows

Existing Rate Re. 1 Rs. 3

Proposed Rate Rs. 10 for one show and Ra. 5 for every additional show on the same day. Rs. 10 for a show.

3.68. The surcharge on show tax may be dispensed with as the revised rated recommended are intended to include the income on account of surcharge also. 6. OPTIONAL TAXES (i) Service Tax 3.69. In addition to Building tax, Panchayats are empowered under Section 66 of the Kerala Panchayat Act, 1960 and Kerala Panchayat (Service Tax) Rules, 1962 to levy Service Taxes for Sanitation, Water Supply, Street Lighting and Drainage at such percentage of annual rental value not exceeding the maximum rate shown below with the approval of the Director of Panchayats. Item

Maximum Rate 1. Sanitary Tax (General sanitation of Panchayats) 1% 2. Water Tax (Construction, improvement, extension, maintenance, repairs 2% etc. on water works) 3. Lighting Tax (for expenses connected with lighting in the Panchayat 2% area) 4. Drainage Tax (Construction, improvement, extension, repair, 1% maintenance etc. of drainage works)

3.70. Details of receipts towards Service Tax are furnished below (Rs. in lakhs) 51

Name District

of No.of panchayats Service Tax

(1) 1. Trivandrum 2. Quilon 3. Pathanamthitta 4. Alleppey 5. Kottayam 6. Idukki 7. Ernakulam 8. Trichur 9. Palghat 10. Malappuram 11. Kozhikode 12. Wynad 13. Cannanore 14. Kasargode Total

(2) 8 20 16 18 23 2 4 7 12 15 16 7 20 2 170

levying Receipt 1979-80 1980-81 1981-82 1983-84 (3) (4) (5) (6) 1.11 0.45 0.44 0.52 2.10 1.58 2.00 2.02 A 1.30 1.52 1.60 1.65 0.68 1.08 1.09 2.53 2.58 2.77 2.99 0.38 0.17 0.16 0.21 1.16 0.95 0.96 1.15 2.37 0.56 0.63 0.66 1.56 1.18 1.61 1.35 0.31 1.36 1.63 1.83 0.55 1.27 0.95 0.92 A 0.10 0.28 0.31 1.80 1.00 1.09 1.27 A 0.01 0.01 0.01 15.52 13.19 15.13 15.93

1982-83 (7) 0.78 3.06 2.39 1.84 3.91 0.24 1.44 1.22 2.24 2.51 1.39 0.33 1.58 0.01 22.94

A Vide Foot Note below Table under Para No. 3.26. The increase noticed during 1983-84 is on account of the quinquennial revision of Building Tax from 1-4-1983. 3.71. As in the case of Building tax, Service tax shall be levied annually in two halfyearly instalments. But because of the fact that this is not a compulsory tax it is being levies at present by 170 only out of 1001. This is another example how Panchayats are absolutely indifferent in the matter of collecting tax revenue for which they are statutorily empowered. It may be noted that Service Tax for Water Supply, Drainage, Street Lighting and Sanitaion is being levied compulsorily in Municipalities in our State. (The property tax levied by Muncipalities include Building Tax as well as the above components). We cannot overlook the fact that since the enactments of Panchayats Act and Rules during 1962 the rural scenario in our State has under gone a change for the better during the last 2 decades as a result of the developments brought into being by the Five Year Plan Schemes. The benefits of Rural Water supply Schemes and rural Electrification and other Rural Works Programe s have now embraced a vast majority of the population in rural areas. These visible benefits have directly cast on the Panchayats the additional burden of expenditure for maintenance and improvement of such services. A three fold increase in electricity charges since 1979-80 has become an unbearable burden to many Panchayats. Similaraly the maintenance charges of Water Supply Schemes has also added to the burden of Panchayats. The State Government with its finacial constraints, cannot be expected to come to the rescue of Panchayats. The

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Panchayats should therefore no longer hesitate to invoke their power to levy Service Tax for service like Water Supply, Street lighting etc. provided by them. Levy of Service Tax to be made compulsory 3.72. The Commission has considered whether Service Tax has to be levied compulsorily for all the items mentioned under the Service Tax Rules and if so the tax is to be collected to cover full expediture incurred for rendering each service. Compulsory levy of Servicce Tax for all the items may cause additional burden to the tax payers. Further, it is neither desirable nor practicable to insist that the receipts from Service Tax should cover the whole expenditure towards its maintenance. Therefore compulsory levy of Service Tax need be confined only in respect of those items for which sizable income is to be spent for its maintenance and the tax need be levied only for meeting a part of the expenditure incurred for such maintenance. Accordingly the Commission recommends that the Service Tax at minimum rate of one percent each shall be compulsorily levied in respect of 'Street Lighting' and 'Water Supply' by those Panchayats whose annual expenditure for maintenance of the above services exceeds 10% of the Building tax under each, provided Building Tax together with Service Tax should not exceed maximum rate of Building tax recommended by the Commission under Para 3.22. This tax may be levied along with Building tax, showing it as a separate component in the Demand Notice. Levy of Service Tax for the remaining items may continue to be optional taxes as at present. (ii) Surcharge on Building tax 3.73. This is also an optional tax under Section 73 of the Kerala Panchayat Act, 1960. The above section enjoins that the Panhayats may levy from the whole or specified portion of Panchayat area, a surcharge on Building Tax, for a specified period in order to cover unusual expenses incurred by the Panchayat in respect of any one of the following services. (i) Education (ii) Treatment of diseases including maternity and child welfare services. (iii) Supply of protected water (iv) Scavenging or (v) Drainage. Rules insist that at a time Panchayats shall not levy surcharge or more than two items specified above and the surcharge so levied for each item shall not exceed one fourth of the Building tax. Surcharge levied under Section 73 of Kerala Panchayat Act shall be demanded and collected in the same manner as if it were the Building tax levied under section 68 of Kerala Panchayat ACt. No Panchayat in the State is collecting surcharge under this item. Already there is provision to levy Service Tax for some of the services

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mentioned above. Besides, we have recommended in para 3.72 to make the levy of Service Tax compulsory in respect of Water Supply and Street Lighting. In such a context Government may decide whether there is any need for retaining the provision for levy of Surcharge on Building Tax in the statute especially when no Panchayat in the State is collecting it. (iii) Land Cess 3.74. According to original Secton 66 (2) of the Kerala Panchayat Act, 1960 "a cess on all lands in the Panahcyat area other than any land or class of lands which the Government may, by notification in the Gazette exempt, shall be levied at the rate of two paise per annum for every five cents of land or part thereof". Imposition of this cess was challenged in the High Court of Kerala in O.P.No. 2127/64 filed by the Kannan Devan Hill Produce Company Ltd. The Kerala High Court in their judgement dated 30-11-1965 held that section 66(2) of the Kerala Panchayat Act was unconstitutional in so far as if authorised the levy of cess at a uniform rate on all lands within the jurisdiction of a Panchayat. Following this, Government omitted sub-section (2) of Section 66 and Section 66 (A) was inserted by Act 13 of 1969. According to the amendment a land cess at the rate of on sixteenth percent of the capital value of the land was to be levied on every land in Panchayat area. The cess levied was payable by he owner of the land annually. Even though assessment of land cess in 950 Panchayats was completed during 1974-75 and an amount of Rs. 101.49 lakhs was assessed only, Rs. 26.65 lakhs was collected. 3.75. Land cess which was originally a compulsory item o tax ws subsequently made optional by Ordinance No. 11 of 1975 and subsequent Act 3 of 1976. Besides, land valued at Rs. 20,000 and below were exempted from the operation of the ces. Collection of land cess during each year rom 1974-75 is shown below:Year 1974-75 1975-76 1976-77 1977-78 1978-79 1979-80 1980-81 1981-82 1982-83 1983-84

Amount collected (Rs. in lakhs) 26.65 100.82 79.12 30.94 22.85 13.61 5.76 7.68 4.54 1.63

Modification o land cess as an optional item on the one side and wide spread protest from public against the levy, gradually gave rise to a situation in which the entire Panchayats in the State have opted out of this taxation, and thereby loosing a sizable revenue which was nearly one crore during 1975-76. To compensate this loss the Commission has

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recommended in Chapter VI another compulsory tax on the lines prevailing in other States in India. Copyright © 2003 by Information Kerala Mission , A-23, Jawahar Nagar, Thiruvananthapuram - 695041, Tel:-91-471-2313835, Email:[email protected]

CHAPTER IV NON TAX REVENUE 1. LICENCE FEES 4.1. Income from 'Licence fees' and 'Panchayat Properties' are two major receipts of Panchayat under 'Non Tax Revenue'. General provision under Section 109 (2) of Kerala Panchayat Act, 1960 empowers Panchayat for levy of fees at such rates as may be fixed by the Panchayat, or grant of licences and permissions or renewal of licences which under the provision o the Act are required to be issued by the Panchayats for: (i) Conducting private markets under Section 86 and 87 of the Act. (ii) Conducting private cart stands under Section 92 of the Act. (iii) Conducting private slaughter houses under Sections 93 to 95 of the act (iv) Use of places (Panchayat area) for Dangerous and offensive Trades under Section 96 of the Act. (v) Construction or establishment of factories, workshops or work place and installation of machinery under Section 97 of the Act. (vi) Construction of buildings in Panchayat where Municipal Building Rules are extended. (vii) Keeping dogs or pigs in the Panchayat area. (viii) for permanent and Temporary theatres under Cinema Regulation Act. (ix) for places o Public Resort under P.P.R. Act, 1963. (x) for occupation of poramboke lands vested with Panchayats. Besides Panchayats levy ees rom Public markets/Cart stands/Slaughter Houses etc. run by the Panchayats and also for various other purposes contemplated under Registration of Births and Deaths Rules, 1970, Prevention of food Adulteration Act, Taxation and 55

Appeal Rules, 1963, etc. Total income derived towards Licence fees and other fees levied by the Panchayats during the years from 1979-80 to 1983-84 are as follows:TABLE Receipts under Licence fees, fines etc. (Rs. in lakhs) Name of District Trivandrum Quilon Pathanamthitta Alleppey Kottayam Idukki Ernakulam Trichur Palghat Malappuram Calicut Wynad Cannanore Kasargode Total

1979-80 1.87 3.29 .. 2.48 1.40 0.85 3.18 4.20 2.59 2.08 3.86 .. 4.80 .. 30.60

1980-81 4.61 4.00 1.60 2.85 2.26 1.78 3.56 4.05 4.52 7.19 6.27 1.64 5.40 2.25 51.98

1981-82 3.98 4.03 2.47 3.19 2.73 2.01 4.23 4.59 4.62 6.41 5.93 2.23 6.33 2.83 55.58

1982-83 5.50 4.44 1.91 3.57 3.08 2.23 4.01 4.93 6.03 6.72 6.31 2.30 6.81 3.23 61.07

1983-84 6.45 4.84 2.01 3.48 2.79 1.95 4.24 5.44 5.01 7.47 7.03 2.67 7.41 2.93 63.72

4.2. Granting of licences for different purpose are meant for observance of rules and regulations laid down for public safety, convenience and health. The general tendency is always to observe the rules and regulations more in its breach than in observance. It is to prevent such tendencies that the local bodies are empowered to issue licences to such trades and other activities. The fees to be levied for granting licences should commensurate with the administrative and other expenses of Panchayat or regulation and supervision of such activities in the Panchayat. The existing rates for licences etc., were fixed as early in 1963 on the basis of the administrative expenses of those days. The administrative expenses have gone up by five or six times since then. Despite this fact, no attenpts have been made to revise the rates so far. 4.3. If a revision in the rate of licence fee is proposed taking into account the proportionate increase in the administrative expenses during the period from 1963 to 1985 it will be viewed as abnormal and unjustifiable eventhough it is quite reasonable from the point of view of erosion in money value since 1963. Had the rates been reviewed and revised at reasonable intervals, say, at least once in five years, a revision on the basis of the present standards will not be viewed as an abnormal hike. Therefore the maximum that the Commission could recommended is only a two increase in the rate 56

except in one or two speciic cases in which a higher rate has been recommended eventhough a five fold increase is quite justified, as already pointed out. Similarly the list of items for which licences are to be granted ought to have been revised along with the revision of rates, after considering the changes occurred from time to time. Incidentally it is pointed out that the Commission did not receive any suggestions worth considering either or enlarging the list of items requiring licences or revision of rates. However the Commission has attempted a general study on certain selected areas and suggestions are made in the ensuing paras, keeping in view our observation regarding the maximum increase that can be thought for in the present circumstances. (i) Markets 4.4. Provision under Section 86 of the Kerala Panchayat Act, 1960 insists a licence from Panchayat to conduct private market in Panchayat area. Such licence shall be got renewed by the licence every year. Licence fees prescribed under Section 86 (4) of the Act is an amount not exceeding 331/3rd per cent of the Gross income off the owner from the market in the preceding year. for new private markets opened during a year licence fee is fixed at the rates noted below:Area For area not excceding 25 cents Above 25 cents but not more than 50 cents Above 50 cents

Rates/fees Not less than Rs. 50 Not less than Rs. 100 Not less than Rs. 150

4.5. The existing practies of levy of licence fees on the basis of previous years collection, will not yield the desired income to the Panchayats, since licensee cannot be expected to disclose the details of his real income or reasons best known to all. Therefore the Commission would recommend to fix the rate for the existing and new markets in terms of area, of course taking into account the location, importance, scope for levy of fees, extent of trading activities likely to be carried out in the market and all other attending factors. As regards rates the Commission would suggest to have a minimum two fold increase in the existing rates of licence fee which is quite reasonable in the context of the erosion in money value since the introduction of the Act in 1962. The Department of Panchayats may examine the scope for enhancing the rates still further, if deemed necessary, after taking into account the aspects mentioned above. 4.6. As regards the fees, leviable from the markets for various uses by licensees and lesees prescribed in the schedule under Rule 7 of Kerala Panchayats (Public & Private Market) Rules, 1964 the Commission is not inclined to suggest any revision as it may inevitably lead to increase in prices of commodities sold through such markets. 4.7. During the Course of collection of evidence there were suggestion to dispense with the system of encouraging private markets in Panchayat areas as private parties are deriving huge profits by exploiting traders and public alike. The Panchayats can do practically nothing to prevent the private party from perpetrating such practices. The Commission therefore suggest that, as a policy, Panchayats may start opening of public 57

markets and that no new private markets to be permitted in future. Even in areas where private markets are existing, efforts should be made to climinate it in a phased manner by converting them into public markets. 4.8. In the case of Public markets ie., markets owned and maintained by the Panchayats, the right of levying fees from markets at prescribed rates is sold in auction annually to the highest bidder. This system appears to be more profitable than direct collection by the Panchyats as direct collection will invariably involve expenditure which may often be disproportionate to receipts. Panchayats, if any, collecting fees directly may be advised to switch on to the practice of selling the right of collection of fees by auction, at the earliest opportunity. (ii) Private Cart Stand 4.9. According to Section 92 of the Kerala Panchayat Act no person shall open Private cart stands without obtaining a licence from Panchayats and such licence shall be got renewed by the licensee. Section 92 (5) empowers the Panchayats to levy on every grant or renewal of a licence a fee not exceeding two hundred rupees. No minimum rate is prescribed in the Act. In the absence of a minimum rate there is scope for fixing the rates as low as possible thereby causing loss to Panchayats. In order to avoid any possible misuse of the provision in favour of the owners of cart stands, the Commission would recommend to adopt the system of levying fees based on area, after fixing a minimum rate as in the case of private markets. (iii) Slaughter Houses 4.10. The Kerala Panchayat Act provides for the establishment of public Slaughter houses and to charge rent and fees or the use of the same (Sections 93-95). Kerala Panchayat Slaughter House and Meat Stall Rules, 1964 elaborates the procedure or establishment and maintenance of slaughter houses and its inspection by the Executive Authority and other authorised officers. 4.11. Most of the Public Slaughter Houses are attached to the public Market and some are located in isolated places. Meat is one of the main items in the market for which separate meat stalls are provided for. There are complaints and objections from public that the slaughter houses are not maintained properly, the sofequarels and the precautions as also conditions prescribed as per rules are not properly adhered to. There are complaints of unauthorised slaughtering of and slaughtering deceased, dying or dead animals. There are no separate receptacles to be provided for putting refuse and allowing blood to flow. Besides , slaughtering of animals and transport of meat for sale are done in unhygenic conditions. Sale of adulterated meat is also rampant. 4.12. In view of public safety and to abate nuisance the Commission feel that there should be an approved plan for the construction of slaughter house and the existing slaughter houses should provide necessary arrangements or water and other facilities to prevent the nuisance. There should also be arrangement for the inspection of animals

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brought for slaughtering regularly and random inspection of meats for sale in the stalls periodically. Hygenic condition of slaughter houses should be ensured by the Veterinary Surgeon of the Block by making suitable arrangements. The Doctor may be given some additional remuneration for the work. The District Panchayat Officer can identify the Doctor. from the point of view of public hygiene, establishment of private slaughter houses should be discouraged and dispensed with in a phased manner wherever they exist. Public Slaughter Houses may be establisted in all Panchayats fulfilling hygenic conditions and the right of collection of fees may be sold in auction as suggested in the case of public markets. Fees for Private Slaughter Houses 4.13. According to Section 94 of the Kerala Panchayat Act, 1960 the owner of any place within the Panchayat area which is used as slaughter house for the slaughtering of animals shall obtain licence from the Panchayat. The licence fee prescribed under Rule 35 of 'Slaughter Houses And Meat Stall Rules, 1964' is 20% of the gross income of the slaughter house for the year immediately preceding rounded to the nearest rupee subject to a minimum of Rs. 20 in the case of existing houses. for a new slaughter house licence fee is Rs. 20 per annum. Licence is renewable every year. The minimum rate in both case may be enhanced to Rs. 100 per annum. In the preceding para we have suggested to dispense with the practice of private slaughter house. The enhancement suggested above is or those private slauhghter house which are allowed to be continued by Panchayats in exceptional circumstances. (iv) Licence or Dangerous and Offensive Trades 4.14. According to Section 96 of Kerala Panchayat Act, 1960 no place in the Panchayat area shall be used without obtaining licence from Panchayat for the purposes of trades, which are likely to be offensive or dangerous to 25/1089/MC. human life or health or property, specified under Schedule I appended to Kerala Panchayats (Licensing of Dangerous and Offensive Trades & factories) Rules, 1963. There are about 126 such items included in the above schedule. Licence has to be renewed every year. Panchayat is at liberty to fix the licence fee at such rates as are deemed sufficient by them, with the approval of Deputy Director of Panchayats (vide Rule 7). Since the Rules do not prescribe any minimum or maximum rates, Panchayats are levying licence fees at different rates which do not appear to be on reasonable basis. Case study of certain Panchayats has revealed that while poor Panchayats are levying the fees at a higher rates rich Panchayats are collecting it at low rates. for example, for sale and storing of coconut shells, Ulloor Panchayat which is considered to be a rich Panchayat is levying only Rs. 2 while Kadakampally and Balaramapuram Panchayats are levying Rs. 15 or the same trade. This disparity is visible in other Panchayats too. A few cases are Illustrated below:-

Name of Trade 1.

Manufacture

Rate levied by the Panchayats for Dangerous and Offensive Trades Kadakampally Ulloor Vattiyoorkavu Pothencode Balaramapuram of 5.00 5.00 10.00 10.00 25.00 59

acrated water 2. Bamboos manufacturing/storing 5.00 for sale 3. Bricks manuacturing 20.00 4. Bread baking 10.00 5. Coffee and Tea 5.00 shops Grade A Coffee and Tea shops 3.00 Grade B Coffee and Tea shops 2.00 Grade C 6. Hotels Grade A 5.00

3.00

3.00

7.00

25.00

10.00 30.00 3.00 3.00

25.00 7.00

75.00 25.00

6.00

6.00

15.00

50.00

3.00

4.00

10.00

25.00

2.00

2.00

5.00

10.00

6.00

6.00

20.00

75.00

In order to prevent the Panchayats from fixing rates at too low a rate it is advisable to have a minimum rate or licence under Section 96 of the Kerala Panchayat Act. 4.15. Licence from Pachayat is also required for the following purposes specified under section 97 of the Kerala Panchayat Act. (a) Construct or establish any factory, work shop or work place in which it is proposed to employ steam power, water power or other mechanical or electrical power (b) Install in any premises any machinery or manufacturing plant during by any power as aforesaid not being machinery or manufacturing plant exempted by the Rules. According to Dangerous and Offensive Rules, fees to be charged for licences granted or for its renewal under Section 97 of the Kerala Panchayat Act shall not exceed the maximum specified in Schedules II & III appended to the above Rules. In these cases also no minimum has been prescribed but only maximum rate and this maximum rate in certain cases is as low as fifty paise. As these maximum rates were fixed about 22 years back, a revision is quite necessary, besides prescribing minimum rate for each. 4.16. As regards revision of maximum rates for grant of licences, the Commission has not received suggestions of a serious nature deserving consideration from any quarter. So also no suggestions were received for addition of any items to the existing list or for deletion. The past two decades have indeed witnessed and unprecedented flowering in the various facets of the socio-economic life of our rural population bringing them face to face with new technologies and avocation and this change has brought in several trades and occupations not contemplated in the Schedules appended to Dangerous and Offensive Trade Rules, 1963. The Commission therefore recommends that the existing schedule which is prepared long back, may be revised by the Director of Panchayats incorporating new items and deleting unnecessary items. further a two fold increase is absolutely justifiable in the case of existing maximum rates for licence under Section 97 and the same is recommended. Similarly minimum and maximum rates may also be

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prescribed for licence issued under Section 96 of the Kerala Panchayat Act, 1960. Minimum fees for grant or renewal of a licence should be not less than Rs. 10 in both cases (ie. Sections 96 and 97). (v) Fees or Permanant and Temporary Theatres under Cinema Regulation Act 4.17. Rule 22 of the Kerala Cinemas (Regulation) Rules, 1975 prescribes fees for grant of permission for construction/re-construction of cinema theatres as stated below:(1) For every permission under section 6 of the Kerala Cinemas (Regulation) Act, 1958 granted or renewed under these rules, a fee shall be collected at the following rates: Temporary theatre Rs. 5 Permenant theatre Rs. 10 The above rates are applicable to cinema theatres in Corporation, Municipal and Panchayat areas. The rates require revision as the income derived by the theatre owners have increased manyfold since the rates were fixed in 1975. The Commission would therefore recommend to revise the rates as indicated below:Temporary theatre Rs. 50 Permanent theatre Rs. 100 (vi) Licence fees for other items 4.18. Panchayat are levying fees/licence fees for various other purposes also such as for use of poramboke lands, places of public resorts, keeping dogs etc., etc. As pointed out earlier the fees or the above purposes were prescribed more than two decaded back. Similarly revision of rates for fines, Distraints fees, Demand Notice, Warrants etc. is long overdue. We would therefore recommend that the existing rates of fees, fines etc., or all other items may be refixed by making a two fold increase to compensate the increase in the cost of administrative services incurred in discharging duties connected with the licensing work of Panchayats. In certain cases no minimum rates of licence fees are seen fixed but only the maximum. In the absence of minimum rates the Panchayats will be generally inclined to levy the rate as low as possible to appease the beneficiaries. The Commission would therefore recommend to fix minimum rates for all minimum rates or all items or which licences are to be granted and the minimum fee or each licence, valid for a year should not be less than Rs. 10. We would also recommend that in future all kinds of licence fee, other fees, fines etc., should be reviwed and revised once in five years.

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2. Income from Panchayat Properties 4.19. Income from 'Panchayat Properties' is mainly derived from remunerative enterprises like market complexes, shopping centres, lodgings, bus stands, Kalyanamandapams etc. Income derived by Panchayats during the Period rom 1980-81 1983-84 is as shown below:TABLE Statement showing income from Panchayat Properties (Rs. in lakhs) District Trivandrum Quilon Pathanamthitta Alleppey Kottayam Idukki Ernakulam Trichur Palghat Malappuram Kozhikode Wynad Cannanore Kassargode Total

Year 1980-81 18.60 15.64 14.61 9.26 9.98 5.06 20.00 12.62 6.21 12.26 9.07 5.25 7.21 4.12 149.89

1981-82 19.57 19.73 19.64 11.02 10.99 7.28 23.93 14.96 8.34 15.43 10.05 5.93 8.77 4.56 180.20

1982-83 1983-84 22.20 33.97 23.19 27.10 20.34 24.29 11.91 14.66 12.40 14.51 7.73 8.56 25.78 29.83 16.37 19.55 9.51 11.72 14.18 20.12 13.35 14.30 8.01 10.97 10.14 12.90 5.40 5.76 200.51 248.24

The above table indicates that receipts from Panchayat properties from an important source of income to Panchayats. In fact receipt is equal to about 41% of the income from Building Tax during the year 1983-84. While Ernakulam and Trivandrum districts are in the forefront in the matter of receipt on this account, Kasargode, Wynad and Idukki districts are backward due to the fact that these districts are having only less number of Panchayats. 4.20. Inspite of the various sources of income viz. taxes, licence fees, statutory and non statutory grants, many of the Panchayats are not in a position to carry out their obligatory functions in a satisfactory manner. Over a quarter of a century since the enactment of the Panchayat Act the horizo of development has widened the activities and services to be rendered by the Panchayats. Income from tax sources is heading towards a saturation point and local bodies are now forced to concentrate their efforts on resource mobilisation more on non tax avenues. The limited tax resources on the one hand and the ever expanding needs on the other are the compelling factors that make them go in search 62

of fresh avenues of resources and in this process remunerative enterprises are found to be excellent potential of non-tax sources which of properly harnessed will yield substantial income and therefore it deserve encouragement. Compared to other States in India a unique feature of our state is the establishment of the Kerala State Rural Development Board. This Board was constructed on September 15, 1971 under the K.S.R.D.B. Act, 1971 which empowers it to arrange for the execution of any of the prescribed types of schemes in a Panchyat area namely water supply schemes, sewerage schemnes and development schemes which include the construction of bus stand, cart stand, market buildings etc. The two main functions which the Kerala State Rural Development Board has taken up for implementation were Rural water supply and remunerative schemes. The water supply schemes in Panchayats implemented by the K.S.R.D.B. were those which were aided by the Life Insurance Coporation of India 50% of the cost of the scheme was paid as loan from Life Insurance Corporation and the remaining 50 % was met by the State Government as grant. On completion of the scheme 25% of the capital cost was treated as share of the Panchayat which was to be repaid by the Panchayat in 25 instalments. Thus Panchayat was required to meet only 25% of the capital cost of the scheme. Later, it was found that most of the Panchayats were not having adequate funds even to meet the above 25% portion, with the result that annual instalment of repayment fell heavily in arreats and Govenment was forced to come to the rescue of those Panchayats to clar the arrears though special grants. Tereupon the K.S.R.D.B. turned its attention mainly to assist the Panchayats for the establishment of remunerative assets. 4.21. The remunerative enterprises launched under the auspices of the K.S.R.D.B. have been instrumental in giving a new facelift to many Panchayats in the last decade. Besides, the remunerative schemes have helped those Panchayats to augment their non-tax resources to such an extent enabling some of them to embark on more and more new schemes utilising the Income derived from the original schemes. For example Perinthalmanna Panchayat which had investded Rs. 13.37 lakhs in 1979 for construction of shopping centre-cum-bus stand could collect an appreciable income of Rs. 5.37 lakhs during 1983-84. No other Panchayat in the State was able net to so much income from an investment of Rs. 13.37 lakhs. This is a rare phenomenon and it deserves compliments. The increase in receipts under "Income from Panchayat properties as many be seen from the Table under para-4.19 is a direct dettection of the financial gains accrued to them from remunerative enterprises. 4.22. Having received opinion from certain quarters expressing apprehensions about the economic viability of the schemes in recent times, the Commission has attempted a case study of some selected Panchayats which have undertaken remunerative schemes with the assistance of the K.S.R.D.B. The study has revealed that schemes executed by the K.S.R.D.B. from 1980 are comparatively non-remunerative often landing Panchayats in an unfortunate situation in which they have to divert their hard-earned tax revenue for repayment of instalmnents of loan to the Rural Development Board. 4.23. Considering the fact that Banks in the Nationalised and Cooperative sector offer attractive rate of interest on long term investment it has to be concluded that unless returns at least at tje rate of 12% per annum on the capital invested by the Panchayat i

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received back by way of rent etc. the enterprises cannot be considered as remunerative. Viewed from the above perspective an analysis of the cost benefit factor made reveals that remunerative enterprises undertaken prior to 1980-81 are profitable except in one or two cases while income derived on schemes executed from 1980-81 are not only inadequate to meet even the repayment of loans but also disappointing from the point of view of 12% returns per annum on investment. Table below explains the above position. TABLE Statement showing Profit/Loss in certain schemes executed by the Rural Development Board

Name Panchayat

of Name Scheme

Capital of Year of cost completion Rs.

Income during 1983-84 Rs.

A. SCHEMES EXECUTED PRIOR TO 1980-81 Shopping 1. Anchal 1977 4,54,700 66,700 complex Shopping 2. Adoor complex at 1975 1,52,200 57600 Parakode Shopping 3. Ollur 1978 80400 17600 centre Shopping 4. Nemmara 1975 44100 22300 complex Shopping 5 . centre cum 1979 1337000 537200 Perinthalmanna bus stand 6. Shopping 1980 402400 59920 Parappanangadi complex 7. Muttom (Idukki Market stall 1977 8250 4700 District) B. SCHEMES EXECUTED FROM 1981 ONWARDS Shopping 1. Ulloor centree at 1982-83 475600 18400 Mannanthala Shopping centre at 2. Adoor 1983-84 1090400 48000 Sreemoolam centre

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12% return on capital cost Rs.

Profitable or not with reference to col. 6

54,564

Profit table

18264

Profit table

9648

Profit table

5292

Profit table

160440 Profit table 48288

Profit table

9900

Loss

57072

Loss

130848 Loss

Shopping 1981 centre Shopping 4. Quilandy centre Bus 1982 stand Shopping 5. center at 1983 Sakthikulangara Kavanad Shopping 6. Chirakkal centre & 1981-82 Market 7. Shopping 1985 Mundakkayam centre 3. Vandiperiyar

1115600 22400

133872 Loss

1805000 169200

216600 Loss

619600

55600

74352

Loss

738400

72000

88608

Loss

20 lakhs 120000 240000 Loss (Approx.) (Approx.)

4.24. In the case of Muttom Panchayat in Idukki District the loss, it is stated, is attributed to the selection of locality where the market stalls are constructed. The proximity of Thodupuzha town is stated to be another factor for the loss. Opinion expressed by the Presidents and Executive Officers generally indicate that at present schemes are executed in such a manner that on completion they find it an unbearable burden to the Panchayat. Their views can be summarised as follows:1. Exorbitant rate of centage charges levied by the Kerala State Rural Development Board. 2. Selection of sites are often made on pressures and sites so selected are not conducive for shopping activities. 3. Once the work is started the Panchayat is not consulted on alternations, deviations and other structural changes which involve considerable additional financial commitment. 4. Avoidable time lag between the commencement and completion of work resulting in increase in the cost of materials warranting frequent revision in estimates. There is majority opinion among Presidents and Executive Officers that the work can be carried out more efficiently, economically and quickly if it is entrusted to the Panchayat itself, under the guidance and supervision of the Local Bodies Engineering Wing constituted by the Government for the public works of local bodies. In support of their argument they have pointed out that remunerative enterprises in Municipal areas are being executed by the Municipalities temselves with financial assistance from Kerala Urban Development Financial Corporation. Many Presidents and Executive Officers have urged for adoption of a similar method in the matter of execution of remunerative schemes by Panchayats. 4.25. The Commission is of opinion that remunerative enterprises originally intended as a boon to the Panchayats should not become a curse and an unbearable burden to them. At the same time it is not wise to abandon the venture altogether on grounds that the 65

schemes executed after 1980-81 are uneconomical. Wisdom consists not in retracting from challenges and problems but in devising ways and means to harness them. With this perspective in mind the Commission would recommend that the system of remunerative enterprises should be redesigned in such a way that the Schemes should indeed be remunerative to the Panchayats. Government may take appropriate steps in the matter. Further the Kerala State Rural Development Board may be provided with more powers and opportunities to enlarge the scope for availing more and more institutional finances with a view to providing adequate financial assistance to the needy Panchayats to undertake remunerative enterprises.

CHAPTER V GRANTS 5.1. Altogether there are 26 types of grants that are being sanctioned by the Government to the Panchayats in the State. According to information available with the Commission no other State Government in India is providing grants for so much items as our State Government is providing. Of the 26 items of grants mentioned below 3 are statutory in nature. These 3 items of grants are taxes collected by the State Government and assigned to them in the form of grants. Details of the grants are mentioned below: Name of Grant Head of debit of expenditure in the State Budget A. STATUTORY GRANT (Tax levied by the Government and assigned to Panchayats in the manner laid down in the statutes) 1.

Duty on Property

Transfer

2. Basic Tax Grant 3.

Motor Vehicle Compensation Grant

of 030 Stamps & Registration C(d) Payment to Local Bodies of net proceeds of Duty on Transfer of Property. 314 (A) (c) Other Expenditure Basic Tax Grant to Panchayats. Tax 363 (a) Taxes on Vehicles Compensation & Assignment to Local Bodies.

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B. NON STATUTORY GRANT 1. 2. 3. 4. 5. 6. 7.

Special Grant Building Grant Establishment Grant Establishment Grant as per audit report. 314 A General (c) Initial Grant Other ExpenditureBlock Grant Assistance to Panchayats. Ad hoc grant Matching Grant to meet pay and allowances 8. of the conservancy staff transferred from Public Health Department 9. Ferrymen Grant Matching grant for maintenance of water 10. supply scheme. Grant for opening and maintenance of 314 C Rural Works Programme (a) 11. Water Supply & Sanitation. burial and burning grounds. Grant for construction of drains and latrins 12. in Panchayats 314 C Rural Works Programme (b) 13. Minor Irrigation Grant Minor Irrigation 314 C Rural Works Programme (c) 14. Village Road Maintenance Grant Roads. Grant for Maintenance of Railway level 314 C Rural Works Programme (c) 15. crossings Roads. 314 C Rural Works Programme (e) 16. Grant for lighting of Public Roads Other Expenditure. 314 A General (c) Other Expenditure Seven Point Programme Grant (Grant for 17. Grant to Panchayats for Developmental Developmetal activities) activities. Grant to Panchayats for providing 314 A General (c) Other Expenditure 18. environmental amenities for the poor Environmental amenities to the poor. 314 A General (c) Other Expenditure Grant to Panchayats for Special Component 19. Environmental amenities to the poor Programme Special Component Plan. 314 A General (c) Other Expenditure Grant under Special Component Scheme for 20. Environmental amenities to the poor the Scheduled Tribes Tribal Sub Plan. Grant for Welfare of Scattered Scheduled 314 A General (c) Other Expenditure 21. Tribes Dispersed Tribes. 277 G (c) Sports & Games Acquisition Sports & Games Grant (for construction of 22. and Improvements Play grounds for Play ground) Sports and games. 278 (b) Promotion of Arts & Culture23. Open Air Theatre Grant Grant in Aid for Open air Theatre in 67

Rural Areas. 5.2. Basis, rate, general conditions for payment etc. of the grants are dealt with in the ensuring paras. A. STATUTORY GRANTS 1. DUTY ON TRANSFER OF PROPERTY 5.3. According to Section 71 of Kerala Panchayat Act, 1960 'Duty' at a rate not exceeding 4% in the form of a surcharge on the stamp duty imposed under the Kerala Stamp Act, 1959 shall be levied on certain transfers of property in the Panchayat areas. This duty is levied by the Registration Department and the amount collected during each quarter is transferred to Panchayats after making a deduction os 3% of proceeds as collection charges by the Registration Department. Intimation regarding the amount payable to Panchayats in each taluk will be sent by the Inspector General of Registration to the Director of Panchayats within 2 months after the close of each quarter. The Director of Panchayats will allot 75% of the collection from each taluk to the Panchayats in that Taluk in proportion to the population of Panchayat according to the latest census figures. The remaining 25 per cent of the collection will be distributed to the Panchayats in the taluk in such proportion as may be fixed by the Director of Panchayats having regard to area, available resources, and needs of development of the Panchayat and the cost of Panchayat administration. 5.4. This grant is the biggest source of income for Panchayats. Total receipts under "Duty on Transfer of Property" compare with the receipt under 'Building Tax' over the last five years as follows:(Rs. in lakhs)

1. Duty 75% 2. Duty 25% Total Duty 2.Building Tax

1979-80 435.05 113.65 548.70 311.77

1980-81 427.98 101.74 529.72 317.29

1981-82 514.42 137.42 651.84 356.21

1982-83 488.83 132.85 621.68 401.33

1983-84 514.62 136.89 651.51 608.92

5.5. Receipts of Panchayats by way of per capita distribution of 'Duty' (ie. duty under 75 per cent category) rose from Rs. 435.05 lakhs in 1979-80 to Rs. 514.62 lakhs in 1983-84. Growth within the above 5 year period works out to 18% only. Similarly growth in the case of discretionary grant made out of 25% duty is 20% only. The combined rate of growth of two categories (75% + 25%) from 1979-80 to 1983-84 is nearly 19% which indicate that the annual growth rate is below 5%. This shows that inspite of the abnormal increase in the market value of lands and buildings the yield by way of Stamp duty id comparatively less. The reason for this low rate of growth in receipt of Stamp Duty is squarely attributable to the prevalance of under valuation of properties at a rampant scale.

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Having realised the need for curbing this practice which is causing heavy loss to the State exchequer, the Hon'ble Minister for Finance has announced in the Budget Speech, 198586 that steps will be taken to fix fair value of properties on the basis of yield, location and other factors. The revenue from this source is surely to go up with the introduction of the new system of valuation of property under consideration of Government. 5.6. The receipts of Panchayats under 75% category of 'Duty' during 1983-84 are maximum in Trichur District (Rs. 77.16 lakhs) followed by Quilon District (Rs. 59.31 lakhs) & Trivandrum District (55.93). District wise details of distribution of 'Duty' are furnished in Table given below: TABLE Statement showing District-wise Distribution of duty on Transfer of Property for the period from 1979-80 to 1983-84 (Rs. in lakhs) Sl. Name No. District 1 2 3 4 5 6 7 8 9 10 11 12 13 14

of

1979-80 1980-81 1981-82 No.of Panchayats 75% 25% Total 75% 25% Total 75% 25% Total Trivandrum 84 51.98 12.25 64.23 58.68 12.69 71.37 59.74 16.49 76.23 Quilon 75 73.84 14.94 88.78 50.30 15.46 65.76 57.30 17.21 74.51 Pathanamthitta 55 .. .. .. 27.92 6.51 34.43 38.46 10.68 49.14 Alleppey 69 38.04 10.01 48.05 27.53 8.07 35.60 30.54 7.47 38.01 Kottayam 73 33.48 10.93 44.41 35.48 10.28 45.76 40.87 11.26 52.13 Idukki 51 22.06 5.11 27.17 24.38 2.15 26.53 20.01 2.49 22.50 Ernakulam 86 39.09 11.83 50.92 41.14 11.15 52.29 52.91 16.20 69.11 Trichur 98 46.88 13.68 60.56 52.15 11.87 64.02 58.09 15.50 73.59 Palghat 91 16.45 5.66 22.11 26.49 6.92 33.41 33.28 10.44 43.72 Malappuram 95 25.98 7.87 33.85 23.13 4.85 27.93 36.99 8.58 45.57 Kozhikode 77 40.87 9.66 50.53 24.65 4028 28.93 25.09 7.54 32.63 Wynad 25 .. .. .. 9.96 1.53 11.49 12.66 2.30 14.96 Cannanore 85 46.38 11.71 58.09 18.50 4.39 22.89 34.26 6.95 41.21 Kasaragode 37 .. .. .. 7.67 1.59 9.26 14.22 4.31 18.53 Total 1001 435.05 113.65 548.70 427.98 101.74 529.72 514.42 137.42 651.84

TABLE (Contd)

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Statement showing District-wise Distribution of duty on Transfer of property for the period from 1979-80 to 1983-84 Sl. No. Name of District No. of panchayats 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Trivandrum Quilon Pathanamthitta Alleppey Kottayam Idukki Ernakulam Trichur Palghat Malappuram Kozhikode Wynad Cannanore Kasargode Total

84 75 55 69 73 51 86 98 91 95 77 25 85 37 1001

1982-83 1983-84 75% 25% Total 75% 25% Total 66.20 16.64 82.84 55.93 17.36 73.29 53.96 16.12 70.08 59.31 16.75 76.06 33.72 11.03 44.75 35.10 8.08 43.18 27.60 9.67 37.27 32.51 8.45 40.96 38.05 11.17 49.22 35.41 10.25 45.66 16.21 1.78 17.99 12.05 1.17 13.22 49.61 12.91 62.52 41.41 14.67 56.08 55.03 17.22 72.25 77.16 16.71 93.87 35.89 10.34 46.23 32.65 11.56 44.21 32.11 8.82 40.93 41.44 7.81 49.25 29.58 5.78 35.36 27.92 7.98 35.90 7.53 0.81 8.34 12.51 3.33 15.84 29.58 6.76 36.34 35.65 7.60 43.25 13.76 3.80 17.56 15.57 5.17 20.74 488.83 132.85 621.68 514.62 136.89 651.51

5.7. As already mentioned 97% of the collection from 'Duty on Transfer of Property" is distributed to the local bodies, the balance 3% being credited to Government account towards collection charges. According to the existing principle of distribution of the share of 'Duty on Transfer of Property 75% of the duty collected from all the Panchayats in a taluk is to be distributed among the Panchayats in that taluk itself on per capita basis. The remaining 25% of the 'Duty' is also to be distributed among the Panchayats in that taluk on a discretionary basis as mentioned under para 5.3. 5.8. During collection of evidence Ex- Presidents, Ex-Members of Panchayats and other Publicmen have made a strong plea for changing the existing patern of distribution of assigned revenues to Panchayats: their arguments may be summarised as follows:(a) There shall be no apportionment as 75% on population basis and 25% for developmental purposes for Panchayats in the respective taluk itself. (b) Entire receipts from each Panchayat towards Duty on Transfer of Property should be made available to the concerned Panchayat instead of the existing system of pooling it taluk-wise. (c) Per capita distribution if 'Duty" to each Panchayat should be made from the total collection in the Sate instead of the collection from each taluk as is being done at present.

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5.9. In support of their views expressed at (a) above they have alleged that very often political and other extraneous considerations play a vital role in the distribution of discretionary share (25%) of the duty, depriving less influential Panchayats of their legitimate share. It is true that exercise of powers on discretionary basis may sometimes give room for complaints. But it is no advisable to give up a well-intentioned provision in the Act stipulating weightage to under-developed Panchayats in sharing the State revenue. The provision is meant to help the poor, under developed and needy Panchayats which are also expected to come to the level of other developed Panchayats. The Commission is therefore, in favour of the existing system of setting apart 25% of the 'Duty' for development of backward Panchayat by means of Special Grant. Discrimination, if any, in the matter of distributiin of the 25% share, as alleged by the representatives of Panchayats, can be set right by devising more fool proof methods instead of sacrificing a well intentioned principle. To avoid such allegations we have elsewhere in the report suggested a method for utilising the above 25% share as 'Special Grant'. 5.10. The plea for assignment of the entire proceeds form a particular Panchayat to that Panchayat itself runs counter to the principles upheld by our State Government in matters relating to sharing of Central taxes among the States in India. The State Government have been consistently arguing before all the past Finance Commissions that in the matter of sharing of taxes weightage should be given to population and not to 'Collection'. The relevant extract from the Memorandum submitted by our State Government to the Eights Finance Commission is extracted below: "The next question relates to the principles of inter so distribution amongst the State. Traditionally, in the distribution of income tax shares among the States inter se a weightage has been given to the contribution to income tax revenues from each State. The other factor in the distribution formula has been population. In the criteria for distribution recommended by the past seven Finance Commissions, contribution has been assigned a weightage of either 10 per cent or 20 per cent. Four Commissions incuding the last three Commissions recommended a weightage of 10 per cent to contribution and 90 per cent to the factor of population. We feel that in distributing a compulsorily sharable tax like income tax in a country like India where there are wide inter-regional income disparities, there is no question of any compensation or reimbursement principle coming into play, as was observed by the First Finance Commission, though that Commission ultimately gave a weightage of 10% to the factor of collection taken to represent contribution. The other Finance Commissions supported the factor of collection on the basis that industrially advanced State have to face many problems and responsibilities connected with urbanisation and concentration of population in big cities and the agricultural State could tax income from agriculture which comes within the purview of the State. These arguments do not have much of weight in as much as industrially advanced states also derive many revenue benefits by way of larger collections from State taxes like Sales Tax, Stamp Duties, Entertainment Tax, Motor Vehicle Tax etc. The State Government are strongly of the view that "Collection" should be not a factor in the distribution of Income Tax. If a common formula for Income Tax and Excise duties is not

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found acceptable for any reason, we would suggest as a second best solution that the share of States in the divisible pool of Income Tax be wholly distributed on the basis of population". 5.11. The present practice of taluk-wise distribution of the 'Duty' is therefore against the stand taken by the State Government in the matter of sharing of central taxes among the States. While furnishing replies to the questionnaire from the Sarkaria Commission on Central State Relations, our State Government have stated that the principle of "interstate distribution should be such that advanced States are not left with large surpluses". Under the existing practice of distribution of the 'Duty' on the basis of taluk-wise collection, certain Panchayats located in high income areas are benefited too much while other Panchayats in low income areas are getting only small allocations for no fault of them. This uneven distribution of 'Duty' has created grave imbalances between Panchayats in the matter of sharing of State revenue. For example in Trivandrum and Quilon Districts where the total number of Panchayats in each of the above 2 districts is less than the number in Palghat, Malappuram and Cannanore districts the above two districts (Trivandrum & Quilon) have got almost double the share than the three malabar districts mentioned above during the three year period from 1981-82 to 1983-84 vide details furnished belws: District

Total No. Panchayats

Trivandrum 84 Quilon 75 Palghat 91 Malappuram 95 Cannanore 85

of

Total share under Duty received Percentage to total from 1981-82 to 1983-84 (Rs. in proceeds distributed lakhs) 232.36 12.07% 220.65 11.46% 134.16 6.97% 135.75 7.05% 120.80 6.27%

In a district itself there is uneven distribution. For example during 1981-82 Panchayats in Nedumangad Taluk in Trivandrum District have got only Rs. 16 lakhs while the Panchayats in Trivandrum Taluk got around Rs. 30 lakhs. This disparity is more in evidence in northern districts of the State. 5.12. As a matter of fact Duty on Transfer of Property is an income of the State Government which is assigned to the local bodies to argument their resource position. The local bodies in the State do not have any effort in the levy and collection of this item of tax. Therefore this tax levied by the State should be assigned to the local bodies on sound and national principles of equitable distribution. The objective of an equitable distribution of Government revenue among the Panchayats could be best achieved only by distributing the total collection of the State on population basis of the Panchayats after setting apart the portion (ie. 25%) meant for uplifting backward Panchayats. 5.13. The Commission would therefore recommend that out of the total proceeds under 'Duty on Transfer of Property' made available to Panchayats from the Registration

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Department 75% should be distributed to all Panchayats on population basis instead of taluk-wise distribution. This grant may be paid rounding it to the nearest hundred ignoring amounts below Rs. 50. Relevant provision in the Act and Rule may be amended suitably for this purpose. The procedure recommended besides simplyfying the existing system will ensure equitable distribution and timely disbursement of grants and tereby ease the financial burden of Panchayats in providing civic amenities to the public. 5.14. According to our estimate on the basis of the receipts assumed in the Revenue Budget 1985-86, 75% of the share of Duty on Transfer of property would come to around rupees five crores. In that case a Panchayat having a population of 10000 will get a minimum share of Rs.25000 per annum on the basis of per capita distribution suggested by us . This will be an assured income. Incidentally it is pointed out that there are only 30 Panchayats in the State having population less than 10000. The remaining 971 Panchayat are also likely to get share ranging from Rs. 25000 to Rs. 2 lakhs depending on 'Duty' collected by the Government. The magnitude of services and providing amenities by Panchayats is related to the size of the population. The new system of distribution of assigned revenue on population basis suggested by us would certainly benefit many of the bigger Panchayats which are not getting adequate share of assigned revenue from Government to meet obligatory functions due to the fact that tax collection in a taluk is very low on account of its backwardness. Ass regards balance 25% we have suggested to distribute it as 'Special Grant' vide paras 5.23 and 5.64. 2. BASIC TAX GRANT 5.15. This is a grant to the Panchyats in lieu of basic Tax collected by the Revenue Department under the provisions of Kerala Land Tax Act, 1961. By Section 67 of Kerala Panchayat Act, 1960 Government are required to pay annually to each Panchyat in the State a grant equal to three fourths of the amount of Basic Tax collected by the Government in the last preceding year from the Panchayat area. The Government is also required to pay to the Panchayats a grant, the aggregate of which is equal to the balance of the Basic Tax collected by the Government in the last preceding year from all lands in the State in such proportion as may be decided by the Government having regard to the area, population, available resources and the needs of development of the Panchayats and the cost of administration. The amount of Basic Tax Grant available for distribution for a year is the amount equal to the total collection of the Basic Tax in the preceding year less 3% of proceeds towards collection charges to be credited to the account of the Revenue Department. 5.16. In 1962, the Kerala High Court had struck down, Kerala Land Tax Act, 1961 being unconstitutional. Later the above Act was got included in the Ninth Schedule to the Constitution and this made levy of Baisc Tax legally valid. Basic Tax grant Rules for the Panchayats came onto force from 1-1-1978 only. Basic Tax was levied data uniform rate of 2 paise percent ie. Rs.4.94 per hectare per annum throughout the State till 31-3-1983. From the financial year 1983-84 onwards, as against the then existing rate of Rs. 4.94 per hectare, Basic Tax was enhanced to Rs. 20 per hectare per annum in the case of holdings of one hectare and above however in the case of land the annual income from which is

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below Rs. 100 per hectare, Basic Tax has been fixed as one fifth of that amount. There is no minimum or maximum rate. Further, unlike other States no surcharge on Basic Tax is being levied in our State. 5.17. Though the Panchayats were entitled to Basic Tax Grant from 1-1-1978, grant for the respective years could not be paid to the Panchayats by the Director of Panchayts for want of details from the District Collectors regarding Panchayat-wise actual collection of Basic Tax by the Revenue Department, in each taluk. According to information gathered from the directorate of Panchayats, above grant could be paid to 511 Panchayats only as indicated below till the end of 1983-84. Name of District

No.of Panchayats to Period for Amount paid till which grant was which grant 31-3-1984 (Rs. in paid was paid lakhs)

Quilon (including Panchayats 1. since added to Patanamthitta 104 District) 2. Eranakulam

86

3. Palghat

89

4. Wynad

17

5. Malappuram

93

1-1-1978 to 313-1981 1-1-1978 to 313-1981 1-1-1978 to 313-1981 Rs.146.77 lakhs 1-1-1978 to 313-1981 1-1-1978 to 313-1979

Cannanore (including 6. Panchayats since transferred 122 to Kasargode District) Total 511

1-1-1978 to 313-1982 Rs.146.77

5.18. 4 90 number of Panchayats did not receive grant till the above period. Even in the case of above 511 Panchayats, arrears, for the remaining period were also pending disbursement as at the end of 1983-84. Non-availability of details of Panchayat-wise collection of Basic Tax from the District Collections had effected timely disbursement of Basic Tax Grant due to Panchayats. Besides, restriction in withdrawal of money from the treasury as a part of economy measures enforced by the Government during 1983-84 had also resulted in the non-payment of grant. 5.19. As a remedy to avoid delay in disbursement of grant for the Basic Tax collected during previous year, organisations of employees of Panchayats had suggested during evidence collection, for entrustment of work of collection of Basic Tax to the respective Panchayats instead of the Revenue Department. The estimate Committee (1982-84) in their Ninth Report of 1984 had also recommened for transfer of above work to Panchayats vide para 28 of Ninth Report of Estimate Committee (1982-84) of the

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Seventh Kerala Legislative Assembly. But the Commission is not inclined to agree with the above suggestions due to the following reasons. (1) It will not be possible for the Revenue Department to transfer the land records available with them to Panchayats as those records will be required by the Revenue Department for various purposes as part of their statutory functions and duties. (2) Preparation of duplicate records for the purpose of collection of Basic Tax, though not impossible, is a tedious and time consuming job. (3) Entrustment of collection work to Panchayat will definitely necessitate appointment of additional staff to cope with the volume of work resulting in additional expenditure to Panchayats many of which are not having adequate funds even to maintain existing services satisfactorily. 5.20. Information gathered by the Commission shows that all States in India with the exception of one State viz. Gujarat are collecting Basic Tax (Land Revenue) directly. The Commission would therefore suggest that the existing system of levy of Basic Tax by the Revenue Department may continue. The delay in disbursement of grant should however be eliminated by devising suitable methods. 5.21. As already pointed out 75% of Basic Tax collected from each Panchayat in the preceding year has to be assigned to the concerned Panchayat and the remaining 25% as Special Grant to the Panchayats in the State with due regard to need of development etc. Many Panchayats in the State are not co-terminus with villages. Certain Panchayats have jurisdiction over more than one village and in some cases parts of a village will be in more than one Panchayat. This involves administrative difficulties on the part of Revenue Officials in preparing Panchayat-wise statement of collection of Basic Tax because they are having only village-wise accounts, whereas the Department of Panchayats need Panchayat area-wise collection statement to enable them to distribute the 75% of the Basic Tax to the concerned Panchayat on collection basis. The preparation of Panchayatwise statement of collection by the personnel of Revenue Department was one of the causes that have contributed to the delay and resultant non-payment of dues pertaining to the period from 1-1-1978 onwards. Simplification of the existing procedure for distribution of basic Tax Grant will eliminate the bottlenecks. Accordingly, the Commission would suggest that the present practice of preparing Panchayat-wise accounts of collection and distributing the amount to the respective Panchayats on collection basis should be dispensed with. Instead, out of total amount payable (ie. total collection of basic tax in the State less collection charges) 75% should be distributed on per capita basis to all Panchayats in the State for the very same reason mentioned in the case of distribution of 75% 'Duty on Transfer of Property'. This grant may be paid to the nearest hundred rupees ignoring amount below Rs. 50. Provision under Section 67 (1) of Kerala Panchayat Act, 1960 may be suitably amended. Balance 25% may be distributed as 'Special Grant' for development of poor Panchayat as suggested under para 5.64.

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Distribution of 25% of the Assigned Revenue viz. Duty on Transfer of Property and Basic Tax 5.22. We have already pointed out that according to provision in the Act, 25% each of the receipts under 'Duty on Transfer' and 'Basic Tax' should be set apart for sanctioning 'Special to Panchayats to meet their developmental needs. 5.23. The Commission would suggest that the amount payable under 25% may be initially transfer cerdited to a P.D. Account viz, 'Panchayat Special Grant Fund' from which adequate amounts may be released to Panchayats for their developmental needs as and when need arises. Our specific recommendation on the utilisation of the amount under the above found are made in the ensuing para relating to Special Grant vide para No. 5.64. 3. VEHICLE TAX COMPENSATION 5.24. This grant is being sanctioned to the Panchayats under Section 19 of Kerala Motor Vehicle Taxation Act 1976. Above section reads as follows:"From the proceeds of the tax collected under this Act every year there shall be paid to each local authority such compensations as may be fixed by Government in accordance with such principles as may be prescribed". 5.25. Principle laid down for payment of compensation to local authorities under Rule 11 of K.M.V. Taxation Rules 1976, is as follows:" The expenses for collecting the tax and the cost incurred by the Government in exercising their administrative functions in regard to the control of motor vehicles, shall be deducted from the tax collected for the year and the balance divided between the Government and local authorities based on recommendations of a Committee to be appointed, by the Government for the purpose. The decision of the Government on the recommendation of the Committee appointed by the Government under the above Rule, for fixing the amount of Vehicle Tax Compensation payable to the local bodies for the five year period from 1-4-1978 to 31-3-1983 had recommended to Government for payment of 10% of net vehicle tax collected by the Government to the bodies in proportion to length of roads maintained by each local body and the nature (type) of such roads. Though Government issued orders on 21-5-1984 for payment of share of tax on the above basis with arrears from 1-4-1978 to 31-3-1983, arrears amounting to Rs. 127.34 lakhs were not paid to the Panchayats till the end of 1984-85. For payment of compensation (grant) for five year period from 1-4-1983, Government have already appointed a Committee headed by Transport Commissioner and the report of the Committee is pending finalisation. As regards compensation due for the year 1983-84 Government had ordered to pay ad hoc compensation amounting to Rs. 33.36 lakhs in G.O. No. 624/84/ transport (C) department dated 28-9-1984. This amount was also not disbursed till 31-3-1985 due to ban on treasury payments ordered by Government as a part of economy measures. Thus an amount of Rs. 160.70 lakhs towards arrears of

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Vehicles Tax Compensation sanctioned by the Government for the period upto 31-3-1984 is outstanding payments to Panchayats as on 31-3-1985. 5.26. Vehicle Tax Compensation is a statutory item of grant which shall due to the Panchayats every year on the basis of vehicles tax collection in the preceding year. But this is not being made available to the Panchayats during the year in which it is due for one reason or other. Most of the Panchayats in the State are badly in need of resources to carry out their on-going road development programme as well as maintenance of motorable roads. Delayed receipt of grant will invariably affect the above activities of the Panchayats. Moreover lapse of time will lead to escalation of cost of estimates and upset the programmes of Panchayats originally planned for road maintenance. In the result the grants received will become to inadequate for the purpose for which it is meant. 5.27. The Commission would therefore recommend to Government to evolve a system of payment by which above grant pertaining to preceding year is paid to the Panchayats during next financial year itself. V.T.C. may be disbursed at 90% of old rate for a year pending finalisation of the recommendation of the Committee appointed for determining the share payable to local bodies for the five-year period. This 90% may be disbursed to the panchayats during every year in July. If there is any difficulty in releasing the amount in lump, Government may consider the disbursement in two instalments, one in July and the other in January every year. Such an arrangement will enable the Panchayats to draw up estimates and execute the works in time and avoid rush of expenditure at the fag end of the financial year. B. NON STATUTORY GRANTS 1. SPECIAL GRANTS 5.28. This grant is sanctioned for the following purposes. (i) Construction and extension of Panchayat office building. (ii) Construction of hospital buildings for providing additional wards to hospitals etc. (iii) Rural Water Supply Contribution. (iv) Construction of school buildings. (v) Satisfying court decrees. (vi) Construction of bridges including foot bridges and civil works. (vii) Conduct of Ferry Services. (viii) Acquisition of land for development schemes like Market, play grounds, Park, waiting shed, Balawadies, Community Hall, Library building etc.

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(ix) Providing drainage facilities. (x) Acquisition of land for burial grounds. (xi) Construction of new roads and for giving local contribution for such works. (xii) Flood relief works. In G.O. (Rt) No. 677/80/LA & SWD dated 11-3-1980 Government have laid down following norms for sanctioning the Special Grant to Panchayats: (i) Backwardness of the area in development activities. (ii) Financial position of Panchayats. (iii) The maximum special grant that will be granted to a Panchayat in a particular year for all or any purpose shall not exceed Rs. 25000 (iv) A Panchayat may not be considered for sanctioning the grant for more than 3 purposes in an year. (v) Panchayats which have not received any special grant during the last 5 years may be given preference. 5.29. During the last 3 years special grant had been sanctioned to the Panchayats as follows:Year 1982-83 1983-84 1984-85

No. of Panchayats to which grant was sanctioned 323 445 406

Amount (Rs. in lakhs) 52.00 48.00 62.41

5.30. The subject committee on Local Administration had recommended for payment of special Grant to all the Panchayats at 25000 per annum. To implement the above recommendation, a provision of Rs. 250.25 lakhs per annum will be required. But the provision made in the Budget (1985-86) for all the first 8 items (including Special Grant) mentioned under non statutory grant (vide para 5.1) is Rs. 160 lakhs only. Hence due to paucity of funds Panchayats Department could not implement the above recommendation so far.

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2. BUILDING GRANT 5.31. This is granted for construction of building to those Panchayats which do not have own office building and also for the purpose of extension of office building. Maximum amount of grant has been restricted to Rs. 15000 at a time. There is no for granting it for more than one occasion. Further, Panchayats can avail grant for the same purpose under the 'Special Grant Rules' also. Assistance given on this account during the last 3 years is as follows:Year 1982-83 1983-84 1984-85

No. of Panchayat 54 75 73

Amount (Rs. in lakhs) 8.10 9.00 8.20

As at the end of 1984-85. there are Panchayats in the which do not have own office building. 3. ESTABLISHMENT GRANT 5.32. This is paid to 1st, 2nd and 3rd Grade Panchayats as follows:I & II Grade Panchayats To meet establishment cost in excess of 40% of normal income. III Grade Panchayats To meet the establishment charge in excess of 25% of their normal income. Of the amount due to each Panchayat, 75% is initially paid by the Director of Panchayats. Balance 25% will be paid later Audit of accounts. Annual requirement on this account would come to around Rs. 60 lakhs. 4. ESTABLISHMENT GRANT AS PER AUDIT REPORT 5.33. Increase in D.A. sanctioned to Government employees automatically applies to the employees of the local bodies also. But Government are not paying any assistance to the Panchayats for the increase made after 1-7-1973. For the increase in D.A. sanctioned prior to 1-7-1973, arrears of grant is being paid to the Panchayats after Audit by the Examiner of Local Fund Accounts. Similarly balance 25% of Establishment grant mentioned under item 3 above is also paid after receipt of Audit Report. Annual expenditure for payment of this grant would come to nearly Rs. 2 lakhs.

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5. INITIAL GRANT 5.34. This grant is being sanctioned to the newly constituted Panchayats to meet heir initial preliminary expenses. Normally an amount of Rs. 10000 is sanctioned to each newly constituted Panchayats. 6. BLOCK GRANT 5.35. This grant is being paid to all 3rd grade Panchayats irrespective of their annual income and also to those 2nd grade Panchayats who are having minus fund balance, at the following rates Grade Rate Grade III Panchayats Rs. 10000 per annum Grade II Panchayats Rs. 5,000 per annum Special Grade and I Grade Panchayats are not eligible for he above grant. Annual requirement is arround Rs. 10. lakhs. 7. ADHOC GRANT 5.36. This is being sanctioned to financially poor Panchayats to meet unforeseen expenditure. No grant in this account was paid during 1983-84 and 1984-85. 8. MATCHING GRANT TO MEET PAY AND ALLOWANCES CONSERVANCY STAFF TRANSFERRED FROM PUBLIC HEALTH

OF

5.37. Expenditure incurred by the Panchayats under the above account is being reimbursed by the Government in the form of grant. Expenditure would come to around Rs. 3.25 lakhs annually. 9. FERRYMEN GRANT 5.38. Expenditure incurred by the Panchyats towards pay and allowances of Ferrymen transferred from the P.W. Department to the Panchayats is being reimbursed by the Government by means of above grant. Annual expenditure on this account would come to around Rs. 1.10 lakhs. 10. MATCHING GRANT FOR MAINTENANCE OF WATER SUPPLY SCHEME 5.39. This grant is being paid to meet maintenance cost of water supply schemes in Panchayat area maintained by the P.H.E.D. (now Kerala Water and Waste Water Authority). Amount of grant is restricted to expenditure in excess of 121/2% of normal income of the Panchayat. For want of adequate funds in the Budget this grant is not being

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paid to all the eligible Panchayats. In recent times, more water supply schemes have been commissioned. According to requirement assessed by the Panchayat Department, a sum of Rs. 15 lakhs will be required annually for payment of above grant as against Rs. 10 lakhs provided in the Budget 1985-86. 11. GRANT FOR THE CONSTRUCTION AND MAINTENANCE BURIAL AND BURNING GROUNDS 5.40. No rate has been fixed for payments of this grant. This grant is being sanctioned according to availability of funds. During the five year period from 1979-80 to 1983-84 budget provision for each year was Rs. 0.75 lakhs and this amount had been fully paid to the Panchayats. Under Seven point Programme 132 burning and burial grounds have been newly constructed during Sixth Five Year Plan period, making the total No. of public burning/burial grounds to 267 as at the end of 1984-85. For payment of maintenance grant to above 267 public burning/burial grounds at least an amount of Rs. 12 lakhs will be required annually. It is also noticed that Panchayats are getting grant for acquisition of land and construction of burning/burial grounds under 2 other grant-in-aid schemes also viz. "Special Grant" and "Seven Point Programme Grant" mentioned against Sl. Nos. 1 and 17 respectively under Non-Statutory Grants (vide para 5.1). 12. GRANT FOR CONSTRUCTION OF DRAINS AND LATRINES 5.41. No specific rate had been fixed for the payment of this grant. This grant is being sanctioned based on requirements of Panchayats and subject to availability of funds in the Budget. During the last 5 years provision made in the budget was Rs. One lakhs for each year and this amount had been fully paid to the Panchayats though requirements were much above. 13. MINOR IRRIGATION GRANT 5.42. This grant is being sanctioned for maintenance of Minor Irrigation wporks under the control of Panchayat on the basis of the benefited area. The rate fixed is Rs. 10 per acre of benefited area vide G.O. (MS) 302/80/AD dated 8-8-1980 from Agriculture (M.I) Department. But since Government did not provide funds to the extent required on the basis of above rate grant could be paid only at the rate of Rs. 6 per acre during 1982-83 and at Rs. 3 per acre during 1983-84. Total benefited area in the Panchayat for which grant has to be paid is about six lakhs acres according to details made available by the Panchayats Department. On that basis annual requirement is Rs. 60 lakhs. But Government have provided only a sum of Rs. 31.25 lakhs in the Budget 1985-86 for the above purpose.

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14. VILLAGE ROAD MAINTENANCE GRANT 5.43. This grant is being sanctioned to the Panchayats for maintenance of village roads under the control of Panchayats. Roads for which vehicle tax compensation are paid will not be reckoned for this grant. Rates of grant with effect from 1-4-1982 (fixed in G.O. (Rt) 52/83/LA & SWD dated 5-1-1983) are as follows: 1. Metalled and black topped roads Rs. 1200 per K.m. 2. Gravelled road Rs. 900 per K.m. 3. Earthern road Rs. 750 per K.m. But for want of sufficient funds in the Budget, grant at the above rates has not been sanctioned to the Panchayats so far. During 1982-83 no grant could be paid to Panchayats due to economy measures enforced by the Government. However an amount of Rs. 120.20 lakhs had been transfer credited to the account of P.H.E.D. towards arrears of water supply maintenance charges. During 1983-84 also, an amount of Rs. 26.06 lakhs was transfer credited to the account of the P.H.E.D. Provision made in the Budget during 1982-83, 1983-84 was Rs. 450 lakhs each. But this year only a reduced provision of Rs. 270 lakhs has been made. As per cost estimated by the Panchayat Department an amount of Rs. 605 lakhs will be required annually for payment of V.R.M. Grant at the prescribed rates to the Panchayats. 15. GRANT FOR MAINTENANCE OF RAILWAY LEVEL CROSSING 5.44. 50% of expenditure incurred by the Panchayats is reimbursed as grant to Panchayats. During the last 5 year, there was a provision of Rs. 2 lakhs for each year and this was found enough to meet the expenditure. 16. GRANT FOR LIGHTING OF PUBLIC ROADS 5.45. This grant is sanctioned to the Panchayats whose expenditure on account of lighting the roads and public places exceeds 15% of the annual income of the Panchayat. For want of adequate funds in the Budget this grant could not be sanctioned to all the Panchayats which were entitled to above grant. Due to enhancement of electricity tariff with effect from 1-9-1982 expenditure on street lighting has shot up. Annual Budget provision during the last 3 years from 1982-83 was to the order of Rs. 1.50 lakhs only as against estimated requirement of Rs. 5 lakhs. Provision made in the Budget, 1985-86 is Rs 2 lakhs only.

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17. GRANTS TO PANCHAYATS FOR DEVELOPMENTAL ACTIVITIES (SEVEN POINT PROGRAMMES) 5.46. This grant is being sanctioned from 1980-81 onwards for implementation of following developmental activities of Seven Point Programme under Plan Schemes. 1. Communication. 2. Irrigation. 3. Construction of Community Hall. 4. Construction of Public Burial/Burning grounds 5. Construction of Mini Stadium. (Of the 7 items under seven Point Programme one item viz. Opening of Pre-primary Residential School is not being implemented in the Panchayats for want of resources. Other item viz. comprehensive scheme for providing environmental amenities to the dealt with separately). 5.47. The Maximum grant which can be sanctioned for each of he five programme has been fixed as follows:1. Communication Rs. 1.00 lakhs 2. Irrigation Rs. 0.50 lakhs 3. Community Hall Rs. 3.00 lakhs 4. Burial/Burning Ground Rs. 0.75 lakhs 5. Minimum Stadium Rs. 0.75 lakhs. 5.48. Above grant was subject to the condition that in respect of item Nos. 1 to 3, the Special Grade and First Grade Panchayats whould meet 50% of cost from their own funds and 2nd Grade Panchayats, and 3 rd Grade Panchayats should meet 25% of he cost. For item Nos. 4 and 5, no such contribution has been made compulsory. These programmes were intended to be implemented in all the Panchayats within the 5 year period of Sixth Plan. But due to paucity of funds and non-availability of materials like cement etc., programme could not be completed within above period. Amount spent by Government towards grant to Panchayat for the above 5 items during Sixth Plan period was as follows: (Rs. in lakhs)

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Year 1980-81 1981-82 1982-83 1983-84 1984-85 Total

Budget provision 1000.00 100.00 100.00 100.00 100.00 1400.00

Grant paid 1007.50 98.74 93.19 71.62 98.75 1369.80

This has been included as a continuing scheme under Seventh Five Year Plan. For 198586 a sum of Rs. 80 lakhs has been provided in the Budget. 18 to 21. COMPREHENSIVE SCHEME FOR PROVIDING ENVIRONMENT AMENITIES 5.49. This is one of the schemes under Seven Point Programme. Grants disbursed under this programme are known as1. Grant for implementation of Environmental amenities for the poor. 2. Grant for implementation of Environmental amenities for Special Component Plan. 3. Grant for implementation of Environmental amenities for Scheduled Tribes. 4. Grant for implementation of Environmental amenities for scattered Scheduled Tribes. Grant under this scheme is to carry out the following four activities. (i) Construction of approach roads to Harijan Colonies (ii) Electrification of houses of weaker sections and construction of approach roads to colonies. (iii) Water supply to the Colonies by digging of wells in the Colonies (iv) Supply of E.S.P. type Slabs to the poor people, construction of latrines in the colonies etc. 5.50. Above scheme was first introduced during 1980-81. Nearly an amount of Rs. 1 crore was spent under this scheme during 1980-81 by Rs.10000 to each Panchayat. During the years from 1981-82 to 1983-84 grand amounting to Rs. 50 to 55 lakhs have been paid each year. During 1985-86 only amount of Rs. 10 lakhs is provided in the Budget. The grant received by the Panchayats was spent mainly for electrification of houses, providing E.S.P. type lartrines, extension of water supply etc., to houses under

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One Lakh Housing Scheme and to colonies of Harijans and Tribals. The State Government have taken up it as a continuing scheme in the Seventh Five Year Plan. 22. SPORTS AND GAMES GRANT FOR PLAY GROUNDS 5.51. Under this Scheme a sum of Rs. 1.50 lakhs is being disbursed every year to Panchayats. The amount is too inadequate to construct new play grounds and therefore the amount is being utilised by the Panchayats for repairs and maintenance of the existing play grounds. 23. OPEN AIR THEATRE GRANT 5.52. Every year a sum of Rs. 1 lakhs is being disbursed to the Panchayats. This amount is distribution to 10 Panchayats to 10 Panchayats only in a year in the State as the provision made in the State Budget is only to that extent. 5.53. During evidence collection it has been pointed out by representatives of Panchayats that a major part of civic amenities programme included among the functions of the Panchyats could not be undertaken by them because of inadequate resources. They have vehemently argued that, after having entrusted with a long list of statutory functions and duties by Government, it should be the moral responsibility of the State Government to provide adequate resources to enable the Panchayats to discharge those functions. Role of Panchayats in rural development requires no elucidation. In fact some of the functions like providing protected water supply (drinking water) providing metalled roads, street lighting etc., are part of the responsibility of Government in a welfare state and entrustment of these functions to Panchayats without providing adequate resources for carrying it, is quite meaningless. This is all the more important when the areas of revenue earnings (Self raised income) of Panchayats are limited unlike Municipalities and Municipal Corporations. The Panchayats have, therefore, to depend largely on assistance/grants from State Government in carrying out their obligatory functions. This is not a feature peculiar to the Panchayats in Kerala alone but a phenomenon perceivable in almost all States in India. Grants from State Governments are therefore a major source of income to the Panchayats in our country to carry out its functions. These recurring grants are given by the State Government for general purposes and specific purposes. General purpose grants are meant for discharging their normal functions without attaching any conditions whereas specific purpose grants are earmarked to specific purposes such as road maintenance, water supply etc., to those local bodies which are actually rendering such services. in addition to above grants, non-recurring grants are also provided by the Government for meeting initial capital expenditure for water supply, providing street lights, construction of new roads etc., in order to bring the backward Panchayats to satisfactory levels and also to upgrade the standards of services. 5.54. In Kerala, Grants for the above purposes are made available to Panchayats under different terminology such as Special grant, Block Grant, Initial Grant, Matching Grant, M.I. Grant V.R.M. Grant etc., numbering about 26 as mentioned earlier in Para I, Chapter V. It is found that the long list of grants provides for assistance to same purpose under

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different description eg. for construction of office building grants are provided under 'Special Grant' and 'Building Grant'. Similarly grants are available for burial and burning grounds under 'Grant for the Construction of Burial and Burning Grounds', 'Special Grant' and 'Grant for Developmental activities'. The multiplicity of grants makes the administration of these grants more cumbersome resulting in administrative inconvenience in accounting. A rationalisation of the existing classification of grants with a view to make it more purposeful based on broad principles on this subject evolved by various study teams at national level is found to be essential. 5.55. Various Commissions and Committees appointed by the Government of India to enquire into local body finances have emphasised the need for providing adequate assistance to local bodies for discharging the obligatory and executive functions, besides providing grants for maintaining certain services at prescribed level of efficiency. The Taxation Enquiry Commission (1953-54) headed by dr. John Mathai had recommended a system of grant-in-aid based on the following principles. (i) There should be a basic general purpose grant for each local body so that with this grant and its own resources the local body will have fairly adequate finance for discharging its obligatory and executive functions. (ii) In addition to above, there should be a specific grant (annual and other) which will be for particular items and services. These should be conditional on (a) the particular service being maintained at a prescribed level of efficiency and (b) the local body exploiting its own resources to the extent to the extent indicated by Government from time to time. 5.56. The Taxation Enquiry Committee appointed by the Government of Kerala with Sri. M.J.R. Thavaraj as Chairman and Shri C Achutha Menon, Shri R. Sankar etc., as members had recommended to provide grants to local bodies for the following also in addition to General Purpose Grant. (a) Matching grants as an inducement to maximise collection of tax. (b) Capital grants for development purposes. 5.57. Keeping in mind the various categories of grants to local bodies based on General principles suggested by the Central and State Commissions, the Commission recommends that the existing items of grants disbursed under 26 descriptions to Panchayats may be regrouped and brought under five categories as explained below:1. General Purpose Grant (Recurring) 2. Specific Purpose Grant (Recurring) (ie. Maintenance grants for specific services for which specific norms have been laid down by the Government) 3. Special Grant (Non Recurring)

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4. Grant for Developmental Programmes (Non Recurring) 5. Incentive Grant. The character of each grant and the purposes for which it should be sanctioned are explained below:(1) GENERAL PURPOSE GRANT (RECURRING) 5.58. This grant is recommended on the basis of the general principles suggested by the Taxation Enquiry Commission (1953-54) headed by Dr. John Mathai and reiterated by other Commissions including Kerala Taxation enquiry Committee (1969). Intention of this grant is that with this grant together with the resources, Panchayat will be able to discharge the obligatory executive functions in a satisfactory level. Though the Taxation Enquiry Commission had recommended a General Purpose Grant, they have not suggested any specific norms on which payments have to be made. 5.59. Quantum of assistance to be provided to be Panchayats for discharging obligatory functions may vary from Panchayat to Panchayat depending on the area, populations, size and location (coastal, forest, tribal etc.) In fact it is practically difficult to determine the level of needs and services relating to the existing levels of development attained by each Panchayat and classify them into various groups for purpose of financial assistance. In the absence of any specific norms for assessing the extent of requirements for providing general purpose grants we can go only by a principle that can be applied uniformly to Panchayats having common characteristics. Since the local people in a Panchayat are the beneficiaries of the services rendered by the Panchayat there is every justification in concluding that the financial requirement of the services will laregely depend on their number and the income derived from them by way of taxes etc. In such a situation it will be quite reasonable to link the payment of General Purpose Grant with the population of each Panchayat. Such a system has been favoured by the Committee on Panchayat Raj Institution (1978) headed by Sri. Asoka Metha. Our neighbouring States of Andhra and Karnataka are paying per capita grants to Panchayats. In our State Municipalities and Corporations are already receiving per capita grant at the rates shown below: Rates of grant with effect from 1-4-1982 1. Corporations and Municipalities Grade I Rs. 2 per capita 2. Municipalities Grade II Rs. 2.50 per capia 3. Municipalities III Rs. 3 per capita 5.60. During collection of evidence there was strong plea from all quarters to provide for per capita grant to Panchayats at the rates ranging from Rs. 202 to 10. Therefore

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considering all the above aspects we recommend a per capita grant which may be termed as "General Purpose Grant" at the rate of Rs. 2 per head based on latest census figure subject to a minimum of Rs. 10000 to each Panchayat except Special Grade Panchayats. In the case of newly formed Panchayats per capita grant at the rate of Rs. 3 per head of population may be paid subject to above ceiling for a period of two years to enable them to meet the initial expenses. Special Grade Panchayats are already having a highter per capita income than Panchayats under other grades. Moreover, we are suggesting elsewhere revised norms for reclassification of Pancahayats based on income. Hence we are not recommending General purpose Grant on per capita basis to Special Grade Panchayats. For puropose of calculation of per capita grant due to each, the amount may be rounded off to the nearest hundred rupees ignoring amount below Rs. 50 With the introduction of general purpose grant on per capita basis, payment of other grants like establishment Grant Establishment grant as per audit report, Block grant, Grant for burial and burning ground etc. may be dispensed with. 2. SPECIFIC PURPOSE GRANT (RECURRING) 5.61. This must be a recurring grant meant to meet cost of maintenance certain amenities provided by Panchayats. Grant for Maintenance of Village Roads, Minor Irrigation Grant, Matching Grant for maintenance of Water Supply Schemes, Grant for Lighting of Public Road, Grant for maintenance of Railway Level Crossings, Grant to meet the Pay and Allowances of Conservancy staff transferred from the Public Health and Ferry men transferred from the P.W.D. etc. for which specific norms for Maintenance Grant have been prescribed by Government may be brought under this category. 5.62. The Commission has found that the Government are not paying Maintenance Grants to Panchayats at the rates approved by Govenment. In the case of Village Road Maintenance Grant, rate fixed with effect from 1-4-1982 as per G.O. (Rt.) 52/83/LA & SWD. dated 5-1-1983 are as follows:1. Metalled and black topped roads Rs. 1200 per Km. 2. Gravelled Roads Rs. 900 per Km. 3. Earthern Roads Rs. 750 per Km. Though the above rates were fixed with effect from 1-4-1982 Government have not sp far paid grant at the above rates. Payment is still made at the rates prior to 1-4-1982. Similarly in the case of Minor Irrigation grant it is being paid only at the rate of Rs. 3 per acre of benefited area as against Rs. 10 fixed by Government. So is the case with grants for lighting, water supply etc. for which also specific rates of grant have been prescribed by Government. This has led to deterioration in the standards of maintenance of existing services and amenities. 5.63. The requirement assessed by the Panchayat Department based on the approved norms would come to rupees 687 lakhs as follows:-

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(Rs. in lakhs) V.R.M. Grants Minor Irrigation Grant Grant for street lighting Grant for maintenance of Water Supply Grant for maintenance of Railway level crossing Road

605.00 60.00 5.00 15.00 2.00 687.00

For the above items of grants Government had provided Rs. 480 lakhs each during 198283 and 1983-84 and Rs. 485 lakhs during 1984-85. The norms and the rates are fixed by Govenment nearly 3 to 5 years ago and even at this rate the grants are not provided in the Budget and distributed for one reason or other. Unless grants at the rates which are prescribed by Government after due consideration of the requirements are made available to the Panchayats they will not be able to maintain services and provides amentities at satisfacrory standards, Now there is ever increasing cost of materials and maintenance and the rate has doubled by this time. The Commission would therefore recommend to provide at least a sum of Rs. 687 lakhs (ie. the amount worked out at the rate fixed by the Government about 3 to 5 years back) in the next year's budget (1986-87) and to allow a progressive increase by 5% every year threafter. In the case of water supply and street lighting Commission is however, making separate recommendations vide Chapter VII. 3. SPECIAL GRANT (NON RECURRING) 5.64. We have suggested in para No. 5.23 dealing with Assigned Revenue (Statutory Grant) that 25% of the 'Duty on Transfer of Property' collected in a year and 25% of the 'Basic Tax' (Land revenue) collected in the preceding year shall be transfer credited to a P.D. Account viz. Panchayat Special Grant Fund. the amount accumulate in a year shall be disbursed to backward Panchayats in the form of Special Grant to meet capital cost in respect of the following items. (i) Providing protected water supply (ii) Street Lighting. (iii) Construction of (Office buildings, Schools dispensaries and hospital wards, libraries etc.), (iv) Construction and extension of roads and bridges (Link roads to connect main roads, conversion of earthern roads (having sufficient width for plying motors) into metalled/black topped roads.) (v) Construction of public latrines and bathrooms,

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(vi) Construction including land acquisition charges of public markets, public slaughter houses, waiting sheds, parks, play grounds, burial and burning grounds, (vii) Works relating to Flood relief and natural calamities. Besides Special Grant may be sanctioned by the Director of Panchayats for tackling special problems, if any, of Panchayat. Maximum amount that can be granted to a Panchayat to one or all items together in a year may be enhanced from the existing limit of Rs. 25000 to Rs. 50000. Powers of the Director of Panchayats in this regard may be enhanced to Rs.50000. In deserving cases grant may be sanctioned upto Rs. one lakh with Government sanction. While sanctioning grants under 'Special Grants' priority should be given for providing essential civic amenities viz. water supply, street lighting, link roads (including conversion of roads) construction of office building, burial and burning grounds. Other items may be considered only if funds are available after providing grants for the items mentioned above. 5.65. The above recommendation does not involve any financial commitment on the part of Government as the expenditure is proposed to be met from the 'Panchayat Special Grant Fund' which is created from the 25% of the proceeds from 'Duty on Transfer of Property' and 'Basic tax grant' paying to Panchayats. 5.66. From the revenue assumed by the state Government for 'Duty on Transfer of Property' and 'Land Tax' in the Budget 1985-86 we estimate that an amount not less than 250 lakhs will be available every year under 'Panchayat special Grant Fund'. With this amount the State Government will be able to provide special grant to 500 Panchayats at the rate of Rs. 50000 in a year. As time passes, the 'Special Grant' provided to the Panchayat will reduce the inequlities in providing essential amenities and services for want of resources. 4. GRANT FOR DEVELOPMENTAL PURPOSES 5.67. From 1980 onwards Government are implementing a development Scheme by name 'Seven Point Programme' to improve the standards of Administration of Panchayat by providing certain essential amenities like construction of Kalyanamandapam/Community Hall in the Panchayats which do not have it, construction of new roads in order to increase the length of roads of each Panchayat, Minor Irrigation works, opening and maintenance of burial and burning grounds, construction of Mini Stadium, providing drinking water and street light in areas inhabited by socially and economically backward section of society, construction of approach roads to Harijan colonies and providing latrines in the above colonies. Though some of the items referred to above will also come under the purview of 'Special. Grants', the schemes are intended to achieve self sufficiency to Panchayats by providing basic essential needs on a time bound programme. The Commission would therefore recommend to continue payment of grant for the above developmental programmes by providing a sum of rupees 100 lakhs annually in the Plan Budget so that 100 Panchayats may be identified every year and a sum of Rs. one lakhs sanctioned to each under this scheme.

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5. INCENTIVE GRANT 5.68. The system of providing incentive grant to encourage the Panchayats to boost boots up their tax income by levying and collecting it to the maximum extent in a year is prevalent in State like Tamil Nadu, Andra Gujarat etc. This has been favoured by several Commissions including Kerala Taxation Enquiry Commission (1969) and Committee on Panchayat Raj Institutions (1978) headed by Shri Asoka Mehta. 5.69. The Commission has noticed that there is laxity in assessment and collection of building tax and service tax in a considerable number of Panchayats, resulting in loss of tax revenue to the Panchayats. In order to avoid such laxity and to encourage the Panchayats to maximise their tax collection we recommend incentive grant as follows:(1) Special Grade Panchayats 5% of the total collection in the preceding year under Building Tax (and) Service tax taken together. (2) I, II & III Grade Panchayats 10% of the total collection in the preceding year under Building Tax taken together. 5.70. The grant may be paid rounding amount to the nearest hundred by ignoring rupees below fifty. The maximum incentive grant payable may however be limited to Rs. 20000 in a year. The financial commitment on this account will come to Rs.50 lakhs approximately. Financial Commitment 5.71. The total annual financial commitment on account of the recommendations made by the Commission relating to grants mentioned under preparas would come to Rs. 1017 lakhs as follows:(i) General Purpose grant (per capita grant) Rs. 180 lakhs Specific purpose Grant (ie. Maintenance (ii) Rs. 687 lakhs grant for specific item) No Commitment being assignment of (iii) Special Grant revenues by Government. (iv) Grant for Developmental activities Rs. 100 lakhs (v) Incentive Grant Rs. 50 lakhs Total Rs. 1017 lakhs The above commitment compares with the provision made by Government in the State Budget during the year 1982-83, 1983-84 and 1984-85 for payment of grants as shown below: (Rs. in lakhs)

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1982- 1983- 1984- Head of Account in 83 84 85 the Budget 314-A(c) Other 125.00 150.00 150.00 Expenditure

Purpose of Grant 1. Assistance to Panchayats

Grants to Panchayats for Development 2. Activities (Environmental amenities to poor 161.00 etc.) 3. Grant for Water Supply 6.75 4. Grant for Minor Irrigation 20.00 5. Grant for Maintenance of Village Roads 452.00 6. Grant for Street Lighting 1.50 Total 766.25

146.0 146.00 6.75 20.00 452.00 1.50 776.25

6.75 25.00 452.00 1.50 781.25

314-A(c) Other Expenditure 314C(a) 314C(b) 314 C(c) 314 C(e)

5.72. Against Budget provision of Rs. 781 lakhs made during 1984-85, provision required for payment of grants as per our recommendation would come to Rs. 1017 lakhs as mentioned under para 5.71. Of this, Incentive Grant of Rs. 50 lakhs will alone be an additional commitment. General Purpose Grant does not involve any additional commitment as this grant is in lieu of other items of grants such as Block Grant, Establishment Grant etc. Further we have already pointed out in para 5.63 that the provision required for payment of 'Specific Purpose Grant' on the basis of norms prescribed by the Government towards maintenance of certain services by the Panchayats would come to Rs. 687 lakhs as against Rs. 485 lakhs provided in the Budget 1984-85. This increase of Rs. 202 lakhs thereunder, plus Incentive Grant contributes mainly to the increase from Rs. 781 lakhs in 1984-85 to Rs. 1017 lakhs in future.

CHAPTER VI NEW MEASURES FOR AUGMENTING THE RESOURCES OF PANCHAYATS 6.1. While Panchayats in the State are having an enlarged sphere of obligatory activities in recent times there has not been any significant improvement in their resource position to discharge the responsibilities. By and large, our Panchayats are still dependent on the conventional sources of income which do not indicate any encouraging trend for growth. The scope of further budgetary devolution from the State Government is also limited due to resources constaraints. The above limitations in mobilising additional resources should not however, be permitted to act as an impediment in providing basic civic amenities to the rural public. The Commission has therefore attempted to identify fresh areas that would appreciably augment the revenues of Panchayats. The ensuing paras contain our

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recommendations on new measures intended to raise additional resources to Pancahayats. This is in addition to our recommendations contained in Chapter III and IV for changes in rates of Building Tax, Entertainment Tax, Show Tax, etc. and also enhancement of Licence Fees and other fees levied by the Panchayats, with a view to raising more resources to match their expenses. 1. SURCHARGE ON LAND REVENUE 6.2. One of the most important factor which made land cess an unpopular levy is that the cess was to be collected at the rate of one sixteenth per cent of the capital value of land. As already indicated in para 3.7 and 3.8 in the Chapter relating to Building Tax, assessment of capital value for the purpose of levy of tax always a controversial subject. In the absence of a radical improvement in the methods and machinery of assessment, the criticism that assessment of capital value of lend for the purpose of levy of land cess was done arbitrarily and without regard to the returns from the land is not altogether out of place. 6.3. Land cess as an important source of tax revenue to the bodies has been recognised in our country long ago. The Taxation Enquiry Commission (1953-54) has pointed out that land cess as it existed in those days was in the nature of a surcharge on land revenue and was usually collected by the State Government along with land revenue and credited to the local boards. In the former Travancore- Cochin state, Panchayats, were allowed to levy land cess at one and a half paise for every 4 cents of land. West Bengal which has been levying land cess on the basis of annual Rental value of the land has since made it a levy on then basis of land revenue. According to information available with us 15 states in India are at present levying land cess in varying degrees along with land revenue and crediting it to local bodies. In Tamil Nadu a local cess at the rate of 45 paise on every rupee of land revenue payable to State Government is being levied by Government and distributed to Village Panchayats at the rate of 20 paise per capita and the balance to the Panchayat Union. In Andra Pradesh too land cess/local cess is levied at rates varying from 18 paise to 25 paise rupee of land revenue and apportioned among Gram Panchayats, Pancahayat Samithis and Zilla Parishads. There is a proposal in andra Pradesh to enhance the cess to 50 paise per rupee of land revenue. In Karnataka too land cess is levied on the basisi of land revenue. Thus it may be seen that levy of a surcharge on land revenue termed as Land Cess is being adopted in our neighbouring States for raising resources of local bodies. It appears that the levy of surcharge on land revenue as prevalent in other States would be a source of revenue for Panchayats in our State. 6.4. Land cess as it originally existed, was intended 'to be an item for raising substantial resources to the Panchayats. The income from land cess has dwindled when it was made an optional tax subsequently and the receipts from it is becoming negligible compared to other optional taxes. There for the Commission feels the need for a compulsory tax that will fatch an assured income to Panchayats to compensate the loss of income consequent on making land cess an optional tax. The Commission therefore recommends a levy of 'Surcharge on Land Revenue' at the rate of 50 paise per one rupee of Land Revenue. this tax may be collected by the Revenue Department along with the Land Revenue (Basic

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Tax) and distributed among Panchayats by adopting the same principle of distribution of Basic Tax suggested in para 5.21. According to revenue under Land Tax estimated by Government in the Revenue Budget 1985-86 Basic Tax Grant will be around Rs. 350 lakhs in a yar. Therefore the additional yield on account of the above measure will be Rs. 175 lakhs, ie. 50% of Rs. 350 lakhs. 2. ENHANCEMENT OF THE RATE OF DUTY ON TRANSFER OF PROPERTY 6.5. The rate at which Surcharge 'Duty' is levied as per section 71 (b) of Kerala Panchayat Act is 4%. Our neighbouring states viz. Tamil Nadu and Andra Pradesh are levying it at the rate of 5%. In our State also the rate may be fixed as 5%. This enhancement will straight away bring in additional income of Rs. 1.75 crore which is 1/4 of the receipts assumed for Panchayats at the existing rate under Duty on Transfer of Property in the Budget Estimate for 1985-86. 3. TAX ON SALE OF LAND 6.6. During the course of collection of evidence a suggestion has come up from representatives of Panchayats that it is desirable to levy a tax at the rate of Rs. 5 or 10 for each cent of land transferred by sale or otherwise at the time of registration of documents by the Registration Department and transfer the entire amount to Panchayat Department along with Duty on Transfer of Property for being distributed among Panchayats. Large number f land transactions by sale or otherwise are going on in our State every year. Levy of a tax as suggested above is likely to yeild sizable income to Panchayats. We recommend to Government to consider levy of 'Tax on Sale Transfer of Land' at the rate of Rs. 5 per each cent of land by the Registration Department, and to distribute the proceeds to the Panchayats adopting the same principle of distribution of proceeds from Duty on Transfer of Property. Though the exact volume of land transaction is not readily available with the Commission to quantify the yield, it is estimated that minimum 5 acres (ie 500 cents) of land transactions are likely to take place in each Panchayat every year and on that basis additional income for 1001 Panchayats on account of this new measure has been assessed at Rs.25 lakhs per annum. 4. TAX ON ADVERTISEMENT 6.7. Municipal Corporation and Municipalities in the State are levying tax on advertisement other than advertisements published in News Papers. cine-wall posterns, cut outs, displayed by manufacturing firms and dealers for publicity on road sides, buildings etc. by errecting structures or hoardings for otherwise (cinema slides etc.) are the main items on which advertisement tax is levied by the Municipalities as per Section 126 of Kerala Municipalities Act. Panchayats can also levy such tax in respect of advertisements of similar categories exhibited in Panchayat areas and thereby they comobilise additional resources if the relevant rules are made applicable to Pancahayats also. There is scope for collecting sizable income by way of advertisement tax as cinema wall posters provide an excellent potential. This tax will in no way affect common man but only those who want to earn more by means of publicity. An exhibitor who spends

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huge amount for publicity will not mind to pay a small amount by way of tax to Panchayats. As per section 142 of the Kerala Panchayat Act, 1960 "The Government may whether at the request of the Panchayat or otherwise by notification in the Gazette declare that any of the provisions of the law relating the Municipalities in force for the time being or of any rules made there under shall be extended to and be in force in a Panchayat area or any specified place there in. The provision so notified shall be construed with such alterations not affecting the substance as may be necessary or proper for the purpose of adopting them to the Panchayat area or specified place therin". 6.8. By virtue of the above provision many Panchayats have extended the Municipal Building regulations in their respective Panchayat areas. In the same manner the provisions relating to "Tax on Advertisement" ie. Section 126, 127, 128, 129, 130 and 131 etc. of Kerala Municipalities Act along with Notification regarding the rates of advertisement tax can be extended to all Panchayats in the State. The Commission therefore recommends that Government may issue necessary Notification conferring Powers ti Panchayats forlevy of Advertisement Tax by invoking powers under Section 142 of K.P Act, 1960. The rates shall be those prevailing in III Grade Municipalities. By a moderate assumption of an average receipt of Rs.1000 per annum to each Panchayat, the total annual receipts will be around Rs. 10 lakhs. 5. EXTENSION OF MUNICIPAL BUILDING RULES TO ALL SPECIAL GRADE PANCHAYATS IN THE STATE 6.9. Government have already extended Kerala Municipal Building Rules to certain Panchayats of the State by virtue of powers with them under Section 142 of the Kerala Panchayat Act, 1960. According to these rules prior permission of the local authority is required for construction, re-construction, extension etc. of Buildings for which fee as prescribed under the rules have to be levied. The Panchayats, where Municipal Building Rules are in force, are deriving income from this source, Other Panchayas, where the rules are not extended, are not getting any income from this source though it is a good source of income. The commission therefore recommends to extended the relevant provision of the Kerala Municipal Building Rules to all Special Grade Panchayats in the State. 6. PERMISSION FOR CONSTRUCTION OF BUILDING IN PANCHAYATS 6.10. In para 6.9 the Commission has recommended to extend the Kerala Municipal Building Rules to all the Special Grade Panchayats in the State. This would mean that other Panchayats coming under I, II and, III grades will have no regulations governing construction of buildings and other construction activities. the Building Rules will become automatically applicable to a Panchayat as and when it is upgraded to Special Grade.

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6.11. The Commission, however, is of the view that there must be some kind of checks in the field of construction activities in Panchayats other than Special grade. According to the existing practice Bill Collectors are to bring the fact of new constructions in Panchayat area to the notice of the Executive Authority fro purpose of assessment of building tax. Experience has shown that in majority cases the above practice is not scrupulously observed. Delay in noticing new constructions invariably leads to delay in assessment of Building Tax and consequent loss of revenue to the Panchayats from building tax. There are other aspects too justifying the need for devising a method by which the Panchayats are kept informed in advance about any construction activities in their Jurisdiction. Particulars of residence of a citizen are now required for various purposes like getting a new ration card, passport, inclusion of name in the voters list, Water Supply and electricity connections identification of beneficiaries under Rural Development Programmes etc. 6.12. The Commission, therefore, recommends to introduce a system of granting permission for new constructions in the Panchayats where the Municipal Building regulations have not been extended. For this, Commission consider that is would be better to have a system of granting permission from Panchayats for new construction/extension by which the Panchayat will come to know about the intention of the parties for construction of buildings in the Panchayat area and thereby they can check after a specified period for which permission is valid, unless it is got renewed by the owner, whether building has been completed and occupied and due for inclusion in the tax assessment register. Accordingly Commission would recommend the following procedure to be observed in the case of new buildings/extension of buildings in Panchayats other than those where Municipal Building Rules are already in force. (i) The owner who intends to construct new building or to make alteration to existing building shall obtain prior permission from the Panchayat. (ii) For obtaining permission from Panchayat, the Owner shall be required to submit an application in plain paper with a rough sketch of building indicating his name and address, location including survey No., Pancahayat ward No. etc. where the building is proposed to be constructed, specifying also total plinth/floor area. (iii) A fee Rs. 10 may also be realised along with each application in order to cover the expenses connected with the issue of permit. (iv) 'Permission may be issued by the ' Executive Officer within thirty days of receipt of applications as required under section 109(3) of the Kerala Panchayat Act, 1960, after making necessary entries in a register which may be required to be maintained for the purpose of receipt and disposal of applications, receipt of fee levied for the permission granted etc. (v) Validity of permit may be fixed as one year. After the expiry of the period building may be assessed for the Building tax (unless it is got renewed) after necessary verification.

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(vi) If the construction of the building is not completed within the period of validity of permit owners shall be required to get the permit renewed for a further period of one year for which a fee of Rs. Five may be levied by the Panchayat. 6.13. Necessary enabling provisions may be incorporated in the relevant Act and Rules. 7. INCOME FROM PORAMBOKE LANDS 6.14. According to Sections 62 and 82 of the Kerala Panchayat Act. 1960, all poramboke lands, water course, public land adjacent thereto, etc. are vested with the Panchayats. Accordingly the right of collection of usufructs except forest produce, use of porambokes etc. is exercised by the Panchayats. It is pointed out that the Panchayats do not get the full benefit of income because the Panchayats have not been furnished with area-wise details of poramboke lands by the Revenue Department with the result that the benefits from usufructs in most Panchayats go to encroachers. In the absence of full details of the extent, survey number and other demarcation details the Panchayats are not in a position to proceed against encroachers. The Commission therefore recommends to Government to issue appropriate orders to the Land Revenue Department for supplying necessary details of poramboke lands, land adjacent to water courses etc. to the concerned Panchayats. Panchayats may utilise road side poramboke lands for planting seedlings supplied by the Forest Department under the Social Forestry Scheme. Since there is demand for timber and firewood it would be an additional source of income to Pancahayats in future. Bunks may be constructed and installed on roadside porambokes wherever there is scope for it. Tight of use of the bunks owned by the Panchayats may be sold in auction for reasonable periods. This is likely to add to the non-tax income of Panchayats with a small investment. 8. INCREASE IN THE SHARE OF VEHICLE TAX DUE TO LOCAL BODIES 6.15. Increase in vehicular traffic in rural areas in recent times has completed the local bodies to provide more and more motorable roads. Besides, the cost of maintenance of roads has increased enormously due to increase in cost of materials. Therefore the present allocation of 10 per cent of net Vehicle Tax being the share of local bodies for maintenance of motorable roads is quite inadequate. The Commission would therefore suggest that at least 20% of proceeds of Vehicle Tax (Net) collected in the preceding year should be allocated for maintenanced of roads of local bodiies. Further, the present practice of determining share due to the respective local bodies once in five years may be changed to once in three years as five year is too long a gap. The share due to Panchayats on the basis of allocation at 10% is Rs. 67.34 lakhs per annum on the basis of vehicle tax receipts from 1978-79 to 1982-83. If allocation is made at the rate of 20% additional yield will be more than the above amount since annual net receipts of Vehicle Tax after 1982-83 was more than the receipts during the years prior to 1983-84. The additional yield per annum can therefore be safely placed at Rs.70 lakhs.

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6.16. Additional yield on account of other measures suggested under Chapters III and IV is as follows:1. BUILDING TAX 6.17. Total number of households in the Panchayats as per 1981 census is 36.31 lakhs. According to our recommendations in Chapter III, minimum Building Tax for a house in Panchayat will be around Rs. 20 per annum. There may be houses which will be exempted from the purview of Building Tax, being huts or houses whose annual rental value is less than Rs.240 as per our recommendation. But the tax exemption in those cases will be off-set by tax income at a higher rate in the case of buildings with higher rental value. On an average we may estimate Building tax at Rs. 25 per Building per annum. Therefore annual receipts from 36.31 lacks of houses in the Panchayats will be not less than Rs. 9.08 crores as against Rs. 6.08 crores now collected. Additional yield, accordingly, will be around Rs. 3 crores annually. In terms of per capita, total receipts from Building tax will be Rs. 4.50 per annum. We have assumed only the barest minimum additional yield. 6.18. Ratio of number of households and population in the Panchayats as per 1981 census is 1:5. Therefore in a Panchayats with a population of 10000 the minimum number of houses will be nearly 2000 on the above basis and the receipts from Building Tax will not be less than Rs. 45000 per annum as per our assumption on the basis of Rs. 4.50 per head. 2. SERVICE TAX 6.19. In para No. 3.72 under Chapter No. III, we have recommended to levy 'Service Tax' compulsorily from Building Tax Building Tax payers for 'water supply' and 'Street lighting' at 1% of rental value of building for each of the above services. Panchayats are having either 'water supply' or 'street lighting' or both services. Assuming that there is only one service for which 'Service Tax' is to be levied compulsorily by the Panchayats, we can reasonably estimate one eighth of receipts under Building Tax as income from 'Service Tax'. On that basis we can expect the additional income to the order of Rs. 110 lakhs or say 100 lakhs annually. This will not be on highter side because actual income under 'Building Tax' is likely to be more than what we have assumed, due to enhancement of minimum and maximum rates of levy of Building Tax. Per capita additional yield from 'Service Tax' will be 50 paise per annum. 3. PROFESSION TAX 6.20. Total population in the Panachayats in Kerala is 217 lakhs. 10% among them may be treated as earning members (either engaged in business/trades or employed in institutions). The minimum Profession Tax which the Commission has recommended is Rs.10 per half year i.e. Rs.20 per annum. If so, Profession Tax that can be collected from 21.70 lakhs persons (ie 10% 217 lakhs population) at above minimum rate will be Rs.434 lakhs per annum. However we are assuming it as Rs 400 lakhs only forl giving allowance to omission of employees in assessment shortfall in collection etc. Among the assesses

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there will be persons who will have to pay Profession Tax above the minimum rate ie at Rs 15, Rs 20, Rs 25 etc, per half year. Minimum 25 % increse over the income of Rs. 400 lakhs estimated at the lowest rate, can be assumed on that account. Adding this 25 % increase, income from Profession Tax can be reasonably estimated at Rs. 500 lakhs per annum as against Rs.300 lakhs now being collected. Per capita income form Profession Tax will be nearly Rs. 2.50 per annum. 4. VEHICLE TAX 6.21 Income from Vehicle Tax on an average is Rs.7 lakhs annually. We have recommended 2 to 5 fold increase in rates. However increase in total receipts is anticipated by 300% only. Accordingly additional income will be Rs. 20 lakhs per annum under this item. 5. ENTERTAINMENT TAX, ADDITIONAL ENTERTAINMENT TAX AND SHOW TAX 6.22. Total receipts at present by way of Entertainment tax, Additional Entertainment Tax and Show Tax in the case of 300 theatres in different Panchayats is below Rs. 18000 per annum. (A minimum Rs. 18000 would have been fetched had the gross daily collection been Rs. 200 in a theatre). With the implementation of our recommendations, minimum receipts of the above Panchayats from a theatre running 2 shows daily through out the year and matinee shows on Sundays (Additional shows on festival days are ignored for the sake of calculation) will enhance to Rs. 33000 per annum giving an additional income of Rs. 15000 as worked out below. Income per day Rs. 11. Income from Entertainment Tax and Additional Entertainment 70.00 Tax for 2 shows @ Rs. 35 per show 22. Show Tax for 2 shows =Rs. 10+Rs. 5 15.00 Total income per day = 85.00 Annual Income 11. Total income for a year at Rs. 85 per day 85X365=31025.00 22. Income from Matinee shows on 52 Sundays in a year @ Rs. 40 (i.e. Rs. 35 towards Entertainment Tax & Additional Entertainment Tax & and Rs. 5 towards Show Tax). 2080.00 Total 33105.00 Rs. 33,000 (rounded) 6.23. Thus total increase in receipts in respect of 300 theatres will be around Rs. 45 lkhs (ie. Rs. 15000 X 300). Besides, we anticipate 25% increase in receipts from Entertainment Tax if tax is levied at a fixed percentage of gross seating capacity from all theatres. This will come to Rw. 75 lakhs per annum.

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6. FEES FOR LICENCE, PERMISSIONS ETC. 6.24. Annual income under this at Present is around Rs. 64 lakhs. As a result of our recommendation for fixing minimum fee for Licence/ Permission etc. at Rs. 10 for a year and to enhance all existing rates by 100% minimum, an additional income of Rs.75 lakhs per annum can ve reasonably anticipated However we have assumed it as Rs. 50 lakhs only. 6.25. Total additional minimum yield at a glace will be as follows:Rs. in crores 1. Surcharge on Land revenue 1.75 2. Enhancement rate of 'Duty on Transfer of Property' from 4% to 5% 1.75 3. Additional receipt on account of enhancement of share of allocation of V.T.C. 0.70 from 10% to 20% of Net proceeds of Vehicle Tax 4 Building Tax 3.00 5 Service Tax 1.00 6. Profession Tax 2.00 7. Entertainment Tax 1.20 8. Vehicle Tax 0.20 9. Advertisement Tax 0.10 10. Tax on Sale/Transfer of land 0.25 11. Fees for Licence & Permission 0.50 12. Fees for construction of Building, extension of Municipal Building Rules to the 0.05 Special Grade Pancahayats, etc. Grand Total 12.50

CHAPTER VII EXPENDITURE 7.1. Following are the major items for which Panchayaths in Kerala are spending their resources. (i) Establishment charges (Salaries and allowances, Pensionary contributions of its Officers and servants and the Travelling allowances, sitting fees to the president and Members, Office Expenses such as Telephone charges, current charges and Other Miscellaneous expenses connected with Office Management,)

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(ii) Public Works (Maintenance, repairs and extension of rural roads, bridges, culverts, parks and gardens etc.) (iii) Water Supply and Drainage (Expenditure on installation, maintenance etc. of Water Supply Schemes.) (iv) Street lights (Expenditure connected with providing street lights, its maintenance etc. including current charges). The table below shows the growth of expenditure under above items for a period of 10 years from 1974-75 to 1983-84 and percentage of expenditure in relation to total self raised income. TABLE (Rs. in lakhs) 1974-75 1980-81 1981-82 1982-83 1983-84 Items of Expenditure (1) (2) (3) (4) (5) (6) Total Self raised Income (Tax & Non (513.62) (1143.67) (1321.39) (1424.83) (1771.36) Tax) 11. Establishment (Percentage to self 271.38 765.01 910.81 1117.44 1143.77 raised income) (53%) (67%) (69%) (78%) (65%) 22. Public Works 159.39 495.84 707.62 767.40 738.35 (31%) (43%) (54%) (54%) (42%) (Percentage to self raised income) 33. Water Supply and Drainage 27.05 29.29 42.27 52.03 74.04 (5%) (3%) (3%) (4%) (4%) (Percentage to self raised income) 44. Street Lighting 83.30 131.55 165.71 228.11 340.80 (16%) (12%) (13%) (16%) (19%) (Percentage to self raised income) 1. ESTABLISHMENT CHARGES 7.2. Above table indicates that out of total 'self raised income' of the Panchayats about 65% to 78% is being spent every year from 1980-81 to 1983-84 towards establishment cost. (Salaries of staff, Travel expenses, Office expenses etc.) If Individual Panchayats are taken, sizable income in majority cases has been swallowed by establishment cost and only very little is left over out of self raised income for rendering essential basic 101

amenities to the tax payers Another perturbing factor which the Commission has noticed is that during 1983-84, 358 Panchayats, that is more than one third of Panchayats in the State have not only spent entire 'self raised income' for meeting establishment cost but encroached at an over whelming degree upon the grants receive from the Government leaving almost nothing worth while for undertaking developmental activities. The percentage of expenditure of Panchayats of establishment in relation to 'self raised income' during 1983-84 is as follows:1. No. of Panchayats where establishment cost is 100% and above of self raised 358 income 2. No of Panchayats where Establishment cost is 75% and above but below 100% of 231 self raised income 3. No. of Panchayats where Establishment cost is 50% and above but below 75% of 275 self raised income 4. No. of Panchayats where Establishment expenditure is below 50% 137 Total 1001 Vattavada Panchayat in Idukki district is incurring the highest percentage (424) of establishment expenditure compared to its self raised income Next comes Ayancheri Panchayat in Kozhikode District (395%) followed by Naranamoozhi Panchayat in Pathanamthitta district (324%) and Rajakumari Panchayat in Idukki District (313%). The lowest expenditure on Establishment charges noticed is Eloor in Ernakulam District (10%)which is having the highest self raised income in the State. Table showing the number of Panchayats in each district under different ranges of percentage of establishment charges in relation to their self raised income is furnished below:TABLE Statement showing number of Panchayats under different ranges of percentage of Establishment charges in relation to self Raised Income of Each during 1983-84 ExpendTotal Expenditure Expenditure iture from Expenditure No. of from 75% and from 50% and Name of District 100% and below 50% of Pancabove but below above but below above of income hayats 100% of income 75% of income income 1.Trivandrum 84 43 12 23 6 2.Quilon 75 16 26 18 15 3.Pathanamthitta 55 16 14 19 6 4.Alleppey 69 27 21 16 5 5.Kottayam 73 24 19 18 12 6.Idukki 51 27 11 8 5 7.Ernakulam 86 19 28 21 18 8.Trichur 98 20 21 39 18

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9.Palghat 10.Malappuram 11.Kozhikode 12.Wynad 13.Cannanore 14.Kasargode Total

91 95 77 25 85 37 1001

39 50 34 5 22 16 358

20 19 8 3 23 6 231

22 19 25 10 26 11 275

10 7 10 7 14 4 137

Total No. of Panchayats which have spent 50% and above of Income=864 7.3 The above position is in comparison with the 'Self raised income' of Panchayats whereas a slightly different will emerge if the cost of establishment is compared with the total receipts of Panchayats under "Self raised income" and 'Assigned revenues' from Government (ie. Statutory Grants viz. Duty 75%, Basic Tax Grant and Vehicle Tax Compensation). Table below gives the number of Panchayats under different income. group (computed on the basis of Self raised income + assigned revenue) and percentage of establishment cost of panchayats under each income group in relation to the income from the above two sources. TABLE Position of income (Self Raised Income plus Assigned Revenue) and Establishment cost during 1983-84 Number of Panchayats where Establishment cost is No.of 50% and 75% and 100% and Panchayats unde Below Income group 50% of above but above but above of each income total below 75% of below 100% total group income total income of total income income Upto Rs. 50,000 8 8 Above 124 Rs.50,000 and upto Rs. one lakh Above Rs. one 226 lakhs and upto Rs. 1.50 lakhs Above Rs. 1.50 163 lakhs and upto Rs. 2 lakhs Above Rs. 2 255 lakhs and upto Rs 3 lakhs

1

17

51

55

11

125

78

12

39

110

11

3

148

101

5

1

103

Above Rs. 3 148 lakhs and upto Rs. 5 lakhs Above Rs 5 77 lakhs

207

16

1

1

Total

406

369

146

80

1001

It may be seen from the above table that there are 80 Panchayats which have nothing left under total income after meeting establishment cost. The number of Panchayats spending 50 and above of their total income towards Establishment cost is 595 as per above table. 7.4. The staff pattern sanctioned by Government G.O. Ms. No 85/82/ LA & SWD dated 30-4-1982 to different grades of Panchayats is as follows:III Grade Panchayats Head Clerk Panchayat Assistant Grade II Bill Collector Junior Bill Collector Midwife Part time Liberarian Part time Sweeper Part time Scavenger Tractor Driver Part time Pound Keeper

.. .. .. .. .. .. .. .. ..

1 1 1 1 1 1 1 1 1 1

.. .. .. .. .. .. .. .. .. .. ..

1 2 1 1 1 1 1 1 1 1 1

II Grade Panchayats Head Clerk Panchayat Assistant Grade II Bill Collector Junior Bill Collector Peon Midwife Librarian Part time Sweeper Part time Scavenger Tractor Driver Part time Pound Keeper I Grade Panchayats 104

Head Clerk Panchayat Assistant Grade I Panchayat Assistant Grade II Bill Collector Peon Midwife Work Superintendent/Overseer Grade III Librarian Part time Sweeper Part time Scavenger Tractor Driver Part time Pound Keeper

.. .. .. .. .. .. .. .. .. .. .. ..

1 1 2 3 2 1 1 1 3 2 1 1

.. .. .. .. .. .. .. .. .. .. .. .. .. ..

1 1 3 4 2 1 1 1 1 1 6 2 1 1

Special Grade Panchayats Manager Head Clerk Panchayat Assistant Grade II Bill Collector Peons Overseer Grade II Work Superitendent/Overseer Grade III Midwife Sanitary Inspector Librarian Full time/ Part time Sweeper Part time Scavenger Tractor Driver Part time Pound Keeper

7.5. Increase in salary of staff due to revision of pay scales from 1-7-1978 and periodical revision of D.A. are stated to be main factors for increase in the establishment cost. Besides due to lack of financial control expenditure under T.A., purchase of stationery articles, printing of forms and registers, telephone charges etc., have made heavy inroads into the finances of Panchayats. During evidence collection and also at the time of case study of few panchayats, certain representatives (Non Officials) had expressed their concern over the ever growing financial burden of the panchayats towards payment of "salaries" (including leave salary and pension contribution) of employees of Panchayats. In order to economise establishment cost they had suggested that Panchayats require full complement staff as per approved staff pattern. They had pointed out that the post of Head Clerk in addition to Manager is superflous in Special Grade Panchayats. According to them either one of them is sufficient to supervise office work, Some of the Panchayats,

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after having become Special Grade, are placed in an embarassing situation in which they find there is practically nothing left from thier own resources to provide even minimum amenities and services to the local people. Hence some of them even went to the extent of requesting for downgrading of their Special grade Panchayats to First Grade. Another demand is that the State Government should subsidise the Establishment charges atleast by 50%. 7.6. Since Government have approved the staff pattern for different Grades of Panchayats and since revision of Pay and Allowances of State Government Employees ordered from time to time are applicable to employees of local bodies also mutalis mutandis there is not much scope for reduction of expenditure under salaries of staff. Despite, in the case of Panchayats whose total establishment cost exceeds 75% of total income (self raised income+statutory grants reckoned for purpose of grouping of Panchayats) Commission considers that in future there must be some sort of restriction in appointment against sanctioned posts in those Panchayats without adequate resources.Besides, it will be possible to make a drastic reduction in expenditure in respect of other areas viz. Purchase of stationery articles, printing of forms and registers, tour T.A., telephone expenses, petty purchases etc. Therefore, with a view to exercise a certain degree of economy in the matter of other items which form part of the establishment cost, the Commission would make the following recommendations. (1) STD facilities for telephones wherever available should be barred. (2) There should be annual ceiling on expenditure under T.A. (3) The recurring expenditure under establishment charges, other than on "Salaries of Staff", 'Leave salary and Pension Contribution' and 'Sitting fees' should be limited as follows:(i) 2nd and 3rd Grade Not to exceed 15% of income that will be reckoned for Panchayats the purpose of grouping of Panchayats. (ii) Special Grade and Ist Not to exceed 10% of income as stated above. Grade Panchayats Non-recurring expenditure like purchase of vehicle, furniture on scale prescribed for staff, purchase of Typewriter Deposit to P & T Department for telephone connection, election expenses, printing of forms for quinquennial revision of tax may be excluded from the above ceiling of expenditure. 7.7. As regards demands for 50% subsidy on establishment cost, the Commission is of the view that the Administrative expenses being a routine expenditure for normal running of a local body, it should be met from its own resources plus whatever is made available to it by State by way of "General Purpose Grant." 'Incentive Grant' and Assigned Revenues' for discharge of normal duties and functions of those Bodies.

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2. PUBLIC WORKS 7.8. Next to establishment cost, expenditure on public works consumes the largest share of income of Panchayats in the State. Bulk of the expenditure is incurred for maintenance of earthern roads, culverts and bridges. The length of earthern roads furnished by the Panchayats in the annexure to the detailed questionnaire issued by the Commission is so elusive that the sum total of the distance of all such earthern roads in all Panchayats in the State may be a staggering figure and hence no attempt is made to quantity the requirements for its maintenance on the basis of distance. The term "earthern road" is too elastically used by Panchayats in their road registers that the description is equally applicable to a "foot path" hardly having width less than one metre and a 'pucca earthern road' with sufficient width. 7.9. The Panchayats in the State have been spending for public works during the period between 1980-81 to 1983-84 on an average 43 to 54% of their self raised income. The expenditure incurred by the Panchayats towards 'Public Wroks' during the years 198182,1982-83,1983-84 was to the order of rupees seven to seven and a half crores. The total receipts of panchayats from VTC and VRM grant together was Rs. 479.40 lakhs during 1983-84 against an expenditure of Rs. 738.35 lakhs under 'Public Works'. Further, if we compare the expenditure under 'Public Works' with total receipts from 'Building Tax' during 1983-84 which was Rs.608.92 lakhs it can be seen that the Panchayats in the State are spending for road maintenance more than the receipts from 'Building Tax' by one to one and a half crores of rupees annually. 7.10. During collection of evidence and in the replies furnished to the general questionnaire the representatives of the public were very much critical about the poor standard of village roads in Panchayats. They have pointed out that in spite of the fact that each Panchayat is spending a sizable portion of its income towards maintenance of earthern roads no tangible results could be perceived as vast majority of earthern roads are unable to withstand the vagaries of the two seasonal rains occurring in the State in June and November. Very often, they allege, the very same earthern roads are repaired every year only to be washed off in the fury of the ensuing monsoon. Repairs and maintenance of earthern roads are therefore found in practice to be an exercise in futility, it not an annual ritual, with no benefits to the public for whom it is meant. The public opinion was strongly in favour of changing the present practice of spending enormous amounts on maintenance of earthern roads. Instead, they have wanted conversion of the existing earthern roads into metalled roads and metalled roads into black topped roads. 7.11. The Commission has found that there is substance in the opinion expressed by the Public as stated above. While there is need for maintaining earthern roads, wherever there is absolutely no scope for converting it to the next higher type, the unbridled freedom of Panchayats in utilising funds for public works has, over the years led to a situation in which the conversion process has been assigned a low priority if not totally neglected. The case study of certain Panchayats has revealed that there is no improvement in upgradation of the standards of roads. Anchal , a Special Grade Panchayat, in Quailon District, is having only earthern roads and the total length comes to 96 kilometres.

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Though this Panchayat has spent around Rs. 1.75 lakhs during the period between 198081 to 1983-84 for maintenance of roads nothing is done to convert even a small length of earthern road into metalled one. Ezhukone another Special Grade Panchayat which is having an rea of 17 Sq. K.m, only is reported to be maintaining 1373400 k.m of earthern roads. This Panchayat had spent an amount of Rs. 4.42 lakh for road maintenance during the three years from 1981-82 to 1983-84 as per information made available to the Commission by the Executive Officers. This Panchayat is not having any metalled or black topped road. Despite, a sum of Rs. 8000 is seen disbursed to this Panchayat as V.T.C. Similary Kadakkal Panchayat (Special Grade) which is also maintaining only earthern roads length of which comes to 313 k.m. had spent Rs. 3.43 lakhs for maintenance of earthern roads during the above three years. Not even one k.m. of earthern roads has been converted into metalled road despite spending lakhs of rupees in the name of maintenance of roads. This Panchayat, which does not have any metalled road, has also managed to get V.T.C around Rs.2200 during each of the above three years. This phenomenon is discernible in a large number of Panchayats in varying degrees. 7.12. In order to avoid the wasteful expenditure on maintenance and repairs of earthern roads, the Commission would recommend the following procedures for utilisation of funds by Panchayats in the matter of Public Works. (i) Vehicle Tax Compensation should be utilised exclusively for maintenance and widening of motorable roads and also for widening and conversion of metalled roads into blacktopped road. It should not be utilised for maintenance of earthern roads. (ii) 80% of the V.R.M.Grant shouuld be set apart for conversion of carthern roads into metalled roads or metalled roads into blacktopped roads and for maintenance of the above roads and only 20% need be spent for maintenance of earthern roads. (iii) 20% of the earthern/gravelled roads (excluding foot path) should be converted into the next higher type road every year by utilising V.T.C and V.R.M Grants. 7.13. The Commission is of the view that, if under a phased programme 20% of the earthern roads is converted every year into metalled roads, the entire length of earthern roads excluding foot path of all Panchayats in the State can be converted into metalled/black topped roads over a period of five years. 3. WATER SUPPLY 7.14. Protected drinking water is the most important civic need to be provided by the local bodies. Over the years of Planned development, Kerala could provide safe drinking water to 42% of rural population till the end of 1983-84. Supply of protected water to rural population has been recognised as one of the prime responsiblities of the State. Accordingly the Kerala Water & Water Authority (KW & WWA) which is in charge of Water Supply Scheme from 1-4-1984 has drawn up a massive programme to make protected water available to the entire rural population by 1991. Water Supply Schemes

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in rural areas are implemented under State Sector and central Sector. State sector schemes are implemented with the assistance from L.I.C. The scheme under Central sector is known as Accelerated Rural water Supply Scheme (ARWSS) and it is fully assisted by Government of India. During Sixth Plan period (1980-85) the expenditure on Rural Water Supply Schemes was to the order of Rs.105.29 crores as shown below. (Rs. in crores) State Sector

Central Sector

Year 1980-81 1981-82 1982-83 1983-84 1984-85 Total

(L.I.C aided) 3.34 5.20 8079 30.53 9.17 57.03

(ARWSS) 3.23 5.76 6.96 17.29 15.02 48.26

7.15. According to the K.W. & W.W.A 1948 rural water supply schemes are now in operation. There are 547 on going schemes of which 471 are expected to be commisioned during 1985 86. The proposed outlay during the 7th Plan (1985-90) is Rs. 124 crores. The actual plan outlay is yet to be finalised. The anuual plan 1985-86 envisages an outlay of Rs. 8.50 crores for rural water supply schemes in the State Sector and Rs. 20 crores in the Central Sector. The K.W. & W.W.A. (erstwhile P.H.E.D) has proposed a number of schemes for implementation with bilateral and World Bank assistantce as part of a massive programme of Government for providing safe drinking water to the entire rural population by 1991. 7.16. For the first time, the Wold Bank has approved a water Supply projecy for Kerala which commences this year. The outlay envisaged for the Project is Rs. 97 crores, the major part of which is intended for rural water supply schemes. Work on the following schemes will commence this year. Estimate cost World Bank Projects

Population benefited by year

(Rs. In 1990 (in lakhs) lakhs) (1) (2) (3) 1. Quilon W.S.(Aug.) Scheme to serve Quilon town 2009.10 3.12 and six Panchayats 2. Kottayam W.S.(Aug.) Scheme to serve four 673.90 1.46 panchayats adjecent to Kottayam town

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to

3. R.W.S.S. to Greater Cochin Development area intended to serve the 3100.70 3.43 Panchayats in the GCDA 4. W.S.S.to Vilappil Panchayat 132.10 0.24 5. C.R.W.S.S. to Chitara & adjoining Panchayats ( 4 Panchayats) 578.70 1.11 6. C.R.W.S.S to Adoor & adjoiniing Panchayats (6 Panchayaats) 757.00 1.41 7. C.R.W.S.S in Vadavucode Puthen Cruz 382.00 0.77 7633.50 11.54 Besides the World Bank assistance, Netherlands and Denmark Governments have also agreed to assist to take up some new Rural Water Supply Schemes. Two Schemes with the assistance of Netherlands Government which are under implementation, are VakkomAnjengo Comprehensive. Water Supply Scheme in Trivandrum Division and Comprehensive Water Supply Scheme in Nattika Firka in Trichur Division. The following new Schemes are also proposed to be taken up by the K.W. & W.W.A during 1985-86. New Schems C.R.W.S.S to Kundara & adjoinging Panchayats, (7 Panchayats) C.R.W.S.S to Koipuram Panchayat C.R.W.S.S to Mala & adjoining Panchayats (6 Panchayats) Water Supply Scheme to Thrikkunnapuzha K.W.S.S.To Cheriyanand C.R.W.S.S to Cheakode & adjoining Panchayats (10 Panchayats) C.R.W.S.S TO Kolancherry & adjoining Panchayats (8 Panchayats) C.R.W.S.S to Edappal & adjoining Panchayats ( 5 Panchayats)

(Rs. in lakhs) 718.00 92.00 341.00 14.00 72.00 450.00 500.00 50.00 2237.00

7.17. We hope that the target of providing safe drinking water to entire Rural Population, keeping with the objectives of International Drinking Water Supply and Sanitation Decade, will be achieved by the year 1991 and thereby Panchayats will be relieved of their burden of providing one of the most essential amenities of civic life. Financial liability of Panchayats in respect of Capital cost of Rural Water Supply Scheme 7.18. The main source of financing Rural Water Supply Schemes in the State Sector is loan from the Life Insuarance Corporation of India. The practice till 1-4-1984 was for Life Insuarance Corporance Corporation to give loans to the Kerala State Rural Development Board for meeting 50% the amount required for implementing the Schemes approved by them, the remaining 50% being borne by the State Government. Liability of the beneficiary Panchayats in this transaction is limited to 25% of the capital cost of the Schemes repayable, in 25 equal annual instalments. The amounts have to be paid to the Kerala State Rural Development Board by the Panchayats from its resources, With formation of K.W. & W.W.A. all assets, rights, liabilities and obligations of the Kerala 110

State Rural Development Board relating to execution of Water Supply Scheme in Panchayat areas have become the assets, rights, liabilities and obligations of the K.W. & W.W.A. from 1-4-1984 vide section 16(c) of the K.W. & W.W.A. Ordinance. The arrears as well as future instalments have therefore to be paid to the K.W. & W.W.A being a legal liability as pre agreements executed by the Panchayatas with K.S.R.D.B. However the position would change materially from 1-4-1987. From that date according to sec. 18 of the K.W. & W.W.A. Ordinance all the water supply schemes vested in the Panchayats will stand transferred to the Authority (unless of course Government extends the date of transfer). Since ownership of the Water Supply Systems will no longer vest with Panchayats from 1-4-1987, the procedure for meeting 25 % of the cost of Water Supply Schemes could be deemed to have lapsed from that date and it will not be necessary for the Panchayats to meet the share of the cost accruing from 1-4-1987. 7.19. Since the ownership of the Rural Water Supply Schemes will stand transferred to K.W. & W.W.A with effect from 1-4-1987 as per Ordinance mentioned in pre para the Panchayats are surely to raise a claim for refund of amount invested by them towarrds 25% of the capital cost of the Scheme. This being the position, a question may naturally arise as to whether Panchayats need pay the outstanding arrears as well as future installments that will accure till 31-3-1987. This being a question of policy the Commmission leaves the matter to Government for taking appropriate decision regarding the outstanding liability of Panchayats in respect of the capital cost of Water Supply Schemes. Liability of Panchayats for Maintenance of Rural Water Supply Schemes 7.20. The completed rural piped water supplies are operated and maintained by the P.H.E.D. (now K.W. &.W.W.A) on behalf of the Panchayat which is obliged to compensate K.W. & .W.W.A. for all its expenditure for operation and maintenance. Part of theses expenses are met by domestic consumers by way of water charge. The remaining part of maintenance and operation charges are billed to the Panchayats as charges for water supplied to the Panchayats through street taps. Liability of Panchayats in this regard is however limited to a maximum of 12.5% of its revenue. Expenditure in excess of the above limit is compensated by Government by means of Water Supply Maintenance Grant to Panchayat wide g.o mS. 260/67 DD dated 7-9-1967. However in actual practice this grant is being paid only subject to availability of funds in the budget. Hence most of the Panchayats which are incurring expenditure in excess of 12.5 % of revenue are not receiving above grant. The maintenance charges demanded by the Executive Engineers of concerned Divisions of the K.W. & W.W.A. are stated to be: (1) Cost of staff exclusively engaged in the operation and maintenance of Water Supply Schemes. (2) Electricity Charges. (3) Cost of water treatment and

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(4) Other expeditures. 7.21. There are huge arreas under maintenance charges outstanding payment to P.H.E.D by the Panchayats. The reason for non-payment of maintenance charges put up by the Panchayats is that the maintence charges demanded by the P.H.E.D inflated figures and that the details of the claims asked for the Panchayats are not furnished to them by the P.H.ED. On verifying records of certain panchayats it has been noticed that the P.H.ED. 'demand ' towards maintenance charges is for a lump sum and ne split up details showing how the amount is arrived at have been furnished. Panchayat has its own reasons to call for such details of claims as are deemed necessary to satisfy Audit. On the other hand P.H.E.D. views this as a tactics to evade or postpone payment by calling for details. Whoever be at fault, it is true that arrears have become too large and in many cases beyond the capacity of Panchayats to pay. As the arrears relate to the past several years it will be a difficult task now to the P.H.E.D. to prepare detailed claims with split up details. Moreover the PHED has been converted in autonomous body viz. Kerala Water and Waste Water Authority and hence collection and preparation of old data after searching old records has now become a difficult job for them. Prior of the formation K.W. & W.W.A., Government had adjusted arrears maintenance charges to the P.H.E.D by transfer crediting grant-in-aid due to Panchayats. According to P.H.E.D. arrears on maintenance charges would come to around Rs. 7.35 crores as on 31-3-1984. Whether adjustments against Grant-in-aid made by Government have been accounted for under the above arrears requires cross checking. Lapse of time has indeed rended verification of past accounts very difficult. At any rate, the amount in dispute cannot be more than fifty per cent of the amount claimed by the P.H.ED. The Practical Solution for clearance of arrears of maintenance charges seems to be to write off 50% of the dues outstanding payment to the P.H.E.D. (now K.W.. & W.W.A) relating to the period upto 31-3-1984. Balance 50% may be paid to the K.W. & W.W.A., sharing the liability by Government and Panchayat on a 50 : 50 basis. 7.22. In respect of claims from 1-4-1984 onwards the K.W. & W.W.A should be required to furnish to the Panchayats the claim in detail covering the relevant items mentioned in para No. 7.20 and Panchayts need honouronly those claims having split-up details. Maintenance liablility after 1-4-1987 7.23. According to the Ordinance constituting the Kerala Water and Waste Water Authority all the water supply schemes including pumping stations, distribution lines owned by the Panchayats will stand transferred to the Authority with effect from 1-41987 vide section 18 of the Ordinance. Since ownership of Water Supply Schemes will no longer vest with Panchayat from 1-4-1987 the responsibility for maintenance of Water Supply Installation after the above date will not be with the Panchayats but with the K.W & W.W . Authority. The Panchayats need pay only the water charges for street taps from 1-4-1987 onwards. A question will however arise then as to the share of expenditure to be borne by the Panchayats in respect of Street taps provided in Panchayat area.

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7.24. One method is that the K.W. & W.W. A will supply water to the Panchayats on a bulk basis and be paid for 85 per cent of the water supplied allowing the remaining 15 per cent for wastage etc. This bulk support will include water consumed form street taps as well as from domestic connections. The Panchayats will be at liberty to collect water charge at such rates as are fixed by them. This method will necessitate appointment to additional staff in the Panchayat exclusively to attend to the work like method reading, preparation and serving of water bills etc. The additional expenditure on this account will add to the mounting establishment charges Panchayats. Often the expenditure may be disproportionate to the receipts by way of water charges. Moreover such a system is likely to result in each panchayat fixing its own water charges proportionate to the expenditure incurred by each and in many cases it will give rise to an inequitous system in which rates of water charges may vary from Panchayat to Panchayat. In their enthusiasm to keep the consumers in good humour some Panchayat may even go to the extent of subsidising water charges from the revenue Panchayats. The K.W. & W. W.A. which is having a technical organisational set-up will be able to undertake the work of meter reading and collection of water charges more effectively and expeditiously. Moreover the Ordinance constituting the K.W. & W.W. Authority responsibility for hour connection, its servicing, maintenance etc., will rest with the Authority. Since the above functions are clearly defined and vested with a statutory authority it will not be proper for another body, not equipped for the purpose, to interfere with it. The Commission is therefore of the view that collection of Water charges from domestic consumers in Panchayat areas should be undertaken by the K.W. & W.W.A itself for the sake of ensuring uniformity in water charges and other attending factors. 7.25. The more national way will be to collect charges for water supplied through the street taps in the Panchayat area from the concerned Panchayats by the K.W. & W.W.A at a fixed rate for each tap if it is not practicable to keep separate meters for measuring the water supplied through street taps. During informal discussion, the Finance Manager of K.W. & W.W.A. has favoured above idea and suggested to pay water charges assuming quantity of water supplied through one tap per day as 2400 litres (ie, at the rate of 5 litres of water per minute for 8 hours in a day). This is fairly a reasonable norm. On the above basis fixed charge per tap per annum at the existing rate of Re. one per 1000 litres of water would come to Rs. 876 or say Rs. 875 (ie. 5 X 60 X 8 X 365)./1000. 7.26. Commission therefore recommends to pay water charges at above rate per tap. In case K.W. & W.W.A enhances rate, Panchayats will have to pay water charges at enhanced rates for quantity of water computed in the manner indicated under para 7.25. Grant for Maintenance of Water Supply 7.27. For water supply installations provided by the P.H.E.D., Govrnment are paying grant in respect of those Panchayats whose annual expenditure on maintenance of water supply installations is in excess of 12.5% of their normal annual income vide G.O. MS. 260/67/DD dated 7-9-1967. Since responsibility for maintenance of water supply installations in future will be vested with the K.W. & W.W.A. and since Panchayats need pay only water charges at fixed rate on street taps, above norm for payment of grant

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requires revision on the basis of future financial commitment of Panchayats for providing drinking water to public. 7.28. The average number of households in Kerala is one for every 5 persons. The norm recommended to be adopted for providing a street tap is one for every 200 persons. It is assumed that about 20% of population in a Panchayat will be covered by house connection. If so, for a Panchayat with a population of 10,000, minimum 40 street taps will have to be provided by the Panchayat for use of 8,000 population, the remaining persons being domestic consumers. According to the present rate of water charges per tap per annum as per calculation shown under para 7.25, would come to Rs. 875. Accordingly total maintenance cost for 40 street taps would come to Rs. 35,000 per annum. This means that Panchayat will have to incur a per capital expenditure of Rs. 3.50 towards charges for drinking water. Commitment will further go up in case of K.W. & W.W.A revises the rate. 7.29. As per our assumption, by devolution of budgetory resources (Duty and Basic Tax) of the State Government and General Purpose and Incentive Grants, per capita receipt of Panchayats will be Rs. 7.50. Of this, Rs 3.50 will have to be spent by the Panchayat for water supply. With the balance available together with the resources by their own efforts which we have estimated on an average of Rs. 9 to 10 per head, they have to meet expenditure on a variety of inevitable items like establishment electricity, sanitation, maintenance of essential services for which no specific grant will be available from Government. In such a context there is every justification for financing part of the expenditure incurred by Panchayats towards water charges payable to K.W. & W.W.A. as supply of protected drinking water to the rural population is one of the most important social obligations of the State. Inclusion of this as an item in the new 20 Point Programme itself highlights the paramount importance accorded to this basis amenity. 7.30. There was demand from representatives of Panchayats to subsidise the expenditure incurred for water supply by Panchayats. Having considered the various aspects of this problem the Commission is convinced of the need for subsidising 50% of the cost of water charges. Accordingly Commission recommends that 50% of the actual cost of water charges per tap paid during a year to the K.W. & W.W.A or Rs. 500 per tap per annum whichever is less may be reimbursed by the Government as specific Purpose Grant. This grant should, however, be limited to the number required for 80% of the population ie. at the rate of one tap for every 200 population (non-domestic consumers). The total financial commitment would come to around Rs. 7 crores per annum at the rate of Rs. 3.50 per head for nearly 2 crores of rural population. The commitment to the above extent will however, arise only if all the Panchayats provide street taps at the scale of one tap for every 200 population (non-domestic consumers) as explained earlier. This will be possible only after 1991 when all the Panchayats are expected to be covered by rural water supply scheme under the "Decade Programine". At present only 42% of the rural population has been covered by drinking water supply schemes. Therefore immediate commitment of Panchayats will be to the Order of Rs. 3 crores of which the Government commitment will be only Rs. 1.50 crore ie. 50% of Rs. 3 crores. In para No. 5.63 under Chapter V dealing with Specific Purpose Grant we have recommended to provide a sum

114

of Rs. 15 lakhs to pay annual grant to Panchayats for maintenance of water supply schemes. On switching over to payment of grant at 50% of the cost of water charges per tap, existing system of payment of grant may be dispensed with. 4. STREET LIGHT 7.31. Eventhough providing street lights is one of the mandatory functions of Panchayats in our State it is by and large dependent on the resource position of each Panchayat. Details gathered by the Commission show that as on 1-4-1985, 12 Panchayats have not been provided with street lights in their areas. However, the 'Economic Review 1984' brought out by the Kerala State Planning Board States thus, "All the villages in the State have already been brought under electrification. However certain karas in certain villages remain unelectrified. In 1983-84, 22 such karas were electrified". It is true that as a result of the intensive rural electrification scheme electricity has reached all villages in Kerala. But to the rural population of several Panchayats in the State the benefits of electrification has not reached them in the sense that street lighting is still a far cry to many Panchayats. The resource constraints of many Panchayats act as a serious handicapt providing street lights. Even those Panchayats which have already provided street lighting on a moderate scale find themselves badly crippled by the steep increase in electricity charges imposed by the K.S.E.B. from 1982. Table below indicates the increase in expenditure towards street lighting during the period from 1979-80 to 198384. TABLE (Rs. in lakhs) Year

Expenditure

197980 198081 198182 198283 198384

111.39

Increase in expenditure from Precentage of increase from 1979-80 1979-80 .. ..

131.55

20.16

18%

165.71

54.32

49%

228.11

116.72

105%

340.80

229.41

206%

During collection of evidence the Commission has found that the public and functionaries of Panchayats were highly critical of the policy pursued by the K.S.E.B in the manner in which electricity charges are levied for street lighting. One of the common complaints received by the Commission is that the Panchayats are obliged to pay electricity charges for several street lights which are not burning.

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7.32. The K.S.E.B levies electricity charges for street lights on the basis of burning hours and this procedure is precisely the bone of contention between the Panchayats and the K.S.E.B. This method will certainly work well so long as all the street lights in the Panchayat area are burning uniformly for the prescribed hours. In the absence of a method or machinery to check the number of street lights not burning, the procedure of calculating electricity charges on the basis of burning hours will operate against the interest of the Panchayats. All the Panchayats in the State have therefore been unanimous in their demand to the Commission that consumption of electricity by street lights should be metered. The Commission has found that the system of metering of consumption of electricity by street lights is adopted in certain other States in India. The Commission would therefore recommend to Government to advise the K.S.E.B. to introduce the system of metering. This will eliminate once and for all the element of arbitrariness in levying electricity charges for street lights. 7.33. As already pointed out, electricity bill for street lighting drains away a sizable part of the revenue of Panchayats in the State. During collection of evidence the representatives of Panchayats have, therefore, strongly pleaded for substantial assistance from Government for meeting the expenses for street lighting. At any rate they wanted Government to bear the electricity charges for street lights provided in roads owned by the P.W.D. 7.34. Annual expenditure of Panchayats towards current charges on the basis of details made available by the Panchayats totals to over Rs. 3 crores. We have recommended in para 3.72 under Chapter III that service charges at 1% of the annual rental value should be compulsorily levied by the Panchayats which have provided street lights. Nearly one crore rupees is likely to be collected by the Panchayats on this account, if our recommendation is implemented. The remaining Rs. 2 crores will have to be met by the Panchayats from their other sources. According to the existing norm expenditure on street lighting in excess of 15% of the normal income of the Panchayats will be met by Government in the form of grant. The Commission considers that the existing quantum of assistance is quite inadequate in view of the steep hike in tariff. As the Panchayats are discharging a very important social obligation, the Commission recommends that one third of the expenditure on street lighting may be met by the Government on the basis of current charges for eight hours burning a day. For the present, commitment on the part of Government would come to Rs. 1 crore.

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CHAPTER VIII FINANCIAL VIABILITY AND NORMS FOR REGROUPING OF PANCHAYATS 8.1. In April 1985 Government have referred to the Commission following two additional items. (i) Study on uneconomic Panchayats which are not able to meet even the establishment expenditure, let alone, other developmental activities and suggestions for making them viable or for amalgamating with other viable. Panchayats. (ii) Examination of the existing norms regarding the Panchayat and suggestion, if any, for their regrouping in consonence with the financial capacity of the Panchayats. 1. VIABLE PANCHAYATS 8.2. The question of "viability" criteria of Panchayats has come up for serious consideration of certain committees on Panchayat Raj affairs. The Asoka Mehta Committee on Panchayat Raj Institution (1978) has observed that smaller Panchayats will not be able to provide services and amenities at satisfactory levels and Panchayats formed on "area-cum population" basis will be more viable units of local administration and favoured Panchayats with a population to the order of 10,000 to 15,000 . In Karnataka where the population of a Panchayat was 1000 to 1500, Mandal Panchayats for every 10,000 to 15,000 people encompassing 7 to 10 existing Gram Panchayats have been formed recently. The Government of Andhra Pradesh where also the size of Panchayats is more or less the same as in Karnataka, has initiated steps to form Mandal Panchayats. The concept of Mandal Panchayat is in recognition of the fact that only larger Panchayats can function as viable units capable of mobilising adequate resources from local people for discharging obligatory functions. Panchayats with smaller population will not be able to raise adequate resources for discharging their functions effectively due to the fact that the size of the Panchayat is too small to extract resources to the extent necessary. But compared to the Panchayats in our neighbouring States the Panchayats in our States are bigger in size and population out of 100, Panchayats there are only 30 Panchayats in our State having population less than 10,000. In future it would be better to have Panchayats co-terminus with revenue villages wherever possible and to insist minimum population of 10,000. As the measures suggested by the Commission are likely to improve the financial capacity of the existing 'Problem Panchayat's the Commission is not inclined to interfere with the basis on which the existing Panchayats are formed. In our view if our recommendations are implemented a Panchayat with a population of 10,000 is likely to fetch an income around Rs. 1.65 lakh annually as indicated below. (i)

Rs. 45,000

Building Tax

(Assumed at Rs. 4.50 per head vide para 6.18 in Chapter VI) (ii) Service Tax (Assumed at 50 paise vide para 6.19 in Chapter VI) Rs. 5,000 (iii) Incentive Grant at 10% of total of (i) and (ii) above (vide para 5.69 in Rs. 5,000 Chapter V) 117

(iv) Profession Tax

(v)

Rs. 25,000

(Assumed at Rs. 2.50 per head vide para 6.20 in chapter VI) General Purpose Grant

Rs. 20,000

(Per capita Grant at Rs. 2 vide para 5.60 in Chapter V) (vi) 75% Duty on per capita basis (Rs. 2.50 per head vide para 5.14 in Rs. 25,000 Chapter V) (vii) Additional income on account of change of rate on Duty on Transfer of Rs. 6250 Property by one per cent (1/4 of item VI) (viii) Basic Tax Grant including surcharge on Land Revenue Rs. 20,000 (Assumed at Rs. 2 per head vide para 5.21 in Chapter V and para 6.4 in Chapter VI) (ix) Vehicle tax, fees for construction of building, licence fee, tax on sale of Rs. 10000 lands, advertisement tax etc. (x) Miscellaneous Income Rs. 3,750 Total Rs. 1,65,000 8.3. Income from Entertainment Tax, Remunerative enterprises, Market etc., will be in addition to the receipts from the above sources. Further we had recommended a sum of Rs. 50,000 as Special Grants to poor Panchayat to meet expenditure of a capital nature. Besides, grant to the extent of Rs. One lakh per annum to the needy Panchayats to carry out developments activities under "Plan" programme will be available to them. Over and above, the Panchayats which are providing certain amenities and services will be entitled to 'Specific Purpose Grant' as per norms laid down by the Government for maintenance of such specific services. With the above resources at their disposal consequent on the implementation of our recommendations we are confident that all the 'Problem Panchayats' in the State will be able to turn the corner in the near future. (ii) GROUPING OF PANCHAYATS 8.4. Regrouping of Panchayats is done one in three years based on the average income of each Panchayat for the previous three years. Last grouping was ordered by Government in G.O. (MS) No. 52/83/LA & SWD dated 10-5-1983 on the basis of average income for the years 1979-80, 1980-81 and 1981-82 and accordingly the following is the basis of existing classification of Panchayats. (i) Special Panchayats having an average income of more than Rs. 1,75,000. Grade (ii) I Grade Panchayats having an average income of more than Rs. 1,00,000 and upto Rs. 1,75,000. (iii) II Grade Panchayats having an average income of more than Rs. 50,000 and upto

(iv) III Grade

Rs. 1,00,000. Panchayats having an average income of Rs.50,000 and below.

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8.5. We have pointed out in Para No. 7.2 under Chapter VII dealing with establishment expenses of Panchayat that out of the existing 1001. Panchayats, 864 Panchayats have spent during 1983-84 more than 50% of their 'self raised income' towards establishment charges (Salary of staff, T.A. sitting fee of members, office expenses etc.). Of them expenditure of 358 Panchayats has exceeded their self raised income and encroached upon grants from Government which is generally intended for providing civic amenities at satisfactory level. Consequently these Panchayats are not in a position to render services or provide amenities worth mentioning as grants received are often diverted for meeting establishment expenses. 8.6. Average cost of establishment based on the figures relating to 1983 -84 as furnished by the Executive Officers is as follows:Rs. III II I

Grade Panchayats Grade Panchayats Grade Panchayats Special Grade Panchayats

65,000 90,000 1,45,000 Above 2,00,000

Average cost on the basis of sancioned strength plus office expenses, T.A. etc., will be still higher. But in most Panchayats all the sanctioned posts are not filled up either as they cannot afford it or there is no immediate necessity for it. These posts include Midwife, Sanitary Inspector' Work Superintendent, Overseer, Tractor Driver etc. Hence average cost on the basis of sanctioned strength will not reflect the true picture. Resenable approach will be to arrive at the present cost of establishment on the basis of 1983-84 figures plus 5% growth in expenditure for each of the years 1984-85 and 1985-86 and a 10% increase to accommodate the impact of the present Pay and D.A. revisions etc. Thus allowing a 20% growth over the figures for 1983-84 the average expenditure that can be assumed for 1985-86 under establishment charges would be as follows:Average establish -ment Add 20% of expenditure arrived at for Establishment cost Establishment cost of during 1983-84 1983-84 1984-85 III Grade 0.65 0.13 0.78 Panchayats II Grade 0.90 0.18 1.08 Panchayats I Grade 1.45 0.29 1.74 Panchayats Special Grade 2.00 0.40 2.40 Panchayats

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8.7. Assuming that a minimum amount equal to one-third of cost of establishment should be available for meeting the expenditure towards providing essential civic amenities like street lighting, water supply, sanitation etc., the reasonable level of income for the purpose of classification of Panchayats should be as follows: Grade Special Grade Panchayats I Grade Panchayats II Grade Panchayats III Grade Panchayats

Income for grouping of Panchayats Average income more than Rs. 3 lakhs. Average income more than Rs. 2 lakhs and upto Rs. 3 lakhs Average income more than Rs. 1 lakh and upto Rs. 2 lakhs. Panchayats having an average income upto Rs. 1 lakh.

8.8. In previous Para No. 8.2 dealing with viable Panchayats we have pointed out that consequent on implementation of measures suggested by us, a Panchayat with a population of 10,000 is likely to have an income around Rs. 1.65 lakhs per annum. Therefore there will be no Panchayat with income below Rs. One lakh to classify it as 3rd Grade. All the Panchayats with income upto Rs. 2 lakhs may therefore be included under a single category namely II Grade Panchayats. As regards other Grades of Panchayats, higher income can be expected consequent on our new measures. 8.9. Accordingly, Commission would recommend classification of Panchayats based on average income as follows:Grade Special Grade Panchayats I Grade Panchayats II Grade Panchayats

Income for Grouping of Panchayats Average income more than Rs. 3 lakhs per annum Average income more than Rs. 2 lakhs and upto Rs. 3 lakhs. Average income upto Rs. 2 lakhs.

The Panchayats will be able to provide services and amenities at least on a moderate scale only if the income level for each grade is fixed as suggested above. 8.10. For the purpose of computing total income for grouping of Panchayats the following components of income alone need be taken into account: (i) Self raised income (ii) General Purpose Grant (New grant on per capita basis proposed) (iii) Incentive Grant (New grant proposed) (iv) 75% Duty on transfer of property (Assigned revenue) (v) 75% of Basic Tax Grant (Assigned revenue) (vi) New Taxes recommended to be levied and assigned to Panchayats.

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V.T.C. need not be reckoned for classification because it is meant for maintenance of motorable village roads and as such it cannot be deemed as a resource of Panchayats for meeting other items of expenditure. Even now V.T.C. is not being recknoned for the purpose of grouping of Panchayts. Similarly Specific Purpose Grant and Special Grant recommended by the Commission should not be taken into account for computing income for the purpse of classification.

CHAPTER IX MISCELLANEOUS 1. LOANS TO PANCHAYATS 9.1. During collection of evidence there was demand for liberal loan assistance from Government to Panchayats to carry out works relating to schemes for providing basic amenities such as street lights, construction of markets, improving facilities in the existing public markets, acquisition of private markets, construction of halting places for buses etc. If Government are not in a position to advance loans due to resource constraints, if any, they have suggested to permit panchayats to borrow money from financial institutions like Banks and other similar agencies who are prepared to grant loans. In support of their plea they have pointed out that certain Municipalities in the State have been granted loans by Scheduled Banks for creation of remunerative assets. 9.2. Government are providing in their Budget a sum of Rs. 20 to 25 lakhs annually for granting loans to Panchayats for creating remunerative assets to Panchayats. The Kerala State Rural Development Board is also advancing loans to Panchayats for the same purposes, but with a difference, that in their case the work is executed by the Rural Development Board itself realising centage charges which is an additional burden to Panchayats. In the case of Government loans, Panchayats are at liberty to carry out the work through their own agencies under the supervision of Local Bodies Engineering Wing. 9.3. Due to resource constraints Government may not be in a position to sanction large amount to each Panchayat towards loan. There are many poor and needy Panchayats in the State which require amounts in the range of rupees one to two lakhs with which they can create remunerative assets without going in for Rural Development Board Schemes which cast a relatively higher burden on them. The commission therefore recommends that Government may set apart a sum of Rs. 50 lakhs in their Budget every year for sanctioning loans to the Panchayats for schemes such as construction of mini markets, improvement of facilities of existing markets, construction of halting place for buses etc., cost of which does not exceed Rs. 2 lakhs. 9.4. According to section 3 of the Kerala Local Authorities Loans Act, 1963, Panchayats can borrow money from any person on the security of its funds with the previous sanction

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of Government. Government have always been rejecting requests for such sanctions for one reason or other. But there are certain Panchayats in the State capable of generating adequate resources and large fund balance for repaying loan instalments. 9.5. The Commission therefore recommends to Government to consider the requests for availing Institutional Finances, from those Panchayats those annual establishment cost have not exceeded their self-raised income for the preceding three years. 2. ARREARS OF LOANS OUTSTANDING TO GOVERNMENT AS ON 31-3-1983 9.6. In the data questionnaire issued to the Executive Officers, the Commission have asked to furnish details of arrears of loan outstanding payment to the State Government as on 31-3-1983. Through it was clearly specified in the pro forma that it is the details of arrears (amount fell due for repayment but not paid) that are outstanding payment are to be furnished, it is found during compilation that the details furnished by majority of them are total outstanding balance of loan which includes amounts which will become due for repayment during periods after 31-3-1983. Therefore the required details of outstanding arrears as on 31-3-1983 could not be sorted out from such figures. Further, it is a timeconsuming job to call for the actual figures again from 1001 Panchayats. 9.7. We have noticed that most of the Second and Third Grade Panchayats in their existing financial position, are finding it difficult to repay Government loans and interest thereon. There will be nothing left out of their meagre income after repaying the loan instalments. Of course their financial position will improve consequent on the implementation of our recommendations. Even though the magnitude of arrears of loan and interest is not readily available with us due to reasons explained earlier, we would recommend that the arrears of loan and interest accrued upto 31-3-1983 but outstanding till 30-9-1985 may be converted into a loan repayable in ten annual instalments commencing from 1986-87. This gesture need be shown only to Second and Third Grade Panchayats. 3. PLAN PROGRAMME FOR RURAL DEVELOPMENT AND PANCHAYATS 9.8. From the very inception of the State of Kerala the Panchayats have been carrying out the traditional pattern of funcitons and duties. Community Development Programmes are being implemented through Community Development Blocks functioning under the administrative, control of the Development Department. Though the rural public are being benefited in many ways by various programmes of Rural Development under Five Year Plan Schemes, the Panchayats in Kerala are not assigned any significant role in the implementation/execution of above programmes. 9.9. During the time of collection of evidence representatives of Panchayats (former Presidents and Members) were highly critical about the non-participation of Panchayats in the implementation of certain Rural Development Programmes like N.R.E.P., I.R.D.P., etc., intended inter-alia for creation of durable assets for strengthening rural

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infrastructure. They have complained that the local bodies which are more close to the public than Government agencies are not consulted neither in the identification of beneficiaries nor in deciding on the priority of rural works. The representatives have stated that consultation with the elected representatives will go a long way in ensuring people's participation in the implementation of Rural Development Programmes. Many of our Panchayats have proved themselves capable of implementing similar schemes in the panchayats with their own funds as well as with the assistance of Government for certain assigned functions. 9.10. In Panchayats, there is a persistent demand for more link roads connecting main roads. Interior rural areas have to be provided with new roads which may provide life lines to create more infrastructure like markets, schools etc. Objective of National Rural Employment Programme (N.R.E.P) is to provide and strengthen above rural infrastructure. Similarly there is great demand for fuel and timber in the rural areas. To meet the demand Social Forestry Programme has been taken up in Kerala under N.R.E.P. The Commission is of the view that it will be more beneficial to the rural public and also a source of encouragement to Panchayats if they are also associated with the above Rural Development Programmes. Accordingly we would suggest that Panchayats are consulted and associated with the implementation of the following programmes. (i) Selection of eligible families for benefits under I.R.D.P. (ii) Programmes of house building in Panchayat area for economically weaker sections under N.R.E.P and R.L.E.G.P. (iii) Social Forestry and Firewood Plantaion Programme including distribution of seedlings in Panchayat area under N.R.E.P and R.L.E.G.P. (iv) Construction of rural link roads, digging of field channels, land development, water conservation works under N.R.E.P and R.L.E.G.P. (v) Construction of drinking water wells, digging and deepening of village water tanks, establishment of Balawadies, Minor Irrigation works, Community Centres etc., under N.R.E.P. (vi) Drought relief works under UNIGEF programmes. 4. DELEGATION OF FINANCIAL POWERS 9.11. Financial powers delegated to Panchayats are those which are enumerated under: (i) Kerala Panchayats (Authorising of Expenditure) Rules, 1964; and (ii) Kerala Panchayats (Plan and Etimates) Rules, 1963. Panchayats are entrusted with a long list of obligatory and discretionary functions but without having adequate financial delegation for discharing those functions by the elected bodies. The powers as it exist today with the exception of one or two are those which have been delegated during 1963 and 1964

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Although the horizon of rural development and the role of Panchayats in village administration has widened considerably since then, there have not been any corresponding enhancement in the delegation of financial powers to Panchayats to cope with the present needs. For example, financial power of a Panchayat for incurring a recurring expenditure under recognised contingencies is only Rs. 25 in a month. During collection of evidence the representatives of Panchayats were highly critical of the inadequacy of the existing financial powers of Panchayats and they have strongly argued for enhancing the powers taking into account the erosion in money value since 1963-64 and the ever-widening social responsibilities of local bodies at the village level. They have complained that the present level of delegation of powers rests more with Government officials and less with the implementing institutions viz., the Panchayats. 9.12. At a time when there are exhortations from all quarters for delegation and decentralisation of more powers to the bodies concerned with the execution/implementation of programmes it does not seem appropriate to allow them to continue functioning with the abridged financial powers. The Commission is of the view that too much of concentration of financial powers with officials will have adverse effects on the day to day functioning of the democratically elected bodies and therefore the elected bodies should be vested with adequate financial powers to carry out smoothly the obligatory and discretionary functions entrusted to them. The officials are expected to exercise only a watch over the observance of rules and regulations laid down by the Government in spending Panchayat funds with a view to check extravagance or overspending. The Estimate Committee (1982-84) of the Kerala Legislature (in para No. 22 of their Ninth Report) had also recommended to enhance the powers for according administrative sanction for works. Accordingly the Commission would suggest to take appropriate action for revision of financial powers delegated under the 'Authorising of Expenditure Rules 1964' and 'Plan and Estimate Rules 1963' for the various items mentioned therein.

CHAPTER X SUMMING-UP 10.1. In the preceding chapters the Commission has tried to analyse the problems of finances of Panchayats in our State with a view to find out ways and means to improve it to the extent possible. 'Finance' has always been a problem for the majority of Panchayats and to those striving with inadequate resources, the problem was more intense. One of the important tasks before the Commission was therefore to devise measures that can make economically backward Panchayats viable units of local self Government. 10.2. While dealing with the question of viability of Panchayats in chapter No VIII we have pointed out that a Panchayat with a population of 10,000 will be able to raise resources to the extent of Rs. 1.65 lakhs at the minimum by their own efforts and own 124

efforts and by devolution of statutary grants on per capita basis. In this connection we have to add that Panchayats can be made financially viable only if they raise a minimum per capita income of Rs. 9 to 10 by their own efforts as follows: (i) Building Tax

Minimum of Rs.4.50 per capita. (ii) Service Tax Minimum of Rs. 0.50 per capita. (iii) Profession Tax Minimum of Rs. 2.50 per capita. (iv) Vehicle Tax, Licence fees and income from markets and Minimum of Rs. 1.50 to other Miscellaneous income 2.50 per capita Total Per-capita levy by own effort Rs. 9 to 10 10.3. Share of Panchayats towards assigned revenue from Government (Duty on Transfer of Property and Basic Tax), General Purpose Grant, Incentive Grant, etc., will be not less than Rs.750 per capita, on the basis of our recommendation. Thus the total per capita income of a panchayat from own efforts and statutory grants from Government will be around Rs. 16.50 to 17.50 which means that a Grade II Panchayat with a population 10,000 will have a minimum income between Rs. 1.65 lakhs to 1.75 lakhs. It is to ensure this minimum resources that the Commission has recommended in chapter VIII that a population of 10,000 should be insisted while forming a Panchayat in future The resource position will be still brighter to those Panchayats having at least one cinema theatre from whch an amount not less than Rs. 33,000 per annum is likely to be collected towards Entertainment Tax and Show first grade and above, since they are having income more than Rs. 2 lakhs. 10.4. The above assumption regarding availability of minimum income will materilise only if it is made obligatory on the part of Panchayats to collect by their own efforts income not less than Rs. 9 to 10 per capita per annum in the manner indicated under para 2 above. 10.5. The mounting cost on establishment is another great strain on the resources of a large number of Panchayats. Added to it is the expenses being incurred towards T.A., purchase of registers, Stationery items without any inventory control, telephone charges etc. The Commission has recommended in Chapter VII that in future there must be some sort of restriction in appointment of staff over and above the barest minimum against sanctioned posts in those Panchayats which do not have the resource base to bear the burden of excess staff even if such appointment is due to the application of the existing staff pattern. We have also recommended a ceiling in expenditure on certain recurring items of expenditure with a view to keep it within reasonable limits so as to have adequate fund balance for providing minimum civic needs after meeting establishment charges.

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10.6. In this context the Commission would like to bring to the notice of Government an important aspect in regard to the mounting cost on establishment charges of Panchayats. As already pointed out salary and other allowances of employees of Panchayats are paid at Government rates and the impact of the present Pay revision is likely to increase the burden of Panchayats considerably. Unless a sizable increce its made in the own resource of the panchayats during ensuing years the establish cost of the panchayats is likely to dream away almost the enter selfraised resources generated at the existing rate. In order to avoid the panchayats the from heading towards such a contingency the Commission would recommend the revision of rates of taxes including Entertainment Tax, introduction of new taxation measures etc., at the earliest opportunity. Advance action may be taken to fulfill statutory requirements if any, for bringing into effect the changes proposed by the Commission in regard to rasing of resources of Panchayats. 10.7. We have recommended various measures for augmenting the resources of the Panchayats. When these are implemented it would fetch an additional income at least to the tuene of Rs. 12.50 crores per annum vide details in Chapter VI. Further, we have in Chapter V recommended a sum of Rs. 50,000 each as 'Special Grant' to the poor Panchayats to meet the expenditure of a capital nature. Besides, grant to the extent of Rs. 1 lakh each to the needy Panchayats (100 Panchayats every year) to carry out developmental activities under Plan Programmes has been recommended. Apart from above, Panchayats which have provided certain Services are entitled to 'Specific Purpose Grant' for its maintenance as per approved norms. 10.8. The general complaint is that the Specific Purpose Grants are not sanctioned at approved rates resulting in inadequate service. Commitment on the part of Government for payment of Specific Purpose Grant at the existing norms has been shown under Chapter V. The amount would come to Rs. 687 lakhs. This is not an additional commitment since Government already stand committed to the above extent as per norms approved by Government. We reiterate the need for payment of grant at the approved rate every year. We have not recommended revision of norms for Specific purpose Grant except in the case of water supply and street lighting as we are of view that payment of Grant at the exising approved rates itself will relieve the Panchayats of their burden in maintaining the services at a somewhat satisfactory level. We hope that Government will make available the Specific Purpose Grant to the eligible Panchayats every year as per the approved norms and that the grant will not be allowed to lapse as occured in the last 2 to 3 years due to resource constraints of State Government. In respect of wates supply and street lighting we have recommended to change the exising normr for payment of grant as follows: Water Supply Street lighting

50% of the cost of water charges per street tap or Rs 500 per tap per annum whichever is less. One third of the current charges for street lighting for eight hours burning a day.

10.9. As per item Nos. (ii) and (iii) of the terms of reference the Commission is required to assess the cost of Services and amenities at satisfactory standards and also to assess the

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gap between the existing resources and the cost of services/amenities at satisfactory standards and also to assess the gap between the existing resources and the cost of services/ amenities at satisfactory standards. As regareds- 'Sastisfactory standards' for maintenance of the services and provision of amenities the Commission has made extensive efforts to find out whether any standards have been prescribed for the purpose by any State. Out enquiries with the National Institute of Rural Development, Hyderabad; Indian Institute of Public Administration, New Delhi; Ministery of Rural Development in our neighbouring States have revealed that no specific standards or norms have been prescribed for rendering services or providing amenities by the Local bodies (Panchayats). In fact it is practically difficult to determine the level of needs and services relating to the existing levels of development attained by each Panchayat and classify them into various groups for porpuse of financial assistance. In the absence of any specific norms for assessing the extent of requirements for providing services we can go only by aprinciple that can be applied uniformly to Panchayats having common charaterstics. Since the local people in a Panchayat are the beneficiaries of the services rendered by the Panchayats there is every justification in concluding that financial requirements of the services will depend on their number and the income derived from them by way of taxes etc. Needs and requirements will vary from Panchayat to Panchayat. The larger the population the greater will be the needs for resources for providing services and amenities. The idea behind our suggestions to link the payment of statutory grants with populations, panchayats to have a minimum population of 10,000 generation of own income on an average of Rs.9 to 10 perperson, etc, is to make available adequate resources at the disposal of Panchayats to provide basic civic amenities to the local people, cost of which largely depends upon population. We have already pointed out that in the ordinary courses, a panchayat in the lower grade with a population of 10,000 will have resource to the extent of Rs. 1.65 to 1.75 lakhs excluding Specific Purpose Grants and Special Grant, out of which nearly one lakhs has to be spent towards establishment charges. With the balance available plus Special Grant and Specific Purpose Grant, Vehicle Tax Compensation etc., The Panchayat will be able to renter essential service like water supply street lighting, Sanitation, maintenance of roads, burial and burnign grounds etc., at a near satisfactory level. Therefore gap in resources is not likely to occur 10.10. We hope that the financial gains accruing out of our recommendations will help all the Panchayats in the State to improve there resource base considerably making them capable of rendering services and providing amenities to the rural public in a better way than the existing levels. We are also confident that Panchayat which are at present striving hard to make both ends meet will also be placed on an even keel if there are earnest efforts from all concerned to generate the resources at the scales and standards assumed by us. If there are Panchayats which find it difficult to survive even after attempting all the fiscal exercises suggested by the Commission and which do no leave any hope of being salvaged the commission has no other alternative but to suggest their merging with the neighbouring Panchayat as the last resort. 10.11. The financial liability to the State exchequer consequent on out recommendation will, for the present, be around Rs. 350 lakhs only as shown below:

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Rs. (i) Incentive Grant 50 lakhs (ii) Additional commitment due to change in the percentage of share of vehicle 70 lakhs tax due to Panchayats (iii) Specific Purpose Grant for Water Supply 150 lakhs (iv) Street lighting 100 lakhs Total 370 lakhs Deduct- Maintenance grant for water supply an dstreet lighting as per 20 lakhs existing norms Net Commitment 350 lakhs When Government incur an additional expenditure of Rs. 350 lakhs as indicated above for supplementing the resources of Panchayats the percapita gain of a Panchayat on this account is Rs. 1.75 only. We hope that our recommendations will be implemented as early as possible as they do not cast any heavy financial burden to the Government. 10.12. A summery of important recommendations is furnished seperately. 1. 2. 3. 4. 5. 6.

Shri K. Avukanderkutty Naha, Chairman Shri T.V. Swaminathan, Member Shri S. Varadachary, Member Shri S. Sundareshan, Member Shri K George Mathew Member Shri M. M Subbayyan, Member- Secretary

Trivandrum, Dated 31st October, 1985

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(Sd.) (Sd.) (Sd.) (Sd.) (Sd.) (Sd.)

SUMMARY OF RECOMMENDATIONS CHAPTER III 1. BUILDING TAX 1. 3.9 24 2. 3.11 25-26 & 3.12

3

3.13 27

4. 3.18 30

5. 3.22 33

The system of assessment of Building Tax on rental value basis as per the existing provision may continue without any change. The work of tax revision be entrusted to Officers outside the Panchayat. An Officer of the Department of Panchayats not below the rank of Taluk Panchayat Officer may be appointed as Tax Revision Officer in charge of quinquennial assessment of Building Tax in all Panchayats of a taluk. Before this appointment, advance action for preparation of list of house, numbering etc., shall be taken by the Executive Officers of the concerned Panchayats and completed within three months. This Tax Revision Officer will complete the revision work of all Panchayats in the taluk within 3 to 6 months in the maximum. The Expenditure towards the salary of the Tax Revision Officer will be apportioned among the Panchayats concerned in such proportion as may be fixed by the Department of Panchayats. In between the quinquennial revisions, Executive Officers may be authorised assess Building Tax on new additions as per the existing provisions with the approval of the Taluk Panchayat Officer who will ensure that the assessement made by the Executive Officer is in confirmity with the standards adopted by the Tax Revision Officer. The maximum reduction that can be effected by the Panchayat on the enhanced amount of Building Tax should be restricted to 20 % of the enhancement (ie, 1/5th of the difference between the revised tax and the existing tax) assessed by the Tax Revision Officer. The powers of Deputy Director of Panchayats for reduction may be restricted to a maximum of 33 and 1/3rd percent ie. 1/3rd of the quantum of enhancement made by the Tax Revision Officer. Only those huts (as defined in sub-clause 14 of Section 2 of the Kerala Panchayat Act) whose grose annual rental value is Rs. 240 and below alone need be exempted from the purview of Building Tax. Section 72 of the Kerala Panchayat Act, 1960 should be exempted from the purview of levy of Building Tax. Existing minimum and maximum rates of Building Tax may be revised as follows:Grade minimum maximum II & III Grade Panchayats 8% 12% Grade I panchayats 8% 15% Special Grade Panchayats 10% 15%

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2. PROFESSION TAX 6. 3.27 38 Though agriculture is a profession liable to be taxed under Profession Tax majoirity of the Panchayats in the State are reluctant to levy it from agriculturists. It is not necessary to add or modify existing rules for levy of Profession Tax on Agricultural income. What is required is enforcement of rules in their true spirit Government may issue suitable instructions in this regard. 7. 3.30 41 Suitable provision for deduction of Profession Tax at source may be incorporated in out Act, so that the present difficulties in collecting Profession tax demanded may mitigated. 8. 3.33 44 No modification to the existing practice of assessment of Profession Tax on "aggregate income" by Panchayat in the state in necessary. 9. 3.36 45 A uniform rate of 1/2 percent of aggregate income ie., 50 paise for 100 rupees of income per half year may be adopted as the basis. For the sake of assessment and accounting it would be better to classify the income slabs in multiples of Rs.1000 and tax levied at half per cent of the minimum of the slab. 10 3.37 46 The exemption limit for the levy of Profession tax at present is Rs. 1,200 per half year. This may be further enhanced, so as to exempt those whose half yearly income is below Rs. 2000. Revised table for calculation of Profession Tax in respect of half yearly income from Rs. 2000and above is recommended. (vide Table below para 3.37) 11 3.40 48 In the case of a company or person transacting business Profession Tax for each half year may be levied at the maximum rate of Rs. 125 if the estimated annual turnover of business for that year is Rs. 5 lakhs and above (turnover of previous year may be reckoned as basis). If the estimated annual turnover is below Rs. 5 lakhs half yearly income may be calculated at 5% of estimated annual turnover and tax levied for the income so worked out for each half year at the rate recommended under para 3.37. 12 3.41 49 In regard to certain categories of Profession, mentioned under para 3.41 Profession Tax may be levied at a flat rate as shown therein instead of calculating income on the basis of estimated annual turnover. 13 3.43 50 Government may move Government of India for amending Article 276 of the constitution to get the ceiling enhanced from Rs. 250 to Rs. 1000 per annum. In case, the ceiling is enhanced the revised table recommended under para 3.37 may be modified in respect of income slabs exceeding Rs. 25,000 by incorporating suitable slabs. 3. VEHICLE TAX 14 3.47 53 The Director of Panchayats will take appropriate action to ensure that Panchayats do not show lack of interest and administrative indifference in collecting obligatory items of taxes

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15 3.48 54

Existing rules may be amended deleting the condition regarding the minimum number of days for which the vehicle has to be kept or used for the levy of vehicle has to be kept or used for the levy of vehicle tax. License from any one of the Local bodies in Kerala is sufficient. 16 3.49 54 Cycles including cycle rickshaws/rickshaws may be exempted from the purview of Vehicle Tax. 17 3.50 55 In order to compensate the loss on account of crosion in money value and to bring the receipts at least on a par with administrative expenses minimum rate of tax for each category of vehicles may be prescribed as shown under para 3.50. 18 3.51 56 Fee of 24 paise for affixing number to the vehicles may be dispensed with. 4. ENTERTAINMENT TAX 19 3.59 62 System of collection of Entertainment Tax on the basis of gross collection with reference to the seating capacity may be introduced as expeditiously as possible so as to prevent the erosion of revenue that is legitimately due to the Panchayats. 20 3.61 62 Till the implementation of new system of levy of tax at a fixed percentage of gross collection, minimum amount of tax shall be levied as follows:(1) Minimum entertainment tax including additional entertainment tax per show may be fixed as Rs. 35.

21. 3.62 63

22 3.64 63

(2) In the case of theatres where at present rate of entertainment tax and additional entertainment tax together is more than 35% minimum tax per show shall be fixed at an amount equal to total rate (percentage) of taxes (Entertainment Tax+Additional Entertainment Tax) i.e., Rs. 40 if total tax is 40% and Rs. 45 if it is 45% and so on. Entertainment Tax and Additional Entertainment Tax may be merged and levied as a single item, by suitably refixing the rates, and incorporating necessary amendments to the Act and Rules. This combined Tax may be termed as 'Entertainment Tax'. Minimum rate for single tax under Entertainment Tax may be fixed at 25% as against the prevailing rate of 24%.

5. SHOW TAX 23 3.67 65 The rate of Show Tax may be revised as follows:1. Cinematographic Exhibition Rs. 10 for one show and Rs. 5 for every additional show on the same day. 2. Other shows Rs. 10 for a show 24 3.68 65 The Surcharge on Show Tax may be dispensed with as the revised recommended are intended to include the income on account of surcharge also.

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6. SERVICE TAX 25 3.71 68 Panchayats should invoke their power to levy Service Tax for services like water supply, street lighting etc,, provided by them. 26 3.72 68 The Service Tax at a minimum rate of one per cent each shall be compulsorily levied on 'street lighting' and 'Water supply' by Panchayats whose annual expenditure for maintenance exceeds 10% of the Building Tax under each, provided Building Tax together with Service Tax should not exceed the maximum rate of Building Tax recommended in para 3.22. This tax may be levied along with Building Tax, showing it as a separate component in the Demand Notice. Service Tax for the remaining items may continue to be optional taxes as at present. 7. SURCHARGE ON BUILDING TAX 27 3.73 69 Already there is provision to levy Service Tax for some of the items coming under 'Surcharge on Building Tax'. In para 3.72, compulsory levy of Service Tax foe 'Water Supply' and 'Street Lighting" has been proposed. In such a context the Government may decide whether there is any need for retaining the provision for levy of surcharge on Building Tax in the statute, especially when no Panchayat in the State, is collecting it. CHAPTER IV NON TAX REVENUE (LICENCE FEES) 28 4.5 74 The rate of licence fee for the existing and new markets should be fixed, in terms of area, location importance, scope for levy of fees, extent of trading activities and all other attending factors. Minimum two fold increase in the existing rate of license fees due to erosion in money value since the introduction of the Act in 1962 is necessary. The Department of Panchayats may examine the scope for enhancing the rate still further, if deemed necessary. 29 4.6 74 As regards fees leviable from markets for various uses by licensees and lessees, prescribed in the schedule under Rule 7 of Kerala Paanchayat (Public and Private Markets) Rules. 1964, no revision is necessary as it may inevitably lead to increase in prices of commodities sold through these markets. 30 4.7 75 Panchayats may open more Public Markets and no new Private markets be permitted in future. In areas where private markets are existing, efforts should be made to eliminate it in a phased manner by converting them into Public Markets. 31 4.8 75 Panchayats if any, collecting fees directly from public markets may be advised to switch on to the practice of selling the right of collection of fees by auction, at the earliest.

132

32 4.9 75

33 4.12 76

34 4.13 77

35 4.14 78

36 4.16 79

37 4.17 80

In order to avoid any possible mis-use of the provision in favour of the owners of cart stands the system of levying fees based on area, after fixing a minimum rate as in the case of private markets, may be adopted. There should be arrangements for the inspection of animals brought for slaughtering regularly and random inspection of meats for sale in the stalls periodically. Hygienic condition of slaughter houses should be ensured by the Veterinary Surgeon of the Block by making suitable arrangement. The Doctor may be given some additional remuneration for the work. From the point of view of Public hygiene, private slaughter houses should be discouraged and dispensed with in a phased manner wherever they exist. Public slaughter houses may be established in all Panchayats fulfilling hygienic conditions and the right of collection of fees may be sold in auction. The minimum rate for new licence for slaughter houses and for its renewal may be enhanced to Rs. 100 per annum. The enhancement is for those private slaughter houses which are allowed to be continued by Panchayats in exceptional circumstances. To prevent Panchayats from fixing rates at too low a rate for Dangerous and Offensive Trades, it is advisable to have a minimum rate for every item of license under Section 96 of Kerala Panchayat Act. The exisiting schedule under Dangerous and Offensive Trades which is prepared long back may be revised by the Director of Panchayats incorporating new items and deleting unnecessary items. A two fold increase is absolutely justifiable in the case of exisiting rates for license under section 97 of the Kerala Panchayat Act., 1960. A minimum and maximum rate may also be prescribed for licences to be issued under Section 96 of Kerala Panchayat Act, 1960. Minimum fees for grant or renewal of a licence should be not less than Rs. 10 in both cases (i.e., Sections 96 and 97). For every permission under Section 6 of the Kerals Cinemas (Regulation) Act, 1958 granted or renewed under these rules, existing rates may be enhanced as follows:1. Permanent theatres Rs. 100

38 4.18 80

2. Temporary theatres Rs. 50 The existing rates of fess, fines, etc., for all other items may be refixed by making a two-fold increase to compensate the increase in the cost of administrative services incurred in discharging duties connected with the licensing work of Panchayats. For all items for which licences are to be granted minimum rates should be prescribed and the minimum rate for each licences valid for a year, should not be less than Rs. 10. In future all kinds of licence fees, other fees, fines, etc., should be

133

reviewed and revised once in five years.

39 4.25 86

The scheme of execution of remunerative enterprises should be redesigned in such a way that, they should indeed be remunerative to Panchayats. Government may take appropriate steps in the matter. The K.S.R.D.B. may be provided with more powers and opportunities to enlarge the scope for availing more powers and opportunities to enlarge the scope for availing more and more institutional finances with a view to providing adequate financial assistance to the needy Panchayats to undertake remunerative enterprises. CHAPTER V GRANTS 40 5013 96 Out of the total proceeds under 'Duty on Transfer of property; 755 should be distributed to all Panchayats on population basis. This grant may paid rounding it to the nearest 100 ignoring the amount below Rs. 50. Relevant provision in the Act and rules may be amended suitably for this purpose. 41 5.20 99 The existing system of levy of basic tax by the Revenue Department may continue. The delay in disbursement of grant should however be eliminated by devising suitable methods. 42 5.21 100 The present practice of preparing Panchayat-wise accounts of collection and distributing the amount to the respective Panchayats on collection basis should be dispensed with. Instead, out of the total amount of basic tax payable 75% should be distributed on per capita basis to all Panchayats. This grant may be paid to the nearest 100 ignoring the amount below Rs. 50. Balance 25% may be distributed as 'Special Grant" for development of poor Panchayats. 43 5.23 101 The amount payable under 25% of 'Duty" and 'Basic' TaxGrant' may be initially transfer credited to a P.D. account viz., 'Panchayat Special Grant Fund' from which adequate amount may be released to the Panchayats for their developmental needs as and when need arises 44 5.27 102 Pending decision on the share payable to the local bodies, V.T.C. may be disbursed at 90% of the old rate for a year, during every year in lump in July. If there is any difficulty in releasing the amount in lump, & Government may consider the disbursement in two instalments, one in July and the other in January every year. 103 45 5.54 113 A rationalization of the existing classification of grants with a view to make it more purposeful bases on broad principles evolved by various study teams at national level is essential.

134

46 5.57 114

The existing items of grant disbursed under 26 descriptions to Panchayats may be regrouped and brought under 5 categories as shown below: 1. 2. 3. 4. 5.

47 5.60 115 & 116

48. 5.61 116

49. 5.63 117 118

50. 5.64 118 119

51. 5.67 120

52. 5.69 120

General purpose Grant. Specific Purpose Grant. Special Grant. Grant for Development Ptogrammes. Incentive Grant.

A per capita Grant which may be termed as 'General Purpose Grant' at the rate of Rs. 2 per head based on latest census figure subject to a minimum of Rs. 10,000 may be paid to each Panchayat except Special Grade Panchayats. In the case of newly formed Panchayat per capita Grant at the rate of /rs. 3 per head may be paid subject to the above ceiling for a period of two years to meet initial expenses. With the introduction of 'General Purpose Grant' on per capita basis payment of other grants like Establishment Grant, Block Grant, Grant for burial and burning grounds, etc., may be dispensed with Grants to the Panchayats which have provided certain services and amenities, paid on the basis of specific norms laid down for its maintenance may be brought under 'Specific Purpose Grant'. & A sum of Rs. 687 lakhs towards 'Specific Purpose Grant' worked out at the norms fixed by Government may be provided in the next year's budget (1986-87). Thereafter a progressive increase in provision by 5% may be allowed every year. & The amount accumulated under P.D. Account viz., 'Panchayat Special Grant Fund' recommended under para 5.23 may be disbursed to backward Panchayats in the form of 'Special Grant' to meet capital cost in respect of the items specified under para 5.64. Maximum amount that can be granted to a Panchayat in a year may be enhanced to Rs. 50,000. Powers of Director of Panchayats in this regard may be enhanced to Rs. 50,000. In deserving cases Grant may be sanctioned upto Rs. 1 lakh with Government sanction. While sanctioning this grant priority should be given for providing essential civic amenities mentioned under para 5.64. Grant at the rate of Rs. 1 lakh each for 100 Panchayats in a year for development programmes may be provided. For this, a sum of Rs. 100 lakhs may be provided in the Annual Plan Budget. In order to encourage the Panchayats and to maximise their tax collection 'Incentive Grant' at the following rates may be paid to Panchayats:1. Special Grade 5% of the total collection in the preceding Panchayats year under Building Tax and Service Tax taken together.

135

2. I, II and III Grade 10% of the total collection in the preceding Panchayats year under Building Tax and Service Tax taken together. 53. 5.70 120 & Above grant may be paid rounding the amount to the nearest hundred 121 ignoring Rupees below fifty. Maximum 'Incentive Grant' may however be limited to Rs. 20,000 in a year. CHAPTER VI NEW MEASURES 54 6.4 125 A levy by name 'Surcharge on Land Revenue' at the rate of 50 paise per one rupee of Land Revenue may be made by the Revenue Department along with land Revenue (Basic Tax) and Distributed among Panchayats by adopting the same principle of distribution of Basic Tax suggested in para 5.21. 55 6.5 125 The rate of Surcharge on 'Duty on Transfer of property' may be enhanced from 4% to 5%. 56 6.6 125 & Government may consider levy of a Tax on Sale or Transfer of Land at 126 the rate of Rs. 5 per cent of land. This may be collected by the Registration Department and the proceeds distributed to the Panchayats adopting the same principle of distribution of proceeds from ' Duty on Transfer of Property.' 57 6.8 127 Government may issue necessary notification conferring powers to Panchayats for levy of Advertisement Tax by invoking powers under Section 142 of the Kerala Panchayat Act, 1960. The rates shall be those prevailing in III Grade Municipalities. 58 6.9

127

59 6.12 128 129

60. 6.14 130

Kerala Municipal Building Rules may be extended to all Special Grade Panchayats in the State. & A system of granting permission for new consctructions of buildings, etc., may be introduced in Panchayats where the Municipal Building Rules are not extended. A fee of Rs. 10 may also be realised along with each application. Renewal fee shall be Rs.5 vide procedure suggested under para 6.12. (I)Government may issue appropriate order to the Land Revenue Department for supplying necessary details of poramboke lands, land adjacent to water courses (river Poramoboke) etc., to the concerned Panchayats. (ii)Panchayats may utilise road side poramboke lands for planting seedlings supplied by the Forest Department under the Social Forestry Scheme. Bunks may be constructed and installed on roadside porambokes wherever there is scope for it. Right of use of bunks owned by Panchayats may be sold in auction for reasonable periods.

136

61 6.15 131

At least 20% of the net proceeds of Vehicle Tax collected in the preceding year should be allocated for maintenance of roads of local bodies. Further, the present practice of determining share due to the respective local bodies once in five years may be changed to once in three years as five year is too long a gap. CHAPTERVII EXPENDITURE 62 7.6

141

63 7.6

142

In future there must be some sort of restriction in appointment against sanctioned posts in those Panchayats whose total establishment cost exceeds 75% of total income. (Self raised income plus statutory grants). The following measures may be a adopted for enforcing economy in expenditure. (i) S.T.D facilities for telephones wherever available should be barred. (ii) There should be annual ceiling on expenditure under T.A (iii) Establishment charges other than salaries, pension contribution, sitting fee should be limited as follows: (a) 2nd & 3rd Grade Panchayats. Not to exceed 15% of income reckoned for grouping.

(b) Special Grade & I Grade Panchayats. Not to exceed 10 % of income reckoned for grouping. 64 7.12 144-145 Vehicle Tax Compensation should be utilised exclusively for maintenance and widening of motorable roads and also for widening and convension of metalled roads into black topped roads and it should not be utilised for maintenance of earthern roads. (ii) 80% of the Village Road Maintenance Grant should be set apart For conversion of earthern roads into metalled roads or metalled roads into black topped roads and for maintenance of the above roads and only 20% need be spent for maintenance of earthern roads.

65 7.19 149

(iii) 20% of the earthern/gravelled roads (excluding foot path) should be converted into the next higher type road every year by utilising V.T.G. and V.R.M. Grants. The question whether the Panchayats need pay the outstanding arrears well as future instalments that will accrue up to 31-3-1987 on account of 25% of capital cost of the Rural Water Supply Scheme may be decided by Government.

137

66 7.21 151

67 7.22 151

50% of the dues towards maintenance charges outstanding payment to P.H.E.D. (Now K.W.&W.W.A) up to 31-3-1984 may be written off. Balance 50 % may be paid sharing the liability by Government and the Panchayats on 50:50 basis. In respect of claims from 1-4-1984 onwards Panchayats need honour only those claims having split-up details.

68 7.24 152

Collection of water charges from domestic consumers should be made by K.W. & W.W.A for the sake of uniformity in water charges and other attending factors.

69 7.26 153

Water charges may be paid at the rate of Rs. 875 per street tap. In case K.W.&.W.W.A enhances rates Panchayats will have to pay water charges at enhanced rates for quantity of water computed in the manner indicated under para 7.25. On switching over to the system of payment of grant at 50% of the cost water charges per tap, existing system of payment of grant may be dispensed with.

71. 7.30 155

72. 7.32 156

Government may advise K.S.EB. to introduce the system of metering of consumption of electricity by street lights provided in Panchayat areas.

73. 7.34 157

One third of the expenditure on street lighting may be met by the Government on the basis of current charges for eight burning a day. CHAPTER VIII FINANCICAIL VAIBILITY AND NORMS FOR REGROUPING OF PANCHAYATS 74. 8.2

159

In future it would be better to have Panchayats conteminus with revenue villages wherever possible and to insist on a minimum population of 10,000

75. 8.2

159

76. 8.9

162

As the measures suggested by the Commission are likely to improve the financial capacity of the existing "problem Panchayats", the Commission is not inclined to interfere with the basis on which the existing Panchayats are formed. Panchayats may be classified based on average income as follows Grade Average income per annum Special Grade Panchayats More than Rs. 3 lakhs I Grade Panchayats More than Rs. 2 lakhs and up to Rs. 3 lakhs. II Grade Panchayats Upto Rs. 2 lakhs.

138

77 8.10 163

For the purpose of computing total income for grouping of Panchayats, the following components of income alone need be taken into account. 1. Self raised income. 2. General Purpose Grant. 3. Incentive Grant. 4. 75% Duty on Transfer of Property. 5. 75% of Basic Tax Grant. 6. New Taxes recommended to be levied and assigned to the Panchats

V.T.G. need not be reckoned as it is meant for a Specific purpose and even now it is not being reckoned. CHAPTER IX MISCELLANEOUS 78. 9.3 164-165 Government may set apart a sum of Rs. 50 lakhs in their Budget every year for sanctioning loans to the Panchayats for schemes such as construction of Mini Markets, Improvement of facilities of existing markets, Construction of halting places for buses etc., cost of which does not exceed Rs. 2 lakhs. 79. 9.5 165 Government may consider the requests for availing institutional finances from those Panchayats whose annual establishment cost have not exceeded their self raised income for the preceding three years. 80. 9.7

166

Arrears of loan and interest accrued up to 31-3-1983 but outstanding payment till 30-9-1985 may be converted into a loan repayable in 10 annual instalments commencing from 1986-1987. This gesture need be shown only to second and third Grade Panchayats.

81 9.10 167

Panchayats may be consulted and associated with the implementation of Rural Development Programmes like I.R.DP., N.R.E.P etc., mentioned under para 9.10.

82 9.12 168,169 The elected bodies should be vested with adequate financial powers to carry out smoothly the obligatory and discretionary functions entrusted to them. Government may take appropriate action For revision of Financial powers delegated under the "Authorising of Expenditure Rules 1964" and plan and Estimates Rules, 1963.' CHAPTER X SUMMINGUP 83. 10.4 171 It should be made obligatory on the part of Panchayats to collect by their own efforts income not less than Rs. 9 to 10 per population per annum in the manner indicated under para 10.2 for which Government may take a firm stand. 139

84. 10.6 172

85. 10.8 173

In order to avoid the establishment cost of Panchayats from Swallowing the entire self raised income generated at the existing rates, revision of rates of taxes including Entertainment Tax, introduction of new taxation measures etc., suggested by the Commission may be implemented at the earliest opportunity. Government should make available the 'Specific Purpose Grant' to the eligible Panchayats every year as per the approved norms and the Grant should not be allowed to lapse.

APPENDIX I Government Order Constituting the Committee G.O. (Ms) 149/83/LA & SWD Dated Trivandrum, 27th September, 1983 ORDER The question of setting up a Panchayat Finance Commission in the State for improving the financial position of the Panchayat has been under consideration of Government for some time past. 2. After examining the question in all its aspects. Government are pleased to constitute the Panchayat Finance Commission with the following persons as members: (i) Shri K Avukadarkutty Naha, M.L.A. Chairman (ii) Shri M. S. K Ramaswamy, Commissioner and Secretary (Local Member Administration and Social Welfare Department (iii) A representative from the Planning & Economic Affairs Department Member (iv) The Director of Panchayats Member (v) A representative from the Finance Department or of the Examiner of Local Member Fund Accounts 3. The terms of reference to the Commission will be as follows: (i) Assessment of the existing panchayat Services and the Amenities and their cost. (ii) Assessment of the cost of Panchayat Services and the amenities at satisfactory standards. (iii) Assessment of the gap between the existing resources and the cost of services and the Aminities at satisfactory standards. (iv) Assessment of the degree of exploitation of the existing local taxes by the

140

Panchayats and possibilites of improving them. (v) Examination of the present Panchayat taxation stucture and suggestions for augmenting the resources of Panchayat. (vi) Examiniation of the possibilities for the raising of non tax revenues. (vii) Suggestions for the baisis of Government grants (both statutory and non statutory) to Panchayats. (viii) Assessment of arrears due to Government from the Panchayats as on 31-3-1983 and Suggestions on measures to be taken to clear these arrears and also ensure the arrears do not accumulate in future. 4. A post of Secretary to the Panchayat Finance Commission is sanctioned in the cadre of Joint Director of Panchayats (Rs. 1125-1725) Shr K Bhanuvikraman Nair, Deputy Director of Panchayats is promoted provisionally under Rule 9 (a) (II) of the Kerala State and Subordinate Service Rules and posted as the Secretary of the Commission. 5. The Commission will submit report to Goverment within 6 months. By order of the Governor, M.S.K. RAMASWAMY, Commissioner and Secretary.

Additional terms of references rd

G. O. (Ms) No. 89/85 LA&SWD Dated, Trivandrum, 23 April, 1985 ORDER Government are pleased to order that following items will also be included in the terms of reference of the Panchayat Finance Commission. (i) Study on uneconomic Panchayats which are not able to meet even the establishment expnditure, let alone, other Developmental activities and suggestions for making them viable or for amalgamating with other viable Panchayats; (ii) Examination of the existing norms regarding the Panchayat and suggestion, if any, for their regrouping in consonance with the financial capacity of the Panchayats. By order of the Governor, V.R. PADMANABHAN, Additional Secretary to Government

141

APPENDIX II Authorisation to the Commission to call for information records from Departments, Boards etc. G. O. (Ms) No 324/84/LA&SWD Dated, Trivandrum, 22nd December, 1984 Read:- 1. Circular No. 1906/C2/84/LA&SWD dated 22-10-1984, 2. G.O.Ms. No.304/84/LA&SWD dated 21-11-1984. In the Circular read as first paper above Government have requested the Secretaries to Government, Heads of Departments, Chief Excutives of Public Sector Undertakings, Boards, Corporations etc,. concerned with Panchayat Finance and the Panchayats to furnish factual information and other docments as may be required by the Commission from time to time. Government are now pleased to authorised the Commission:(i) to call for details of expenditure and receipts and such other information and records, except those are confidential in nature which are deemed necessary for the conduct of study and review of finances of local bodies from the Panchayats in the States, Heads of Departments, Boards, Corporations etc; (ii) to address the Secretaries to Government and Heads of Departments in other States to collect information on various aspects of local body finances in those States; (iii) to verify the accounts and registers of the local bodies in the State by the staff of the Commission, whenever deemed necessary; and (iv) to depute its staff to different places within and outside state to collect data for the purpose of analysis/comparison and study of local body finances subject to the condition that for deputing staff to outside the State the Commission will obtain prior sanction of Government. By order of the Governor, V. R. PADMANABHAN, Joint Secretary

142

APPENDIX III Permission to the representatives of Service Organizations and Employees of Panchayat Department etc., for presentation of memorandum and discussion with Commission G.O. (Ms.) 304/84/LA & SWD Dated, Trivandrum, 21 November, 1984 Read:-Note dated 17-3-1984 from the Chairman, Panchayar Finance Commission. ORDER In G.O. (Ms.) No 149/83 LA & SWD dated 27-9-1983, Government have appointed the Panchayat Finance Commission for making recommendations to improve the financial position of the Panchayats. The Commission is functionig with its Office at Sasthamangalam, Trivandrum-10. In the Note read above the Chairman, Panchayat Finance Commission has requested that permission may be granted to service Organisations, Government employees/employees of Panchayat Department/the Panchayat in the State to present memorandum and hold discussion with the Panchayat Finance Commission. Government are, therefore, pleased to grant permission to the representatives of Service Organisations and individual Government Officers/employees of the Pnachayat Department/the Panchayats in the State to present memorandum and hold discussion with the Panchayat Finance Commission. Government also order that the representatives of Service Organisations and individual Government Officers or Employees of Panchayat who are invited for discussion by the Commission, will be treated as on duty on the day/days on which the discussions are held and on the day/days actually needed for the to and fro journeys. This benefit, will be limited to two representatives per Association. No T.A./D.A will be admissible for the journeys performed for the purpose. By order of the Governor, V.R.PADMANABHAN, Joint Secretary to Government.

143

APPENDIX IV Duties and functions of Panchayats (Extract of Sections 57 of the Kerala Panchayat Act 1960) (1) Subject to the provisions of this Act and the rules made thereunder it shall be the duty a Panchayat within the limits of its funds, to make reasonable provision of carrying out the requirements of the Panchayat area in respect of the following matters namely:(a) the construction, repair and maintenance of all public roads in the Panchayat area other than roads classifed as National Highways, State High ways, (or district roads) and of all bridges, culverts, road-dams and cause-ways on such road; (b) the lighting of public roads and public places; (c) the construction of drains and the disposal of drainage water and sullage; (d) the cleansing of streets, the removal of rubbish heaps, jungle growth and pickly-pear, the filling in of disused wells, insanitary ponds, pools, ditches, pits or hollows, and other improvements of the sanitary condition of the Panchayat area; (e) the provision of public latrines and arrangements to cleanse latrines whether public or private; (f) the opening and maintenance of burial and burning grounds; (g) the sinking and repairing of wells, the excavation, repair and maintenence of ponds or tanks the construction and maintenance of water works for the supply of water for washing and bathing and drinking purpose. (h) preventive and remedial measures connected with any epidemic or with malaria; (i) control of offensive and dangerous trades; (j) construction and maintenance of petty irrigation works; (k) control of cattle pounds; (l) registration of births and deaths; (m)maintenance of the Village Court, established for the Panchayat area, by providing accommodation, necessary staff and funds for meeting contingent expenditure. (2) Subject to the provisions of this Act and the rules made there under a Panchayat may also, within the limit of its fund and wherever possible with Government aid, make

144

reasonable provision for carrying out the requirements of the Panchayat area in respect of the following matters, namely:(i) Agriculture(a) the improvement of agricuture and establishment of model agriculture farms; (b) the establishment of granaries; (c) bringing under cultivation waste and fallow lands belonging to or vested in the Panchayat; (d) ensuring conservation of manurial resources, cultivation of green manure, preparing compost and sale of manure; (e) the establishment and maintenance of nurseries of improved seeds and seedlings; (f) provision of implements, stores, insecticides etc.; (g) the promotion of co-operative farming; (h) the conducting of crop experiments, launching of crop protection schemes and crop competitions; (i) the construction, repair and maintenance of irrigation works field channels and distribution of water; (j) encouraging farmers' clubs and other association of agriculturists; (k) assistance in the implementation of land reform scheme; (l) execution of soil conservation schemes. (ii) Animal Husbandry(a) Improvement of cattle and cattle breeding and the general care of livestock; (b) the promotion of dairy farming; (c) the maintenance of stud-bulls and stud-goats; (d) the Promotion of Poultry farming and bee-keeping. (e) conducting cattle and poultry shows. (iii) Education and culture-

145

(a) the spreadm supervision and improvement of education; (b) the establishment and maintenance of Children's parks, clubs and other places of recreation for the welfare of women and youth; (c) the promotion of art and culture including the establishment and maintenance of theatres; (d) the establishment, maintenance and encouragement of reading rooms and libraries; (e) noon-feeding of school children; (f) the establishment and maintenance of community listening sets, recreation centres and centres for physical culture, sports and games; (g) the erection of memorials for celebrities and historical personages; (iv) Social Welfare(a) maternity and child welfare including the establishment and maintenance of orphanages and foundlings' home; (b) the relief of the old and the infirm and the physically handicapped and the sick; (c) assistance to the residents when any natural calamity occurs; (d) family planning; (e) organising voluntary labour for community works for the development of the village; (f) destitute homes and beggar homes (v) Public health and sanitation(a) preservation and improvement of public health; (b) supply of water; (c) sanitation, conservancy and the prevention and abatement of nuisance and disposal of carcasses of animals; (d) the disposal of unclaimed corpse; (e) the disposal of unclaimed cattle;

146

(f) the taking f measures to prevent the outbreak, spread and recurrence of any infectious disease and vaccination; (g) the reclaiming of unhealthy localities; (h) providing medical relief; (i) the inoculation of animals and birds; (j) the disposal of stray and ownerless dogs; (k) the establishment and maintenance of dispensaries and the payment of subsides to rural medical practioners; (l) control of fairs and festivals; (m)maintenance of the purity of fish, meat and other food stuffs, (vi) Public Works(a) the planting of trees along roads, in market places and other public places and their maintenance and preservation; (b) he construction, maintenance and control of bathing and washing ghats; (c) he construction, maintenance of buildings for ware houses, stores, shops, purchasing centres, etc; (d) contstruction of maintenance of house under colonisation and settlement schemes; (e) construction of maintenance of house under colonisation and settlement schemes; (f) construction and maintenance of choultries and rest-houses; (g) construction and maintenance of houses for Panchayat staff and other village functionaries; (h) the establishment and maintenance of works for the provision of employment, particularly in times of scarcity; (i) the extension of village sites and the regulation of buildings and housing schemes; (j) the opening of and maintenance of public markets, slaughter houses, bus-stands, landing places, halting places and ferries and also the licensing of such places opened and maintained by private individuals and institutions; and

147

(vii) General(a) preparation of plans for the development of the panchayat area (b) the promotion, improvement and encouragement of cottage and village industries; (c) promotion of pisciculture; (d) preservation of objects of archaelogical interest; (e) the promotion of social and moral welfare of the inhabitants of the Panchayat area including the promotion of prohibition, promotion of social equality, amelioration of the condition of the backward classes, the eradication of corruption and the discouragement of gambling, litigation and other anti-social activities; (f) the encouragement of any of the services and activities mentioned in the foregoing clauses of this section by the grant-in-aid or otherwise; (g) any other measure of work which is likely to promote the health, safety, education, comfort convenience or social or economic or cultural well being of the inhabitants of the Panchayat area. (3) The Government may by notification in the Gazette declare any of the duties or functions falling within sub-section (2) to be obligatory duties or functions for such Panchayat areas as they may decide.

APPENDIX V Statement showing the Area, population Etc. of Panchayats in the State Sl. Name of Panchayat No TRIVANDRUM DISTRICT 1 Aryancode 2 Aryanad 3 Aruvikkara 4 Amboori 5 Anad 6 Anjengo 7 Andoordonam 8 Athiyanuur

Grade

Rear constituion

I I I I I I Spl I

1971 1971 1953 1975 1976 N.A. 1953. N.A.

148

of Area in Sq. Population as km 1981 census 21.78 104.92 21.86 49.47 24.15 3.36 13.96 12.44

18973 23725 23645 15897 23864 15632 19984 21035

per

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

Attipra Azhoor Balarampurm Chemmaruthy Chenkal Cherunniyoor Chettivilakom Chirayinkil Edava Elakamon Kadakampally Kadakkavoor Kadinamkulam Kallara Kallikkad Kalliyoor Kanjiramkulam Karakulam Karavaram Karumkulam Karode Kattakada Kazhakuttam Kizhuvilam Kilimanoor Kollayil Kottukal Kulathur Kunnathukal Kuttichal Madavoor Mangalapuram Manampoor Manikal Maranallor Marukil Mudakkal Nagaroor Nanniyode Navaikulam

Spl Spl Spl I Spl I Spl Spl Spl I I Spl Spl Spl II Spl I Spl I I I Spl Spl Spl I I I I I I I Spl I I I I I I I Spl

N.A. N.A. N.A. N.A. 1953 N.A. 1962 1951 N.A. 1947 1961 N.A. 1953 1961 1961 1961 1953 N.A. N.A. N.A. 1961 1953 1953 1951 N.A. N.A. 1961 1953 1953 1968 1979 1961 1977 1953 N.A. 1967 1953 N.A. 1961 1960

16.03 12.46 10.53 17.54 19.37 10.87 7.69 10.87 9.14 17.75 8.14 10.39 17.68 39.48 106.27 17.23 10.36 25.01 22.07 2.43 15.67 22.54 19.47 14.74 19.04 13.73 12.16 11.24 26.85 19.74 18.71 21.66 15.08 33.34 25.13 16.39 27.47 23.30 38.85 28.23

149

27689 24209 26917 23118 29038 15083 27118 28887 24839 19222 20594 23364 33647 21489 10978 26923 15422 32845 22863 22412 24101 28768 24895 25569 16734 19124 25674 26816 30255 15234 15809 27707 17880 28054 27790 24146 26145 21179 23109 29058

49 Nellanad 50 Nemom 51 Ottasekharamangalam 52 Ottoor 53 Panavoor 54 Pallichal 55 Pallikkal 56 Pangode 57 Parassala 58 Pazhayakunnummel 59 Peringammala 60 Perumkadavila 61 Perumpazhuthur 62 Poovar 63 Poovachal 64 Pothencode 65 Pulimath 66 Pullampara 67 Sreekariyam 68 Thirupuram 69 Thiruvallam 70 Tholicode 71 Ulloor 72 Uzhamalakkal 73 Vakkom 74 Vamanapuram 75 Vattiyoorkavu 76 Vellarada 77 Vellanad 78 Vembayam 79 Venganoor 80 Vettoor 81 Vilappil 82 Vilavoorkal 83 Vithura 84 Vizhinjam QUILON DISTRICT 1 Adichanaloor 2 Alappad 3 Alayamon

Spl Spl II II II I II I Spl Spl I I I I Spl Spl Spl I Spl I Spl II Spl I Spl I Spl Spl I Spl Spl Spl Spl II I Spl

N.A. 1961 N.A. 1977 1976 1945 1979 1977 1948 N.A. 1961 1953 1953 1969 1968 1953 1961 1977 1961 1969 1962 1973 1961 1971 1953 1977 1961 1951 1954 N.A. 1962 1953 1979 1979 1973 1962

Spl I Spl

1953 N.A. 1961

18.46 12.18 18.15 9.47 21.90 21.70 16.18 23.31 20.02 25.31 217.95 17.54 18.91 7.34 30.06 20.85 26.93 25.90 23.73 8.57 13.60 22.37 16.67 18.75 5.36 23.87 10.62 31.60 22.19 30.58 10.12 6.82 19.42 12.02 131.59 12.62 19.79 7.38 37.74

150

18729 33288 15462 11983 15624 31130 13032 24030 40867 21487 27542 18495 29605 18024 33272 20630 24096 19419 34551 15429 30547 21783 38277 17255 15935 18419 24249 30735 22361 28052 25982 18366 22980 18433 22574 37298 27480 22883 17002

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43

Anchal Arienkavu Chadayamangalam Chathannur Chavara Chithara Clappana Devikulangara East Kallada Edamulakkal Elamadu Eravipuram Ezhukone Ittiva Kadakkal Kalluvathukkal Karavalloor Karunagappally Kareepra Kilikollur Kottamkara Kottarakkara Krishanapuram Kulakkada Kulasekharapuram Kulathupuzha Kundara Kunnathur Mayyanad Melila Munore-Island Mylom Mynagappally Nedumpana Neduvathur Neendakara Nilamel Oachira Pallickal Panmana

Spl I I Spl Spl Spl I I Spl Spl I Spl Spl Spl Spl Spl I Spl Spl Spl Spl Spl I Spl Spl Spl Spl Spl Spl I I I I Spl Spl I I Spl I Spl

N.A. 1969 1977 1961 1961 1961 1961 1961 N.A. N.A. 1962 1964 1953 1963 1951 1951 1962 1963 1955 N.A. 1961 1961 1961 1961 1961 1968 1969 1961 N.A 1961 N.A. N.A. 1953 1964 1961 1978 1977 1961 1951 1953

24.45 196.84 19.04 33.56 11.89 57.70 17.49 6.75 12.20 38.73 30.02 9.87 17.24 43.89 48.90 36.57 23.64 18.65 23.20 11.21 25.31 17.40 10.96 29.18 16.75 422.23 11.16 21.44 17.21 18.52 13.36 27.49 19.70 28.06 22.70 10.19 22.02 12.86 41.72 16.85

151

24993 15170 18426 41191 33388 37930 19003 19903 19730 32244 21037 46300 20953 30112 40539 35705 19878 39123 25109 50734 53349 26678 22498 27849 37435 28069 16982 21038 36696 19645 9938 27565 32637 36364 24023 13623 12166 23146 35392 41096

44 Paravoor 45 Pathanapuram 46 Pavithreswaram 47 Perayam 48 Perinad 49 Piravanthoor 50 Poothakkulam 51 Pooyappally 52 Poruvazhi 53 Pattazhy-Thekkekara 54 Pattazhi-Vadakkekara 55 Sasthamcotta 56 Sooranad-South 57 Sooranad-North 58 Sakthikulangara 59 Thalavoor 60 Thazhava 61 Thekkumbhagom 62 Thenmala 63 Thevalakkara 64 Thodiyoor 65 Thrikkadavoor 66 Thrikkaruva 67 Thrikkovilvattom 68 Ummannur 69 Vadakkevila 70 Velinallur 71 Vettikkavala 72 Veliyam 73 Vilakudi 74 West-Kallada 75 Yeroor ALLEPPEY DISTRICT 1 Ala 2 Ambalapuzha 3 Arattupuzha 4 Aroor 5 Arookutty 6 Aryad 7 Bharanikkavu

Spl Spl I Spl Spl Spl I Spl I I II Spl I I Spl I I I Spl Spl I Spl Spl Spl Spl Spl Spl I Spl Spl I I

1952 1961 1961 1969 1953 1961 1961 1953 1953 1979 1979 1961 1961 N.A. N.A. 1961 N.A. 1953 1961 N.A. 1953 1962 1951 1961 1963 N.A. 1961 1961 1961 1961 1953 N.A

16.19 26.65 23.62 15.48 24.92 129.85 16.57 22.28 19.35 18.65 18.07 24.42 17.17 22.67 9.17 33.67 23.58 20.26 164.15 15.71 20.61 14.85 18.38 19.31 34.43 8.55 27.46 36.23 30.28 21.43 13.36 42.99

II Spl I Spl II I Spl

1951 N.A 1947 1951 1979 1961 N.A

10.65 24.17 22.80 15.14 11.10 5.91 23.47

152

35562 26286 26970 19946 44829 30150 20696 20280 22327 15025 12931 25502 18823 23223 38559 29021 32976 13805 23502 33414 35535 31236 20788 40108 29100 43680 21548 30612 27115 27335 16692 29447 12532 39825 27252 29002 14079 21068 32567

8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45

Bhudhannoor Champakulam Chennam Pallippuram ChennithalaThriperumthura Cheppad Cheriyanad Cheruthana Chettikulangara Chingoli Chunakkara Edathua Ezhupunna Harippad Kainakari Kadakarappally Kandalloor Kanjikuzhi Karithikappally Karuvatta Kavalam Kodamthuruthu Kumarapuram Kuthiyathodu Mannar Mannancherry Mararikulam North Mararikulam South Mavelikkara Thamarakulam Mavelikkara Thekkekara Muhamma Mulakuzha Muttar Muthukulam Nedumudi Neelamperoor Nooranad Panavally Pandanad

I I I I

N.A 1969 N.A 1947

12.92 22.97 25.53 22.26

16417 17466 23537 26253

I Spl I Spl I I Spl Spl Spl I I I I I I I Spl I I Spl Spl I Spl Spl

1961 1951 1950 1961 1961 N.A 1961 1953 1951 N.A N.A 1947 1961 1961 1951 1951 1963 1951 1963 N.A N.A 1952 1960 1963

12.67 14.24 14.25 20.44 7.24 17.32 22.29 14.08 9.56 36.45 8.95 9.74 16.62 8.73 17.69 17.43 10.81 11.10 9.80 17.55 37.50 16.97 18.63 20.88

17641 19803 11916 30800 13121 20045 22081 20237 13770 20910 16322 18118 21860 16815 19537 14240 16705 18946 19942 26671 35372 24358 39836 22985

I I I II I I II Spl I I

N.A. 1952 1953 1953 1976 1959 N.A. 1961 1968 1961

19.82 26.76 22.64 10.48 11.58 25.98 22.22 21.28 19.55 10.41

28158 20705 24627 10472 19144 21707 13101 22768 23653 11700

153

46 Palamel Spl 47 Pallippad I 48 Pathiyoor I 49 Pattanakkad Spl 50 Puliyoor I 51 Pulinkunnu Spl 52 Punnapra Spl 53 Purakkad I 54 Perumpalam III 55 Ramankari II 56 Shertallai South I 57 Thakazhy II 58 Thalavady I 59 Thaneermukkom Spl 60 Thazhekkara Spl 61 Thiruvanvandoor I 62 hirukkunnapuzha II 63 Thuravoor I 64 Thycattussery I 65 Vayalar I 66 Vallikunnam I 67 Veliyanad II 68 Venmony I 69 Veeyapuram II PATHANAMTHITTA DISTRICT 1 Adoor Spl 2 Anicad I 3 Aranmula Spl 4 Aruvappalam I 5 Ayiroor Spl 6 Chenneerkara I 7 Cherukole I 8 Chittar I 9 Elanthoor I 10 Enadimangalam I 11 Eraviperoor Spl 12 Erathu I 13 Ezhamkulam I 14 Ezhumatoor I 15 Kadampanad Spl

N.A. 1955 1961 1963 1951 N.A. N.A. N.A. 1979 N.A. 1953 1961 1950 1962 N.A. N.A. N.A. 1953 1953 N.A. 1955 N.A. 1951 1955

25.60 26966 16.93 22409 16.28 27942 15.34 26627 11.68 15220 31.53 23092 19388 40422 23.19 25851 16.37 8614 16317 13558 18.34 30911 28.01 18577 15.76 22528 31.44 35648 25.26 32729 10.09 14690 12.53 23111 19.18 23621 13.82 17669 14.44 20698 21.36 25617 19.41 13356 18.02 19969 14.02 12071

1953 1954 1955 1953 1949 1952 1983 1971 1962 N.A. 1951 1963 1951 N.A. N.A.

20.42 19.04 24.04 277.70 25.76 19.50 15.61 25.90 15.09 30.77 18.64 21.74 30.55 27.89 23.95

154

24995 13563 26591 20625 21669 18919 12859 15401 13976 18641 23588 20884 28400 17835 23103

16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

Kadapra Kalanjoor Kallooppara Kaviyur Kodumon Koippuram Koni Kottanad Kottangal Kozhencherry Kulanada Kunnamthanam Kuttappuzha Kuttur Mallappally Mallappuzhasserry Malayalappuzha Mezhuveli Mylapra Naranganam Naranamoozhi Nedumpuram Niranam Omallur Pandalam Pandalam-Thekkekkara Peringara Pramadam Puramattom Ranni Ranni-Angadi Ranni-Pazhavangadi Ranni-Perinad Seethathode Thannithodu Thottappuzhassery Thumpamon Vadasserikkara Vallicode Vechoochira

Spl Spl I I Spl Spl Spl II I Spl Spl I Spl I Spl II Spl I I I III I I Spl Spl I Spl I I I Spl Spl Spl I I I I Spl Spl I

1951 N.A. N.A. 1961 N.A. N.A. 1951 1951 1957 1961 N.A. 1953 1953 1953 1951 1953 1947 1953 N.A. N.A. 1983 1961 1963 N.A. 1953 N.A. 1961 N.A. 1951 1947 1961 1961 N.A. 1971 1978 1953 1953 1961 1961 N.A.

14.74 66.01 16.86 12.67 36.36 22.26 41.44 17.01 23.08 8.61 21.50 17.57 13.40 12.16 20.01 12.45 27.53 14.36 10.38 20.42 20.00 8.49 13.17 14.54 28.40 19.39 20.10 37.10 14.66 15.64 30.72 65.43 103.60 651.94 428.45 14.46 7.84 59.57 18.66 51.80

155

20720 31129 16983 15111 24977 23589 25749 13561 16170 12460 21948 16943 22550 17234 16514 10925 18114 13654 9974 16407 15000 12341 15066 15280 35591 15679 21771 27901 14401 13179 15150 21853 30552 16739 13805 14894 7574 21531 18766 27783

IDUKKI DISTRICT 1 Alakode 2 Arakulam 3 Ayyappancoil 4 Bysonvalley 5 Chinnakkanal 6 Chakkuppallom 7 Edavetty 8 Elappara 9 Erattayar 10 Idukki-Kanjikuzhi 11 Kamakshy 12 Kanchiyar 13 Kanthallor 14 Karimannoor 15 Karimkunnam 16 Karunapuram 17 Kattappana 18 Kodikulam 19 Kokkayar 20 Konnathady 21 Kudaythoor 22 Kumaramangalam 23 Kumily 24 Kuttampuzha 25 Mannamkandam 26 Manakkad 27 Marayoor 28 Mariyapuram 29 Munnar 30 Muttom 31 Nedumkandam 32 Pallivasal 33 Pampadumpara 34 Peermade 35 Peruvanthanam 36 Purapuzha 37 Rajakkad 38 Rajakumari 39 Sanathanpara

II Spl I II I I II Spl I II II I II I II Spl Spl I I Spl II Spl Spl I Spl I II I Spl I Spl I I Spl I II I I Spl

1968 N.A 1977 1969 1969 1977 1968 1962 1971 1976 1968 1977 1964 1961 1961 1976 1961 1976 1973 1961 1961 1951 1953 1969 1969 1961 1964 1973 1961 1961 1968 N.A. 1976 1953 1951 1961 1969 1969 1972

22.54 194.25 42.80 44.03 66.74 40.71 18.43 83.63 32.37 227.51 32.38 64.65 116.29 33.33 22.67 53.21 52.77 18.92 55.91 93.08 27.64 20.05 816.72 543.07 271.53 19.85 108.07 28.33 556.87 25.44 71.95 62.40 36.19 114.75 57.36 23.52 31.03 38.15 78.71

156

8519 21609 10408 9457 9884 16616 9980 25263 18765 20673 17855 21096 8140 18696 11408 28134 28226 12369 11745 2835 11397 11399 34918 18890 24814 11898 6970 9872 78833 9741 30366 14771 14818 24161 17389 11112 15792 10695 11555

40 Senapathy 41 Udumbanchola 42 Udumbanoor 43 Upputhara 44 Vandemettu 45 Vandiperiyar 46 Vannapuram 47 Vathikudi 48 Vattavada 49 Vazhathope 50 Vellathooval 51 Velliamattom KOTTAYAM DISTRICT 1 Akalakkunnam 2 Arpookara 3 Athirampuzha 4 Ayarkunnam 5 Ayamanam 6 Bharananganam 7 Chempu 8 Chirakkadavu 9 Elikulam 10 Erattupetta 11 Erumely 12 Ettumanoor 13 Kadanadu 14 Kadaplamattom 15 Kaduthuruthy 16 Kallara 17 Kanakkari 18 Kangazha 19 Kanjirappally 20 Karoor 21 Karukachal 22 Kidangoor 23 Kooroppada 24 Koottickal 25 Kozhuvanal 26 Kumarakam 27 Kumaranalloor

II Spl I I Spl Spl I I III Spl Spl I

1971 N.A 1951 N.A. 1977 1951 1976 1970 1954 1969 1961 1961

I I Spl Spl Spl I I Spl I Spl Spl Spl I II Spl I I Spl Spl I Spl I I I I I Spl

1962 1954 1953 1961 N.A. 1953 1953 1951 1961 1961 1963 1953 1961 1971 N.A. 1961 1965 1963 1961 1951 1963 1979 1961 1973 1948 N.A. N.A.

31.22 80.14 30.94 71.62 68.18 107.83 23.28 80.90 67.81 171.69 48.12 29.65 34.84 24.37 19.73 30.70 34.35 27.04 18.42 38.81 40.14 14.24 82.46 28.27 40.19 12.98 33.73 27.48 23.23 31.19 52.47 36.84 21.25 25.12 27.42 33.82 21.13 46.61 14.06

157

10616 11438 19241 21248 23347 39865 19214 24004 3554 7498 23355 16351 18778 19150 32416 29282 29685 15979 17444 30028 20684 16505 35945 36601 17419 12404 29681 12192 19374 19626 36546 19377 17721 19268 20003 15169 12147 20807 35491

28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67

Kuravinlangad Kuricy Madappally Manjoor Manimala Marangattupally Maravanthuruthu Mennachil Meenadom Melukavu Moonnilavu Mulakulam Mundakayam Mutholi Nattakom Neendoor Neezhoor Nedumkunnam Paippadu Pallikkathode Pampady Panachikkadu Parathode Poonjar Poonjar-Thekkekkara Puthuppally Ramapuram Teekoy Thalanadu Thalappalam Thalayolaparambu Thalayazham Thidanadu Thrikodithanam T.V. Puram Thiruvarppu Udayanapuram Uzhavoor Vakathanam Vazhapally

I I I Spl Spl I I I III II II Spl I II Spl I II Spl I I Spl Spl Spl II I Spl Spl I II II Spl I I I I Spl I I Spl Spl

N.A. 1961 1952 N.A. N.A. 1979 1953 1953 1982 1961 1969 1968 1961 1961 1971 1961 1961 N.A. 1968 1961 N.A. 1954 1967 1969 1969 1951 1961 1961 1969 1969 1947 1962 1961 1968 N.A. N.A. N.A. 1972 1953 1955

22.93 16.22 24.02 28.98 37.42 37.58 15.69 30.14 12.16 30.49 33.41 28.73 82.67 18.12 25.79 26.00 28.91 25.32 20.88 22.46 41.44 22.74 53.53 24.16 60.86 22.40 54.54 27.19 32.24 22.73 20.63 22.40 37.19 13.31 17.03 33.59 20.15 25.09 26.48 21.73

158

16333 25357 26617 27645 18890 16664 19118 15965 13125 10559 8300 21819 43034 14036 36238 19419 17126 19718 19672 13450 35714 31512 21318 10091 18204 25317 27865 9182 8182 12709 19440 18705 17530 23777 17990 25161 22306 15069 28313 29527

68 Vazhoor 69 Vechoor 70 Veliyannoor 71 Vellavoor 72 Velloor 73 Vijayapuram ERNAKULAM DISTRICT 1 Aikaranad 2 Alengad 3 Amballoor 4 Arakuzha 5 Asamannoor 6 Avoly 7 Ayavana 8 Ayyampuzha 9 Chellanam 10 Chendamangalam 11 Chengamanad 12 Cheranalloor 13 Chittattukara 14 Choornikkara 15 Chottanikkara 16 Edakkattuvayal 17 Edathala 18 Edvanakkad 19 Elamkunnapuzha 20 Elanji 21 Eloor 22 Ezhikkara 23 Kadamakudy 24 Kadungallur 25 Kalady 26 Kalamassery 27 Kalloorkad 28 Kanjoor 29 Karukutty 30 Karumalloor 31 Kavalangad 32 Keerampara 33 Keezhmad

I I II I Spl Spl

1963 N.A. 1972 1962 1953 1961

24.61 29.13 19.49 23.46 19.29 29.69 I Spl Spl I I II I I Spl Spl I Spl I Spl Spl I I I Spl I Spl I Spl Spl Spl Spl I I Spl I I II Spl

159

19208 14553 10989 14582 18485 42924 1953 1961 1961 N.A. 1960 1961 N.A. 1980 1962 1962 1961 1961 1961 1969 1977 1961 1972 1921 1951 1961 1969 1962 1961 1961 1961 1953 1961 N.A. 1961 1951 N.A. 1963 61

25.64 18.35 22.59 29.31 21.27 18.60 29.47 24.55 17.60 10.83 15.15 10.59 9.46 11.01 12.68 26.27 15.98 11.24 11.66 29.48 21.95 15.08 12.91 18.06 16.44 27 24.40 14.32 33.55 21.05 59.91 28.74 17.79

16244 28944 19200 14627 14589 13757 16161 19284 29536 25893 22080 18381 22695 23712 13783 15395 22826 18707 43911 16030 52528 15516 13696 26602 23181 43767 12435 18056 25615 26091 24084 11650 23470

34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73

Kizhakkambalam Kothattukulam Kottappady Kottuvally Koovappady Kumbalam Kumbalanghy Kunnathunad Kunnukara Kuzhypilly Malayattoor Neeleswaram Maneed Manjallur Manjapra Maradu Marady Mezhuvannur Mookkannur Mudakuzha Mulanthuruthy Mulavukkad narakkal Nayarambalam Nedumbassery Nellikuzhy Paingottoor Paipra Palakuzha Pallarimangalam Pallippuram Pampakuda Parakkadavu Pindimana Piravom Poothrika Pothanicad Puthenvelikkara Ramamangalam Rayamangalam Sreemoolangaram

I Spl II I Spl I Spl I I I I II I I Spl II I I II Spl Spl Spl Spl Spl I II II II II Spl I I I Spl I II Spl I Spl I

160

N.A. 61 N.A. 61 53 N.A. 51 53 61 1962 N.A. 1952 1951 1980 1962 1967 1951 1961 1962 N.A. N.A. 1961 N.A. 1961 1953 1961 1961 1963 1978 1961 1953 N.A. 1962 1953 N.A. 1961 1962 1963 1951 1953

31.57 23.18 31.94 21.00 43.97 20.78 15.77 26.86 21.68 7.73 34.22 26.19 23.86 21.00 12.35 21.37 49.11 13.02 21.97 21.47 19.27 8.60 12.19 23.14 27.61 23.50 32.18 22.65 15.82 16.48 29.61 24.66 25.76 29.36 25.53 17.14 16.99 23.88 36.77 14.41

24521 15057 13987 30665 46747 21678 22376 22409 21053 10775 21163 14432 12730 9857 28749 12460 25571 12648 14280 19761 21397 21672 21726 23936 24176 13446 27004 12051 9828 37187 15662 25150 14025 24048 17208 8878 21319 13680 27271 19087

74 75 76 77 78 79 80 81 82 83

Thirumarady Thiruvaniyoor Thiruvankulam Thrikkakara Thuravoor Udayamperoor Vadakkekara Vadavucode-Puthencruz Valakom Varapetty

I I Spl Spl II Spl Spl Spl II II ...................

161

1963 N.A. N.A. 1962 1969 1952 1953 1953 1961 N.A.

29.24 21.91 10.49 27.46 12.33 24.86 11.44 36.88 23.72 21.50

15596 19559 15517 38318 15801 25717 29509 23653 15493 13385