The Second State Finance Commission Report (2001) , Kerala

SECOND STATE FINANCE COMMISION KERALA

REPORT PART -1

JANUARY 2001

1

Dr.Prabhat Patnaik Chairman

Phone: Off: 337430 518822 State Finance Commission Government of Kerala 6th Floor, Secretariat Annexe Thiruvananthapuram - 695 001 Dated: 8th January 2001

His Excellency the Governor of Kerala, Thiruvananthapuram Sir, The State Finance Commission was constituted by Government of Kerala in their notification dated 23rd June 1999 under clause (1) of Article 243-I read with clause (1) Article 243-Y of the Constitution of India to study the financial position of the Panchayats and the Urban Local Bodies and to make recommendations to the Governor. The Commission desires to submit its Report in two parts. The first part deals with the devolution of funds from the Consolidated Fund of the State and the strengthening of the tax base of the LSGIs. The second part will focus on the modification of the budgeting, auditing and accounting procedures and the streamlining of the financial administration of LSGIs. The Finance Commission has completed the first part of the Report. I have pleasure in submitting it herewith. Yours faithfully,

Dr.Prabhat Patnaik Chairman

2

Contents SECTION I

Chapter 1 Chapter 2

Introduction Approach of the Commission SECTION II

Chapter 3 Chapter 4

Overview of Local Government Finances The Decentralisation Process- a Summary SECTION III

Chapter 5

The First State Finance Commission SECTION IV

Chapter 6 Chapter 7 Chapter 8

The Devolution and Inter Sc Distribution of Plan Funds The Problem of Maintenance of Assets Non-Plan, Non-Maintenance Transfers SECTION V

Chapter 9

Enhancing Own Revenue of Local Self Governments SECTION VI

Chapter 10 Chapter 11

State Finances during the Decade 1990-2000 Some Issues raised by the Eleventh Finance Commission SECTION VII

Chapter 12

Procedural Safeguards SECTION VIII

Summary of Recommendations Annexures

3

ACKNOWLEDGEMENTS

1.

The State Finance Commission was appointed by Government of Kerala in a notification dated 23rd June 1999. The Commission desires to submit its Report in two parts. This is the first part of the Report of the State Finance Commission.

2.

The State Finance Commission was ably assisted by a Secretariat headed by Sri.V.Manikantan Nair, as its Secretary. The Commission extends its thanks to the following officers of the secretariat of the Commission. I. Shri.V.Manikantan Nair

Secretary

2.Shri.M.V.Haridas

Joint secretary

3. Shri.L.Sanal Kumar

Joint Director (Panchayats)

4. Smt.A.K.Sasikala

Joint Director (Municipalities)

5. Shri.RI.Raveendran

Under Secretary

6. R.S.Rajan Nair

Accounts Officer

7. Shri.K.G.Sadasivan

Section Officer Section Officer

8. Shri.M.V.Markose Assistant 9. Shri.M.B.Sanu Assistant 10.Shri.P.Unnikrishnan Nair Assistant 11. Shri.S.Suresh Babu Assistant 12. Shri.J.L.Justin Wills Assistant

13. Shri.A.Shibu

4

14.

3.

Shri.B.Pratheep Kumar

Assistant

15. Shri.B.Mohanan

Typist

16. Shri.B.Rajendran Nair

Typist

17.

Confidential Assistanat

Smt.K.Ambika

18. Shri.K.Thankappan

Peon

19.

Smt.C.Kumari

Peon

20. Shri.P.B.Ajithkumar

Peon

The Commission gratefully acknowledges the support it received from Sri. S. Parameswaran Nair,

Consultant,

Municipalities

and

Sri.K.Pushparajan , Consultant, Panchayats. The Commission has greatly benefited from the experience and expertise of the consultants. 4.

The Commission is very thankful for the support it received from the State Government and its various Departments and senior officials by way of information, suggestions and valuable advice.

5.

The Commission likes to offer special thanks to Smt.Shaheena, Assistant Professor, Kerala Agricultural University and Dr. Vikas Rawal, Centre for Development Studies, for the support it received from them in the econometric analysis of a vast volume of data and for the simulation exercises they have done for the Commission. Dr.K.N.Harilal of M.G.University, Kottayam, was kind enough to spare time for a number of very helpful discussion.

6.

The Commission also wishes to thank Dr. I.S.Gulati, Dr.T.M..Thomas Issac and Sri.E.M.Sreedharan Namboothiripad, members of the State 5

Planning Board, and Sri.K.N.Kurup, Secretary, Planning Department, for the valuable suggestions, advice and guidance given by them. 7.

The Commission likes to record its appreciation of the commendable work done by Sri.Vimal and Sri. John Joseph, software programmers and Shri. R. Ratheesh Kumar, Computer Operator. Sri N.Rajendra Prasad, Assistant Director, Statistics deserves special commendation for the analysis of data required by the Commission. The Commission would like to express its thanks to Shri.C.PR.Pillai, Confidential Assistant working in Kudumbasree for his high quality stenographic support. The Commission also acknowledges the assistance it received from Kudumbasree for the prompt and efficient computerisation of the whole data used by the Commission.

DR. PRABHAT PATNAIK, Chairman, State Finance Commission.

Thiruvananthapuram, 08.01.2001.

6

LIST OF TABLES

NUMBER 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8

CONTENTS Distribution of population - Village Panchayats Distribution of population - Municipalities Distribution of population - Corporations Geographical area of LSGIs Classification of Village Panchayats as per extant income norms. Classification of Municipalities as per extant income norms.

3.22 3.23 3.24 3.25

Property Tax rates in ULBs Rate of Building Tax in 1985 and 1995 in Village Panchayats. Rate of Property Tax in 1995 in Urban Local Governments. Rates of Profession Tax in Village Panchayats Rates of Profession Tax in ULBs Rates of Show Tax Receipts from Show Tax & Surcharge on Show Tax. Rates of Basic Tax Details of Basic Tax Grant Rate of Stamp Duty and Surcharge under the 1960 and 1994 Acts Distribution of Surcharge on Stamp Duty Stamp duty deducted and paid to KWA Calculation of Road Units for distribution of VTC Collection and distribution of MVT to LSGIs Share of important items of Non-Tax Revenue in total Non-Tax Revenue Grants-in-aid from the Rural Pool Distribution of General Purpose Grants Distribution of Specific Purpose Grant-in-aid Grant-in-aid given to local governments for running Schools

3.26

Grant-in-aid given to local governments for running Libraries

3.27 3.28 3.29 3.30 3.31

Loans availed by ULBs Plan Grant-in aid devolved to LSGIs Formula for Devolution of Plan Grants Non-Plan Grant-in- Aid to LSGIs Receipt and Expenditure of the establishment grants for District Panchayats / Block Panchayats Expenditure pattern in Village Panchayats and ULBs Self-sufficiency of LSGIs

3.9 3.10 3.11 3.12 3.13 3.14 3.15 3.16 3.17 3.18 3.19 3.20 3.21

3.32 3.33 & 3.34

7

4.1 8.1

Total plan grants to LSGIs as part of people's planning campaign (Including sponsored schemes) Non-Plan transfers to LSGIs

8.2

Tax-Cum- Grants Transfers (Excluding VTC)

8.3

Proposed Distribution of General Purpose Grant Between Tiers Some Important Items of 191 Non-Plan expenditure 200001 Salary, Interest and Pension components of the State for the period 1991-99 Expenditure component of Revenue Deficit from 198990 to 1999-2000 Outlay on Capital Expenditure from 1990-91 to 1999-2000

8.4 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 10.9 10.10 10.11 10.12 10.13 10.14 10.15

Loans and Advance from Government of India 1990-91 to 1998-99 Small Savings and Deposits from 1990-91 to 1998-99 State Provident Funds 1990-91 to 1998-99 Internal Debt of the State from 1990-91 to 1998-99 Total Debt of the State Relative shares of the major streams of borrowings Debt and Interest payments for the period from 19902000 Maintenance Expenditure of the State from 1990-91 to 1999-2000 Gross Fiscal Deficit over of the decade Growth Rates of various items of Tax Revenues Projected Fiscal Services with CFC recommended transfers for 200 1-2006 Behaviour of Revenue Deficit as percentage of SDP

8

LIST OF ANNEXURES NUMBER

CONTENTS

1.1

Notification No. 33384/SFC.Al/99/Fin, dated 23,6.99

1.2

Notification No. 48596/Admn.AI/2000/Fin, dated 26.7.2000

1.3

Visit of the commission to LSGIs of each type

1.4

Commission's discussions with Associations

1.5

Commission's discussions with Secretaries and Heads of Departments Municipalities having Entertainment Tax and Additional Entertainment Tax Exceeding Property Tax collection Use of provisions by ULBs - A Status Report

3.1 3.2 3.3 3.4 3.5.1

Details of Plan provisions to Panchayat Raj / Nagarapalika Institutions Details of Non-Plan Specific Programmes 2000-2001

3.5.6

Total receipts (excluding grant-in-aid for peoples' plan campaign) of Village Panchayats 1993-94 to 1998-99 Abstract of total receipts of Village Panchayats under own revenue Percentage share of taxes to total Direct Tax Re venue- Village Panchayats Percentage increase of taxes over previous year- Village Panchayats Percentage increase of own revenue over previous yearsVillage Panchayats Share of taxes in total own revenue- Village Panchayats

3.5.7

Share of each item under own revenue- Village Panchayats

3.5.8

Total expenditure of Village Panchayats for the years 199394 to 1998-99 (excluding plan grant in aid for peoples' plan campaign) Per capita expenditure of Village Panchayats

3.5.2 3.5.3 3.5.4 3.5.5

3.5.9 3.6.1 3.6.2 3.6.3 3.6.4 3.6.5

3.6.6

Total receipts (excluding grant-in-aid for peoples' plan campaign) of Municipalities 1993-94 to 1998-99 Abstract of total receipts of Municipalities under own revenue Percentage share of taxes to total Direct Tax RevenueMunicipalities Percentage increase of taxes over previous year-Municipalities Percentage increase of own revenue over previous yearsMunicipalities Share of taxes in total own revenue –Municipalities 9

3.6.7 3.6.8 3.6.9 3.6.10 3.7.1

3.7.2 3.7.3 3.7.4 3.7.5 3.7.6 3.7.7

3.7.8 3.7.9 3.7.10 4.1

4.2.1 4.2.2

4.2.3 4.3 5.1 6.1 9.1 9.2 9.3 9.4 9.5 9.6 9.7 9.8

Share of each item under own revenue -Municipalities Total expenditure of Municipalities for the years 1993-94 to 1998-99 (excluding plan grant in aid for peoples' plan campaign) Per capita expenditure of Municipalities Total Receipts and Expenditure of Municipalities at a glance Total receipts (excluding grant-in-aid for peoples' plan campaign) of Municipal Corporations 1993-94 to J 998-99 Abstract of total receipts of Municipal Corporations under own revenue Percentage share of taxes to total Direct Tax RevenueCorporations Percentage increase of taxes over previous year-Corporations Percentage increase of own revenue over previous yearsCorporations Share of taxes in total own revenue-Corporations Share of each item under own revenue -Corporations Total expenditure of Municipal Corporations for the years 1993-94 to 1998-99 (excluding plan grant in aid for peoples' plan campaign) Percapita expenditure of Municipal Corporations Total Receipts and Expenditure of Municipal Corporations at a glance Details of transfer of Institutions and Staff to LSGIs Physical achievement of Peoples Plan Campaign Panchayats Physical achievement of Peoples Plan Campaign – Municipalities Physical achievement of Peoples Plan Campaign Corporations Functions assigned to LSGIs Status of implementation of the recommendations of the First SFC Proposed Formula for Infer Se Distribution of Plan Funds Presumptive Profession Tax for Traders and self employed persons Proposed Licence fees for Trades and Installation of Plants or Machinery Proposed Licence fees under Kerala Cinema Regulation Rules Proposed Rate of Licence fees for Private Market Proposed Licence fees under Kerala Places of Public Resort Act Proposed Rate of Licence fees for keeping animals for commercial purposes Proposed Rates for market fees Proposed Rate of fees for using Public Halting and Parking Places 10

9.9

Proposed Rate of Rent and Fee for Slaughtering Animals in Public and Private Slaughterhouse

CHAPTER I INTRODUCTION BACKGROUND 1.1

Kerala has been following a unique trajectory of decentralisation by devolving substantial development funds to Local Self Government Institutions (LSGIs) for the preparation and implementation of locally appropriate development projects and programmes. The People's Planning Campaign has attempted to use planning as the entry point to achieve a high degree of democratic decentralisation, ultimately moving towards the realization, in letter and spirit, of the Constitutional goal of "genuine institutions of local self government" as set forth by the 73rd and 74th Amendments. The Campaign has succeeded to a large extent in setting the agenda of decentralisation and pushing its pace. The decentralisation efforts of Kerala have moved from the experimentation phase through a corrective phase into the institutionalization phase. This is the background against which the Second State Finance Commission (SFC) has been set up. Thus the Second SFC has a critical role to play in the consolidation of the gains of the decentralisation experience and in laying a firm foundation for its institutionalization.

11

APPOINTMENT OF STATE FINANCE COMMISSION 1.2

1.3

The First State Finance Commission for Kerala as envisaged in Article 243 -I and 243 -Y of the Constitution of India and as provided in Section 186 of the Kerala Panchayat Raj Act 1994 and Section 205 of the Kerala Municipality Act 1994 was appointed on 23rd April 1994. The Commission gave its final report to Government in February 1996. The Second SFC was appointed by Notification No.33384/SFC.Al/99/Fin on rd the 23 of June 1999, (Annexure 1.1) initially for a period of one year which was later extended by one more year by Notification No. 48596/Admn/Al/2000/Fin dated 26-7-2000 (Annexure 1.2). As in the case of the First Finance Commission this is also a three member Commission whose members are: Chairperson

Dr. Prabhat Patnaik, Professor, Jawaharlal Nehru University, New Delhi.

Dr. K.M. Abraham, Secretary to

Member

Government, Finance (Resources) Department, Government of Kerala.

Shri S.M.Vijayanand, Secretary to Government, Local Administration Department, (Now renamed as Local Self Government Dept.), Government of Kerala.

12

Member

TERMS OF REFERENCE 1.4

The Terms of Reference of the Commission as given in the notification are extracted below: "The Finance Commission shall review the financial position of the Panchayats and the Municipalities and make recommendations as to (a)

The principles which should govern, (i) the distribution between the State, Panchayats and Municipalities of the net proceeds of the taxes, duties, tolls and fees leviable by the State, which may be divided between them under Part IX and Part IX-A of the Constitution and the allocation between the Panchayats at all levels and the Municipalities of their respective shares of such proceeds; (ii)

the determination of the taxes, duties, tolls and fees which may be assigned to or appropriated by, the Panchayats and the Municipalities;

(iii) the grants-in-aid to the Panchayats and the Municipalities from the Consolidated fund of the State. (b) The measures needed to improve the financial position of the Panchayats and the Municipalities with reference to,(i)

the scope for local bodies to raise institutional

13

finance, and suggest a framework for local self-governments to take recourse to such sources along with procedures to be followed and limits, if necessary, to raising such resources; (ii)

need for sharing the cost of maintenance of assets and institutions transferred to local self-governments, and evolving criteria for it, with due regard to the fiscal position of the State Government and the local self-governments;

(iii)

steps necessary for efficient financial management with particular reference to efficiency in resource mobilization and economy in expenditure;

(iv)

settlement of claims and dues of Panchayats and Municipalities vis-a-vis Government and Governmental agencies;

(v)

Procedures to be followed for smooth flow of funds to local selfgovernments and for ensuring proper financial accountability,"

1.5

Government have gone beyond the Terms of Reference given to the First SFC, and broadened the scope of the Commission's work by expanding the second portion of the Terms of Reference dealing with the measures needed to improve the financial position of LSGIs by clearly stating five specific items. Thus, the Second SFC, besides suggesting devolution of funds and their distribution among LSGIs has to go into the question of financial management including raising of resources, availing

14

of loans, economy in spending and settlement of debts and dues. Also the Second SFC has been given the task of suggesting procedural refinements to ensure a smooth flow of funds from Government to local governments and for ensuring proper financial accountability.

METHODOLOGY FOLLOWED BY THE COMMISSION 1.6

The Commission has followed a methodology appropriate to the comprehensive task entrusted to it as per the Terms of Reference. Some of the salient features of the methodology adopted by the Commission are outlined below: (1)

The of

Commission the

five

reference Block

directly

types

to

Corporation

of

financial

Panchayat, by

studied local matters

District

visiting

the

functioning

government viz.,

one

with

Village

Panchayat,

of

each special

Panchayat,

Municipality

representative

of

each

and type.

(Annexure 1.3) (2)

The

Commission

of

local

consultations

government

Association, Municipal

held

Block

brought

to

the

finances

of

these

associations

Panchayat

Chairmen's fore local

with viz.,

Panchayat

Association

Chamber. various

representatives

These issues

governments

and

consultations

relating as

the

to

the

recognized

and

Secretaries

and

felt by the elected representatives. (Annexure 1.4) (3)

Detailed

discussions

Heads

of

were

Department

(Annexure 1.5).

15

held

with

involved

the in

decentralisation.

(4)

The Commission had a special meeting with the Finance Minister and the Finance Secretary.

(5)

There was an exchange of views with the State Planning Board

with

particular

focus

on

decentralised

plan

preparation and implementation. (6)

The

Commission

conducted

a

detailed

analysis

of

the

Report of the First Finance Commission and the followup action on it and Annexure IV of the State Budgets since the year 1996-97. (7)

The

services

of

one

Consultant

in

has

the Commission

each

were

utilized

respect

of

Panchayats

entrusted

the

by and

Municipalities. (8)

The

Commission

Auditors

of

India

thorough

study

of

(IPAI) the

with

Institute

the

budgeting,

task

of

of

accounting

Public

doing and

a

audit

systems in both the rural and urban local governments so IPAI

that

these

is

budgeting,

can

be

simplified

expected

to

produce

accounting

and

and

modernised.

detailed

auditing,

The

manuals

on

incorporating

the

best practices from within and outside the country. (9)

The

Commission

has

collected

governments

through

a

detailed

questionnaires

which

were

in

two

data

from

questionnaire. parts

for

the

local These Urban

Local Bodies (ULBs) and Village Panchayats and in one part for the other local governments were filled up and returned by all the local governments except 14 Village

16

Panchayats which could not fill up the first part of the questionnaire relating to own income and non plan grants.

SUBMISSION OF THE REPORT 1.7

The Commission intends to submit its Report in two parts. This Report deals with the first part of the Terms of Reference relating to devolution and a portion of the second part of the Terms of Reference dealing with maintenance needs and the funds required for meeting them and with procedures related to the flow of funds. The second part of the Report which is expected to be submitted in May 2001 would deal with the remaining items of the Terms of Reference. It would also give further suggestions for increasing local resource mobilization which would be generated after close interaction with the newly elected LSGIs whose tenure these Reports would basically cover.

STRUCTURE OF THE FIRST REPORT 1.8

The First Report is structured in eight Sections with twelve Chapters and a summary of the recommendations. The first Section has an introductory Chapter on the constitution of the Second Finance Commission, its Terms of Reference and the Methodology adopted by it and the second Chapter outlines the approach of the Commission to the major Terms of Reference. The second Section has two descriptive Chapters -one giving an overview of local government finances and other summarizing the decentralisation process in Kerala. Section III has just one Chapter analyzing the recommendations of the First SFC, with reference to their present status of operationalisation. Those recommendations, which need to be followed up further are identified in this Chapter. Section IV deals with devolution of funds from the State Government to the LSGIs. This theme is presented in three Chapters - one dealing with devolution of Plan funds, the next dealing 17

with devolution of funds exclusively for maintenance and the last one in the Section dealing with devolution of General Purpose Grant in lieu of the existing Assigned and Shared Taxes and Non-plan grants-in-aid. The fifth Section has the Chapter on enhancing the own revenues of LSGIs. 1.9

Section VI has a Chapter on State Government Finances and another Chapter giving the observations of this Commission on certain issues raised by the 11th Finance Commission. Section VII consists of the Chapter outlining the Procedural Safeguards, including legislative changes, which are required for a proper implementation of the recommendations of this Commission. And the last Section summarizes the recommendations.

18

CHAPTER 2

OUR APPROACH FINANCIAL DEVOLUTION 2.1

The State Finance Commission is concerned with the devolution of funds from the state government to the LSGIs in its entirety, and not merely with one particular part of the total devolution. There has unfortunately been a general tendency to treat the jurisdiction of the State Finance Commission as being confined to the devolution of non-plan funds, the matter of Plan funds being considered a prerogative of the state government. Even the Fist State Finance Commission of Kerala had only a few recommendations concerning the Plan, and did not go into the question of devolution of Plan funds. This tendency echoes the practice that has got established at the central level, where successive Central Finance Commissions have adjudicated over the allocation of only one part of the total devolution from the Union to the state governments, leaving the decision regarding the remaining, more substantial, part to the purview of bodies belonging to the central government itself, such as the Planning Commission or the Ministry of Finance. This tendency however cannot be defended on the grounds either of reasonableness or of conformity to the letter and spirit of the 73rd and 74th Amendments to the Constitution on whose basis State Finance Commissions are formed.

2.2

Such

a

separation,

and

corresponding

attenuation

of the Finance Commission, is unreasonable on two counts.

19

of

the

role

First, different categories of devolution are intrinsically interrelated. If more funds are devolved to LSGIs for plan projects, then correspondingly larger provisions have to be made for them for the maintenance and operation of the assets created through such projects. Two separate bodies therefore cannot in any meaningful sense (i.e. without one of them becoming a mere rubber stamp) decide on these two kinds of devolution. The inseparability of the two kinds of devolution necessitates that they fall under the jurisdiction of one body, which can only be the Finance Commission. Secondly, the 73rd and 74th Constitutional Amendments provide for a statutory body to adjudicate on financial matters, namely the State Finance Commission. The spirit of those Amendments therefore requires that the jurisdiction of that statutory body be as comprehensive as possible. The letter of those Amendments too is in conformity with this. The State Finance Commission's task is to "review the financial position" of local bodies. Since any such review can only be in relation to the functional responsibilities of the LSGIs, and these include the responsibilities vested in them for "the preparation of plans for economic development and social justice", it follows that even the letter of those Amendments enjoins upon the SFC a concern with the total financial requirement, both plan and nonplan, of the LSGIs. Our Commission accordingly proposes to take a comprehensive view of financial devolution from the state government to the LSGIs and not confine itself only to non-plan devolution. 2.3

Given this perspective, and the fact of the inseparability of different kinds of devolution, a tempting idea is to earmark a certain fixed proportion, say 20 percent, of the total tax revenue of the state government for devolution to LSGIs for both plan and non-plan use. The inter sc distribution of this amount among the LSGIs could then be determined by some specific criteria, and individual LSGIs could, within limits, be

20

left free to allocate the funds at their disposal in any manner they choose. This solution is tempting for a number of reasons. First, it is simple and appears more in keeping with the idea of genuine decentralisation which gives freedom of resource use to LSGIs. Secondly, it has intellectual pedigree, having been mooted by some of the first SFCs (including the SFC of West Bengal headed by Dr.Satyabrata Sen). Thirdly, it is in conformity with the trend being initiated by the Central Finance Commission itself. Fourthly, it apparently entails equitable sharing between the state government and the LSGIs: they evenly partake of affluence and penury, without either one of them squeezing the other in any obvious manner. And finally it would seem to be more appropriate in the Kerala context, where, the upkeep of the good infrastructure facilities being very important, the LSGIs should not be constrained by the plan - non-plan distinction. In these respects it would even appear to have an edge over the current practice in Kerala, following the Peoples' Plan Campaign, of giving a fixed percentage of plan funds (35 to 40 percent) to the LSGIs. 2.4

There are two obvious problems potentially associated with the current practice. The first arises from the fact that the LSGIs' requirement of nonplan funds, as already mentioned, is itself linked to the amount of plan funds made available to them. Ensuring that a certain percentage of plan funds is put at their disposal is therefore not enough; an appropriate amount of non-plan funds must also be made available to them for meeting the current operational costs and the maintenance requirements of the plan assets. A system in which a certain overall share of tax revenue of the state government is passed on to LSGIs, and the latter have a degree of flexibility in deciding how to deploy their share, would be better able to avoid any potential disproportionality between asset creation on the one hand and asset maintenance and operation on the other. The second problem associated with the current practice

21

arises from the fact that a relative or even an absolute decline in the size of the state's plan outlay leads ipso facto to a similar decline in the magnitude of devolution of plan funds to LSGIs and hence in the size of the LSGI plans. This means that a sudden draft on the state government's resources on the non-plan side, or plain non-plan profligacy on the part of the state government, or niggardliness on the part of the Planning Commission, or a financial squeeze imposed by the central government, all of these would invariably impinge on the size of the LSGI plans. If we are concerned that the size of these plans, which cater to the basic requirements of the mass of the people, should be kept insulated from such extrinsic developments, then a devolution formula which gives LSGIs a share of the state revenue as opposed to one which gives them a share of the plan outlay appears preferable. (To be sure, even with revenue sharing, LSGI plans would still be vulnerable to the profligacy, on the non-plan side, of the LSGIs themselves; but more directly exerted popular pressure, through institutions such as Grama Sabhas and Ward Sabhas together with the imposition of some pre-determined expenditure "norms", could take care of it). 2.5

The fear that a plan-outlay-sharing system makes LSGI plans vulnerable to a whole range of extrinsic developments including a financial squeeze emanating from the central government via cuts in grants-in-aid, is not an idle one. The additional fiscal burden imposed on the state government on account of the implementation of the recommendations of the Pay Commission, together with the fact that grants-in-aid from the Central government have tended to stagnate, has had an impact on the growth of the state's plan outlay in 1999-2000 (RE) and 2000-01 (BE), and correspondingly on the growth of plan transfers to the LSGIs, even though the absolute amounts of such transfers remain impressive. The total plan

22

and non-plan transfers1 to PRIs as a proportion of the total tax revenue of the state government, which amounted to 7.2 percent in 1996-7, increased to 20.8 percent in 1997-8 when the Peoples' Plan Campaign took effect. The ratio was 19.5 percent in 1998-9, but appears to have declined somewhat thereafter: to 16 percent in 1999-2000 (RE) and 14.1 percent in 2000-01 (BE). Since the proportion of non-plan transfers to the total tax revenue of the state government has remained more or less unchanged, amounting during these five years (in percentages) to 2.07, 2.15, 2.61, 2.2, and 2.61 respectively, it is the ratio of plan transfers to total revenue that appears to have been affected. To be sure, these figures do not tell the whole story, since they exclude the transfers by way of salaries to state personnel who have been assigned to LSGIs; besides, the period is too short, and, for the later years, we are not even talking about Actuals but only about Revised and Budget estimates. Nonetheless, the possibility in the coming years, if the fiscal problems of the central government get compounded, of these problems getting "exported" to the state level, and from there further downwards until they impinge on LSGI plans (or of an exactly similar denouement arising from a worsening of the state government's fiscal position for independent reasons), is to be reckoned with. 2.6

Though the above discussion constitutes a strong case for moving to a general revenue sharing arrangement between the state government and the local governments, the Commission feels that there are a number of weighty counter arguments which cannot also be ignored. These are summarized below.

1. The term "non-plan transfers" here refers exclusively to the transfers which figure in the Appendix IV of the Budget, i.e. it does not include the transfer of the proceeds of the shared and assigned taxes, to which the LSGIs are entitled or transfers in the form of payments of salaries and operational expenses on transferred schemes.

23

2.7

Any general sharing of revenue implies that there is a clear demarcation of responsibilities between the state government and the local governments. But actually this is an evolutionary process. Though Kerala has gone beyond any other state in sharing responsibilities with local governments there are areas like the productive sector where only over a period of time can the functional domains be defined with reasonable clarity. Indeed, the local governments which have been initiated into the planning process are themselves just coming to grips with the developmental needs and solutions within their functional domain, and would also require more time for working out the financial needs of various aspects of the responsibilities transferred to them.

2.8

Besides, the allocation of 35-40 percent of the Plan funds to the local governments also has a symbolic significance, since it is this move which really gave the big push to decentralisation. Participatory planning has been used as the entry point to make decentralisation genuine. Therefore it is necessary to continue the practice, of sharing Plan funds in this ratio, for some more time, until the institutions of local government have struck firmer roots.

2.9

There is a further consideration of some importance. A blanket revenue-sharing arrangement would even suggest a transfer of all obligations of meeting the current expenditure in LSGIrun institutions to the LSGIs themselves. It could for instance imply a transfer of the obligation to pay salaries to the large number of state employees, currently working in LSGI-run institutions but drawing their salaries from the state government, to the LSGIs themselves. These state government employees would overnight become LSGI employees. A blanket re venue-sharing arrangement would also transfer the task of purchasing supplies for LSGI-run institutions, such as medicines for hospitals, and books and consumables for 24

schools, to the LSGIs themselves. All this would entail, first of all, an enormous and unmanageable administrative burden on the LSGIs. They would have to manage the payroll of a large number of personnel who would now constitute their direct employees. They would have to arrange supplies for the day-to-day running of a host of institutions. These tasks are as onerous as they are unnecessary for LSGIs to perform. A distinction must be drawn between decentralisation of administrative burdens and decentralisation of decision-making. The former is not only not a precondition of the latter but may even thwart the latter. Proper sequencing is very important in the decentralisation process. An LSGI system which has not stabilised would be put to severe stress if it takes on the burden of administration in full. For example while it must be the LSGIs which should control officers placed under them, assign them tasks, and ensure their proper performance, this does not necessarily imply that they should bear the burden of recruitment, payment of salaries and dealing with service matters. These tasks consume a lot of time and energy and could detract from LSGI efficiency in carrying out their essential responsibilities. To be sure, there is an obvious contradiction in having personnel who are recruited by one agency but are answerable to another, a contradiction referred to by the Committee on Decentralisation of Powers as "dual control". But a forcible resolution of this contradiction by simply eliminating one of its poles, either through centralisation as existed earlier or through complete decentralisation entailing the parcelling out of administration, is no answer to the problem. 2.10

Even from a financial point of view, making LSGIs responsible for meeting the entire current expenditure obligations in LSGI-run institutions would make little sense. The state government has many more financial options than the LSGIs have. It can borrow. It can introduce new, innovative taxes;

25

and so on. In the event of an increase in the cost of administration, for example a rise in salaries, the state government can absorb the increase far more easily than the LSGIs in case they are asked to bear the cost of administration under a new dispensation. It was mentioned above that under the current practice of plan-outlay-devolution a sudden need on the part of the state government to spend more on the non-plan side would squeeze LSGIs' plans, and that this strengthened the case for revenue-sharing between the state government and the LSGIs. This argument clearly lacks general validity. It holds only when the increase in the state government's non-plan expenditure need is of a kind that LSGIs would not face when expenditure obligations are transferred to them along with a share of revenue. But if they have to face the same non-plan expenditure need as the state government, they would be worse off in a regime of revenue-sharing. For example if they had to implement Pay Commission recommendations out of their own funds in a regime of revenue-sharing, they would have ended up being worse off than they have actually been under the current dispensation. Of course it may be argued that additional financial options which the state government has, such as borrowing, should be made available to the LSGIs too. We examine this issue later, but, should this be done indiscriminately, then very sharp inequalities could emerge among LSGIs, forcing the backward ones to go under, which would defeat the whole purpose of decentralisation. 2.11

Enough has been said to show that any simple rule stipulating the transfer of a certain fixed proportion of total tax revenue from the higher to the lower level, would be inappropriate in the present Kerala context. Accordingly, we reject this approach. The approach we do adopt instead on the question of devolution has six main features which are given below.

26

2.12

First, for reasons discussed in Chapter 6, we are of the view that the current practice of making 35-40 percent of the plan outlay available to the LSGIs to spend on plan projects of their choice should be continued: our precise recommendation is that not less than one-third of total plan outlay (excluding state-sponsored schemes from the numerator) should be given to LSGIs, A feeling has been conveyed to us that the transfer of such substantial amounts of plan funds to the LSGIs has been accompanied by a corresponding slackening of revenue effort by the LSGIs themselves. This feeling is pervasive, though the empirical support adduced in its favour is not very persuasive. But irrespective of whether larger devolution has actually caused a slackening of revenue effort, any slackness in such effort is perse unwarranted. Stimulating revenue effort therefore is a must; and we do so by incorporating revenue effort explicitly into the formula determining the inter se distribution of plan resources.

2.13

Secondly, the question of maintenance of the assets newly created by the LSGIs from the enhanced devolution of plan funds under the Peoples' Plan Campaign, not to mention the assets transferred to them under the Government Order of September 1995, is going to become exceedingly important in the coming years. The resources required for the maintenance of both these types of assets would have to be provided by the state government, even though the maintenance work is actually carried out under the aegis of the LSGIs. In other words, in addition to the devolution of plan funds, the state government has to make available to the LSGIs an amount that would cover the maintenance expenditure on both types of assets. The reasoning behind this is obvious: if the transferred assets had not been transferred to the LSGIs, then the state government would have paid for their maintenance; since they have been transferred the requisite sum should be handed over to the LSGIs to whom these assets have been

27

transferred. Likewise, if the increased devolution of plan funds had not taken place, the state government would have used these plan funds through its various departments, and would have paid for the maintenance of the assets created through the use of these plan funds. The fact that this devolution has occurred simply means that these assets are now under the jurisdiction of the LSGIs; the state government's obligation to pay for the maintenance of these newly-created assets (and those continuously being created) is not removed thereby. Of course if the transferred or newlycreated assets were run on commercial lines, then the expenditure on maintenance could come from their own revenue, exonerating the government from the obligation to provide for their maintenance. But since the bulk of these assets are not commercially operated, and are not meant to be, the obligation on the state government remains. Finally, there are the assets which are neither transferred under the September 1995 Government Order, nor newly constructed out of the higher devolution of plan funds following the People's Plan Campaign. An important segment of this third category is constituted by assets which the LSGIs already owned prior to September 1995. The maintenance expenditure on these assets has come partly from the LSGIs' own funds, including what comes to them as Vehicle Tax Compensation, and to a limited extent from such non-plan, nonstatutory grants of the state government as the Village Road Maintenance Grant (when it existed). But the actual maintenance expenditure on these assets has in practice been rather meagre. Adequate expenditure on the maintenance of these assets, given their non-commercial nature, would necessarily require additional financial support from the state government. 2.14

We suggest that this additional amount, together with the requisite amounts for the first two categories of assets, should be provided by the state government. In other words, the state

28

government should provide the entire maintenance expenditure on the preexisting assets of the LSGIs, on the assets transferred to them after September 1995 and on assets newly-constructed by them out of plan assistance in the period since 1997-8. It need not, however, make any Vehicles Tax Compensation available to the LSGIs. Our approach is to get the state government to transfer a certain total amount for the maintenance of assets to the LSGIs as a whole, among whom it is to be distributed according to certain criteria reflecting maintenance needs. It is essential of course that the LSGIs in turn should not use the amount, handed to them for the maintenance of assets, for all sorts of other purposes; we wish to put this amount beyond their reach for expenditure other than on approved uses. 2.15

Thirdly, there are a host of payments made by the LSGIs to meet social obligations, such as unemployment allowance, scholorships etc., funds are provided by the state government. together under "Non-Plan" expenditures in of the state government's budget. The state continue to make appropriate transfers to this head for them to meet all such obligations.

2.16

pension schemes, for which the These are grouped the Appendix IV government should the LSGIs under

Fourthly, there is the question of operating costs on transferred assets, as distinct from maintenance. These are of two kinds: salaries of personnel and operating costs on account of current inputs, e.g. medicines for hospitals, books and consumables for schools. The state government is already meeting the operating costs of the transferred assets and should, in principle, continue to do so. A reasoning analogous to that in paragraph 2.13 would suggest that even on assets newly created by the LSGIs after the higher devolution of plan funds, the operating costs would have to be met by the state government, unless of course these assets themselves happen to be commercially viable.

29

In practice, however, any system where costs are met by one agency while decisions regarding their size are taken by another, runs the risk of profligacy (even if these decisions have to be formally approved by the first agency). This problem has reportedly become quite acute through pressure for the creation of new posts, by the LSGI. It would become even more acute in the coming years unless something is done about it immediately.

2.17

An immediate response to the problem may be to say that all new posts at the LSGI level should have to be financed out of their own funds (even as the state government meets the salary component on account of the transferred posts). This however could well lead to a diversion of funds earmarked for plan or maintenance purposes towards meeting a burgeoning salary bill. Even if safeguards against such diversions are provided, it would not be appropriate to take such a drastic step immediately. This can be considered as a possible long-term measure and deserves further discussion. Meanwhile to curb profligacy under the existing arrangement we make the following specific suggestion. For the creation of any new post at the LSGI level, no matter who is financing it, there has to be a process of consultation between the state government and the LSGI(s) concerned. After such consultations and before the proposal comes before the cabinet, clearance must be obtained from an Expenditure Watchdog body. We do not propose the setting up of a new Watchdog body. We recommend instead that the existing institution of Ombudsman should be used for the purpose. Technical and other help should be made available to the Ombudsman so that they can also take on this additional role.

2.18

Apart from this new arrangement we propose, recommendations regarding operating costs of LSGI have four elements: first, all existing salary commitments on

30

our assets

transferred schemes, including wages to temporary employees, must continue to be paid by the state government. Secondly, the current practice of state government funding of medicines and books should be continued exactly as it is, but in all other sectors, the state government should be freed from its obligation of having to meet operating costs. And even in the education and health sectors, all other operating costs, such as rents on buildings, electricity and vehicle running charges, telephone expenses etc. should be met by the LSGIs from their own funds including general purpose grants and upto 10% of maintenance grants. Thirdly, the LSGIs, apart from meeting all these operating costs, should have the freedom to undertake extra expenditure at the margin in the education and health sectors, over and above what the state government provides. And fourthly, to enable them to do so, they should be allowed to spend up to 10 percent of the Maintenance Transfer, which is being made available to them, for meeting operating costs. 2.19

Fifthly, in addition to the devolution under the above-mentioned heads, there are the transfers on account of taxes and certain non-plan grants from the state government to the LSGIs. There are three broad categories within this head: assigned taxes which are collected by the government to be handed over to the LSGIs (which in the case of PRIs include Basic Tax and Surcharge on Duty on Transfer of Property and for Urban Local Bodies (ULBs) only the latter); shared tax (which is the Motor Vehicle Tax); and a few grants. A plethora of grants makes the system cumbersome and opaque. Likewise even the system of earmarking particular tax revenues for distribution to LSGIs has little to recommend it. Our approach is to do away with this entire cumbersome system and to stipulate that a certain fixed proportion of the tax revenue of the state government is to be handed each year to the LSGIs. The state government in turn can retain the proceeds of the

31

taxes, which were either "assigned" or shared till now, for its own use. For determining the exact share which is to be so distributed among the LSGIs and also the inter redistribution of the amount among the various tiers of LSGIs, we make use of the observed historical shares in the recent past.

2.20

We are aware that in recommending a shift away from the system of assigning and sharing specific taxes, we are making a

radical

departure,

the world have

since

local

government

finances

all

over

traditionally been based on such a system.

While this departure per se may not cause control, their may be legitimate grounds for serious misgivings on the following score: tax assignment conferse a right on LSGIs which a system of sharing the over all tax revenue appears not to do; it appears to be in the nature of a grant that is open to withdrawal by the State Government at its will.

We wish to remove these

misgivings by emphasising that the tax share proposed by us should be deemed a matter of right by the LSGIs, sanctioned by appropriate legislation.

2.21

Finally,

a

consideration

which

we

hold

to

be

important

and

which has informed our entire approach in this report is that the system of transfers from the state government to the LSGIs should be made as simple as possible. Likewise, the formulae for inter se distribution of funds should be made as simple as possible. 2.22

To sum up, our Commission's approach devolution of funds in its entirety recommendations regarding both plan

is to take the and to make and non-plan

devolutions rather than confining ourselves only to the nonplan side, as has become customary at the Centre and in many states. Though we look at devolution in a comprehensive manner, we reject nonetheless the rather tempting idea of a 32

blanket division of the state government's tax revenue governing devolution. This idea entails fixing a particular share of the total tax revenue of the state government that is made available to the LSGIs as a whole; the amount is distributed among the LSGIs according to some formula and they are then left more or less free to spend their amounts as they like. This idea, notwithstanding its simplicity and appeal, is unworkable in the context of Kerala which has pursued its own unique trajectory of decentralisation, a pursuit that has to be taken by us as a historical datum. Our approach is to stipulate a share of plan outlay that must be handed over to the LSGIs, as is the current practice, and a share of tax revenue to be given as non-plan statutory transfer in lieu of the current complex and cumbersome system of tax-assignments and tax-sharing. In addition to these plan and non-plan transfers, the state government has to keep meeting the salaries of all personnel on the transferred assets, to keep making appropriate transfers to the LSGIs' for meeting a host of social obligations (non-plan payments under Appendix IV of the budget), and to keep defraying the costs of medicines in hospitals and books and consumables in educational institutions under LSGI-jurisdiction. It also has to transfer a certain amount every year for the purpose of meeting the maintenance requirements on LSGI assets. In arriving at the magnitudes of these transfers and their inter se distribution among the LSGIs, our objective has been to simplify the system as far as possible, so that the mystery and opaqueness governing the devolution of funds from the state government to the LSGIs get minimised.

RESOURCE MOBILISATION BY LSGIs 2.23

The increased plan allocation to LSGIs has generated a euphoria among them regarding availability of funds. There is in fact a pervasive feeling that LSGIs are flush with funds. There are however clear parameters within which such funds

33

can be spent; they are meant for new development ventures, and, implicitly, for such development ventures as would give adequate returns, both social and economic. It is important to note that local governments have traditional obligatory functions and are often judged on the quality of their performance of these functions, which relate to public health and sanitation, maintenance of infrastructure, and the exercise of regulatory civic functions to ensure good quality of life for the citizens. Now that a lot of new assets have been transferred to the LSGIs and the flow of maintenance funds from the state government cannot but be limited on any reasonable expectations, the need for mobilizing resources becomes very critical. If LSGIs can raise more funds by themselves they can dramatically improve the upkeep of assets transferred to them. An analysis of the resource inflows of LSGIs shows that in the case of Village Panchayats the proportion was broadly 3:2:11 respectively for own funds, non-plan grant-in-aid from the state government including assigned and share taxes, and plan grant-in-aid. The corresponding proportion for Municipalities as well as Corporations was 3:1:2. Own funds therefore constitute a significant amount. The very fact that LSGIs can raise resources including taxes is a symbolic affirmation of their status as institutions of local self government. The right to fix the rates for taxes and other revenues and collect them gives authority and importance to the LSGIs. On the other hand it also demands a considerable degree of responsibility from them, since the tax payers are not only very close to the collection point but are also witnesses to the mode of utilization of the taxes collected. This opens up the possibility of spontaneous taxcompliance as well as of community pressure to pay dues to LSGIs, provided the services of the local governments are perceived to be useful and relevant.

34

2.24

There are however certain problems with regard to the mobilization of revenue by LSGIs. The most important problem relates to the tax base, which is rather inelastic and cannot be widened very easily. Moreover, the minimum and the maximum rates for the taxes and most of the non-tax revenues are fixed at present by the state government. In the case of many of the non-tax sources the amounts are fixed by the government through rules, and these, for a variety of reasons, do not get revised in tandem with the rate of inflation. A serious additional problem relating to taxation at the local level is the fact of gross under-assessment. Our interactions with representatives of LSGIs suggest that the present demand is only about half of what can really be collected. The assessment is done in a rather primitive fashion and the process of assessment often tends to be very subjective. To compound this problem the collection efficiency is also low. The traditional mode of collecting from the doorstep is still being resorted to. The enforcement provisions are rarely used.

2.25

The Commission believes that the tax base can be expanded inter alia through the introduction of Service Tax. Also some non-tax revenue sources can be further tapped. The Commission strongly endorses the view that only the floor rates and amounts need to be fixed by the government. This would allow greater autonomy to the efficient LSGIs to mobilize more local resources. In addition there is urgent need to index the rates to changes in money value. Tax assessment methods can be rationalised essentially by reducing discretion and moving on to a transparent normative basis, like plinth area in the case of buildings, seating capacity in the case of cinemas, presumptive taxes for certain professions and so on. In this respect, some of the recommendations of the first Finance Commission are very pertinent. Collection efficiency is also very crucial, though the drive to collect larger revenues has to come from the LSGIs themselves. To be sure, training and motivating the collecting personnel would help, as would

35

external incentives of the sort we have provided, by incorporating the revenue effort criterion into the inter se distribution of plan funds. But there is no escape from the fact that the LSGIs themselves must internalize the urgency of the need to garner larger revenue. 2.26

Though there are provisions in the Kerala Panchayat Raj Act, the Kerala Municipality Act and the Local Authorities Loans Act for borrowing by LSGIs, these provisions are not fully utilized. The Commission believes that as more and more re sponsibilities get transferred to LSGIs, they have to supple ment their own resources and grants-in-aid with borrowings, mainly for schemes which would generate a revenue stream that can help repayment, and for socially relevant schemes for which local surcharges can help in repayment. The question of borrowing and the safeguards required would be dealt with in the second part of the Report.

2.27

Raising resources alone is not enough. It is equally important to spend them prudently. For this, there has to be proper financial management. This can be achieved to some extent through improved managerial practices, enshrined in rules regarding the assessment of taxes, the preparation of budgets and the regulation of expenditure. There seems to be a tendency on the part of LSGIs to overspend on items like inauguration ceremonies and to be liberal with the distribution of funds. These need to be curbed through mutually agreed guidelines. The Commission would dwell on these issues in its second report.

2.28

With so much of public funds being handled by the LSGIs, the need for enforcing a degree of accountability upon them increases. Of course, since they are close to the people there is some control from below, especially through various

36

participatory mechanisms, which have already been adopted by the state government. Nevertheless, financial accountability through certain fiscal responsibility provisions as well as through improved maintenance of accounts is very essential. Similarly the presentation of accounts to the public to facilitate social audit also needs special attention. The current procedure by which LSGI accounts are audited leaves much to be desired. There is invariably considerable delay, and the quality of audit too is not particularly good. It is a very routine form of audit and its contribution towards system improvement or towards enabling penal action has been very limited. These need to be totally revamped. The Commission is getting a study done on the maintenance of accounts as well as on the procedures of auditing by the Institute of Public Auditors of India and the second part of the Report would carry detailed recommendations on the subject.

PROCEDURAL SAFEGUARDS 2.29

In

order

to

ensure

that

the

recommendations

of

the

Commission are properly implemented, certain procedural safeguards have to be put in place. The most important safeguard is to give legislative sanction to the proposed devolution, by incorporating the share of taxes due to local governments in the Kerala Panchayat Raj Act and the Kerala Municipality Act. These devolved funds would be in three categories: Plan Grant, Maintenance Grant and General Purpose Grant. Each grant would have clear conditions for use which should be issued in the form of Rules. 2.30

On the part of the state government it is very important to ensure a smooth flow of funds. The Commission feels that there should be automatic crediting of funds to LSGIs, but these have to be combined with reasonable restrictions on

37

withdrawal, linking such withdrawals to actual expenditure. Similarly, the funds have to be devolved according to fair and transparent formulae. This is particularly true of the devolution of the maintenance grant, for which a scientific assessment of the maintenance needs has to be made and the results then used for an equitable inter se distribution of the funds.

2.31

At the local government level there is need for a maintenance plan to be prepared. Also the present tendency to divert funds, earmarked for some particular purpose, towards an altogether different use, needs to be curbed, with penal provisions for such diversion. There should be no diversion whatsoever from Plan Grants or Maintenance Grants.

2.32

Simple financial devices can be tried out to improve accountability. For example, by creating a single account to which all the different streams of own income of the LSGIs are credited, one can get a good idea of the actual income for the year. Similarly by limiting the period of validity of cheques to one financial year, the tendency to inflate expenditure through the issue of pre-dated cheques can be contained. The Commission recommends both these procedures, and would be recommending several others of this sort.

2.33

It has been noted that there is a considerable time lag in operationalising the recommendations of the State Finance Commission even after they are accepted by the state government. Several departments have to take follow up action, and since amendment to Acts and Rules are required in many cases, progress naturally tends to slow down. But this defeats the very purpose of the Commission's recommendations. Since Finance Commissions come only once in five years, any delay in implementing the recommendations of the Commission reduces their effectiveness. There is need therefore for quick

38

follow-up action on Finance Commission's recommendations, for which an empowered Committee is necessary.

CERTAIN OTHER ISSUES 2.34

Unlike

the

Central

Finance

Commissions,

there

is

greater

need

for continuity in the case of State Finance Commissions. As the local government system is evolving in the country, there is greater need to link up with the recommendations of the previous Finance Commissions. Another factor is that several recommendations are slow to get implemented and in such cases there would be a need for reiteration. This Commission has gone into the recommendations of the First Finance Commission in detail and has studied the status of their implementation. Since it is felt that the implementation without delay of many of those recommendations is of critical importance, they are being reiterated in this Report. 2.35

The

recently

submitted

report

of

the

Eleventh

Central

Finance

Commission raises a number of important issues that call for a reaction from our Commission. At least three issues are pertinent here, two of which relate to principles, while the third relates to practice. These issues and our response to each of them are listed below seriatim. First, the CFC feels the need for introducing Constitutional amendments in at least three areas: for empowering Parliament to revise the rates of Profession Tax without having to introduce a Constitutional amendment on each occasion; for making it possible to bring forward the dates of setting up of the State Finance Commissions, so that these could be appropriately synchronised with the date of institution of the CFC and their reports could genuinely provide the basis for the recommendations of the CFC; and for removing the provision which makes it obligatory for the CFC to take the SFC reports as the basis for making

39

its own recommendations. We are in agreement with both the spirit and the letter of the first suggestion. We are in agreement with the spirit, though not the letter, of the second suggestion, since we feel that a carte blanche to state governments to set up Finance Commissions when they like may be open to misuse; our own phrasing of the required Constitutional amendment (given in Chapter 11) attempts to overcome this potential problem. On the third of the CFC's Constitutional suggestions however we have differences of both letter and spirit. Though we understand the circumstances

(relating

to

delays

or

non-compliance

with

SFC

recommendations by state governments) which make the CFC wish to get rid of this albatross round its neck of having to base its own recommendations on those of the SFCs, abandoning this clause altogether would in our view be potentially detrimental to the smooth functioning of our federal system. Our suggestion on the required Constitutional amendment attempts to meet the problem without going to such extremes.

2.36

The second issue of principle raised by the CFC is one where we have a basic disagreement, and it relates to their refusal to take any explicit cognisance of the devolution of Plan funds to LSGIs. (Indeed their nonrecognition of the worth of the Kerala experiment in democratic decentralisation springs essentially from this fact). We are of the view that Finance Commissions should have comprehensive jurisdiction covering both plan and non-plan devolution. It follows from this that if a particular State Finance Commission has interpreted its jurisdiction narrowly and refrained from making any recommendations covering plan funds, then the fact that the state government goes beyond these recommendations to devolve substantial plan funds to LSGIs should be deserving of appreciation rather than unconcern. The index of decentralisation cannot in other words be confined to criteria that stress only conformity to SFC recommendations (which

40

does not of course mean that such conformity should be given the go by); they have to be more inclusive.

2.37

The third issue, one of practice, relates to the task given to us by the CFC to suggest criteria for the inter se distribution of Rs.65.92 crores for PRIs, and Rs.15.05 crores for ULBs, which constitute Kerala's share of the total amount (Rs.1600 crores for PRIs and Rs.400 crores for ULBs) made available by it as a special grant for the improvement in civic services. Our recommendation is that these amounts should be distributed on the basis of the population criterion. They should not be counted as a part of plan funds (either in the numerator or in the denominator) in determining the size of the plan grant to LSGIs.

2.38

The present state of monitoring of local government finances is very weak. The required data are not available and the quality of data is also very bad. In a situation where substantial funds are being devolved and spent at the level of LSGIs, it is necessary to have regular feed back about the finances of local governments. Much more is required than the mere collection of data in a routine manner; they have to be appropriately interpreted. For this a permanent system has to be developed utilizing the experience of Finance and Local Self Government Departments as also the expert services of the Statistics Department.

41

CHAPTER 3

AN OVERVIEW OF LOCAL GOVERNMENT FINANACES 3.1 INTRODUCTION 3.1.1

(1) (2)

Kerala has 990 Village Panchayats, 152 Block Panchayats and 14 District Panchayats; in the urban areas it has 53 Municipalities and 5 Corporations. Since the First SFC, the following charges have taken places.

The former Mattathur Panchayat has been converted into a Municipality with effect from 14-11-1996. Thiruvananthapuram Corporation has been expanded with the addition of Nemom, Thiruvallom, Kadakarapally, Ulloor and Attipra Grama Panchayats.

(3)

Two new Corporations viz. Kollam and Thrissur have been created by adding the following Grama Panchayats. Kollam Corporation

Thrissur Corporation

1.Kilikollur Grama Panchayat

1. Ollukkara Grama Panchayat

2.Sakthikulangara Grama Panchayat

2. Vilvattom Grama Panchayat

3.Eravipuram Grama Panchayat

3. Ayyanthol Grama Panchayat

4.Vadakkevila Grama Panchayat

4. Koorakanchery Grama Panchayat 5. Ollur Grama Panchayat 6. Nadathara Grama Panchayat (Part)

42

(4)

Two municipalities namely Kalpetta and Koyilandi have been expanded by including wards as shown below from the adjoining panchayats. Kalpetta - Ward 11 and 12 of Meppadi panchayat Koyilandi - 3 wards in Arikkulam panchayat

(10)

Five Municipalities viz., Neyyattinkara, Ponnani, Thalasserry, Taliparamba and Kunnamkulam, have been expanded by adding panchayats, as shown below:

Neyyattinkara Municipality

Perumpazhuthoor Grama Panchayat

Ponnani Muncipality

Ezhuvathuruthy Grama Panchayat

Taliparaba Municipality

Anthoor Grama Panchayat

Kunnamkulam Municipality

Arthat Grama Panchayat (full), Porkulam grama Panchayat (part) and Chovannur Grama Panchayat (part)

Thalassery Municipality (6)

Kodeyeri (Full)

While 19 Village Panchayats have been merged with urban local bodies 20 new Village Panchayats have been created due to the bifurcation of 20 large Village Panchayats having a population of more than 50,000.

3.1.2

Except item No.l, all the changes were brought into effect in September 2000, with the general elections to LSGIs. With this reorganisation of urban and rural local governments, the share of the urban population in the State with reference to 1991 census has gone up to 16.87% from 14.22%. Kerala has fairly big Village Panchayats, the biggest in the country. It has relatively small towns. In fact, other than the five cities it has

43

only three Municipalities having a population of more than one lakh. 3.1.3

The distribution of population among the Village Panchayats is given in Table 3.1 Table 3.1 Village Panchayats.

3.1.4

Range of population

No.of Village Panchayats

Below 10,000

16

Between 10,000 and 20,000

287

Between 20,000 and 30,000

426

Between 30,000 and 40,000

181

Between 40,000 and 50,000

59

Above 50,000

21

The distribution of population among Municipalities is shown in Table 3.2. Table 3.2 Municipalities Range of population Below 25,000 Between 25,000 and 40,000 Between 40,000 and 50,000 Between 50,000 and 60,000 Between 60,000 and 75,000 Between 75,000 and 1,00,000 Above 1,00,000

44

No.of Municipalities 6 18 10 6 9 1 3

3.1.5

The population of the five Corporations may be seen in Table3.3. Table 3.3. Corporations

3.1.6

Thiruvananthapuram

7,04,375

Kollam

3,49,348

Kochi

5,64,589

Thrissur

2,99,042

Kozhikode

4,19,831

It would be interesting to compare the distribution of Village Panchayats and ULBs according to area as well. As is evident from Table 3.4, there is much similarity in size between Village Panchayats and ULBs. Table 3.4

45

3.1.7

Kerala has a long sea-coast. 89 Village Municipalities and 4 Corporations face the sea.

Panchayats,

3.1.8

The Village Panchayats were graded in 1983 based on their annual natural income i.e. income excluding all grants-in-aid, contributions and debt heads. The grading at that point of time may be seen in Table 3.5. Table 3.5 Classification of Village Panchayats as per extant income norms.

46

13

3.1.9

The grading using the same norms by the First SFC showed 979 Village Panchayats as Special Grade and the remaining four Panchayats as First Grade and Second Grade (two each) on the basis of the data on 987 Village Panchayats available with them.

3.1.10

Similarly Municipal Councils were graded in 1993. The classification of the Municipal Councils may be seen in Table 3.6.

47

Table 3.6. Classification of Municipalities as per extant income norms.

Subsequently Mattannur was constituted as a Municipality in 1996 and Perinthalmanna was upgraded to the status of a Grade II Municipality in 1999, 3.1.11

A few interesting statistical highlights regarding LSGIs are given below:

48

49

FINANCIAL POSITION OF LOCAL GOVERNMENTS

INCOME OF LOCAL GOVERNMENTS 3.2

For the purposes of this Report, income of local governments is discussed in two parts. The first part covering the tradi tional sources of income, which existed before 1994 and the second part covering the grant-in-aid given by Government to cover the expenditure on additional responsibilities transferred to local governments through the legislative changes made in 1994. TRADITIONAL SOURCES OF INCOME

3.3

These are available only to the Village Panchayats and ULBs. They could be classified into the following categories. (1)

Tax Revenue

(2)

Non-tax Revenue

(3)

Grants-in-aid

(4)

Loans TAX REVENUE

3.4A

Tax Revenue could be further divided into three. (a) Own Taxes (b) Assigned Taxes (c) Shared Taxes

50

3.4A.1

OWN TAXES

These are taxes directly demanded and collected by Village Panchayats, Municipalities and Corporations. 3.4A.1.1 (i)

PROPERTY TAX. Property Tax constitutes the major item of revenue for the Village Panchayats, Municipalities and Corporations, which have a per capita collection of Rs.12.39, Rs.77.62 and Rs. 151.30 respectively. Though amendments have been brought about in the Kerala Panchayat Raj Act and the Kerala Municipality Act in 1999 to introduce plinth area based assessment of Property Tax for both residential and non-residential buildings including commercial buildings, rules and operational instructions have not yet been issued. Therefore, Property Tax continues to be assessed as per the old system based on rental value. In anticipation of switching over to the new method of assessment Village Panchayats have not had any general revision of Property Tax since 1993 and in the case of ULBs where the general revision varies from one Municipality to another there has not been any such revision after 1998. This has prevented the usual periodic increase in Property Tax, which normally works out to be 25% at the time of each general revision.

3.4A.1.2

In the case of Village Panchayats, Property Tax is assessed as per rules issued under Section 203 of the Kerala Panchayat Raj Act. The rate is fixed as between 6 to 10% of the annual rental value in the rules. (This has not been amended in consonance with the Act)

3.4A.1.3

The rates fixed as per the amended Section 233 of the Kerala Municipality Act are given in Table 3.7.

51

The maximum rate is 20% for Town Panchayats, 25% for Municipalities and Corporations.

3.4A.1.4

Property Tax constitutes 15 percent of the tax and non-tax revenues of Village Panchayats; the figure for Municipalities is 21.39 and for Corporations, it is 35.32. Property Tax has grown by 40.34% over a period of six years in the case of Village Panchayats. The increase for Municipalities and Corporations is 66,27% and 76.33% respectively.

3.4A.1.5

It is interesting to note that the LSGIs tend to levy lower tax even when they have a range to choose from. The First SFC has given the details relating to Village Panchayats and Municipalities, which can be seen in Tables 3.8 and 3.9.

52

TABLE 3.8. Rate of Building Tax in 1985 and 1995 in Village Panchayats.

Data from 21 Panchayats have not been received. TABLE 3.9. Rate of Property Tax in 1995 in Urban Local Governments.

53

3.4A.2

(ii) PROFESSION TAX. Profession Tax is levied from individuals and companies by virtue of Section 204 of the Kerala Panchayat Raj Act in the case of Village Panchayats and Section 245 of the Kerala Municipality Act in the case of Municipalities and Corporations. All companies and individuals transacting business or engaged in a profession for at least 60 days in a half year are bound to pay the tax at such rates as are fixed by the concerned local government subject to the maximum rates prescribed by Government. However, Article 276 (2) of the Indian Constitution has fixed the maximum tax leviable per year at Rs.2500/-. Now the 11th Finance Commission has recommended that this provision be taken out of the Constitution and be made part of a Central Act so that its amendment could be easily made. Based on the report of the First SFC, Profession Tax has been

3.4A.2.1

revised in Village Panchayats. (TABLE 3.10) But in the case of ULBs the revision is yet to be carried out. The old rates are still followed. (TABLE 3.11) However, Dearness Allowance is also now included in the calculation of income for assessment of Profession Tax in ULBs as suggested by First SFC. TABLE 3.10 RATES OF PROFESSION TAX IN VILLAGE PANCHAYATS

54

TABLE 3.11 RATES OF PROFESSION TAX IN ULBs

55

3.4A.2.2

Profession Tax constitutes the second largest source of own income for the Village Panchayats and has the 5th position for the Urban Local Bodies. During the last six years the tax has grown by 101.6%, 110.49%, and 180.26% in \ Village Panchayats, Municipalities and Corporations respectively. This has been mainly due to the steep increase in salary due to the Pay Commission Recommendations and due to the inclusion of DA in the calculation of income in ULBs.

3.4A.3

(iii) ENTERTAINMENT TAX: Entertainment Tax is the third largest source of income for Village Panchayats and the second largest source of income for Municipalities and Corporations. In fact in the case of 21 Municipalities, Entertainment Tax constitutes the single largest source of own revenue (Annexure 3.1)

3.4A.3.1

Entertainment Tax is an own tax of local governments in Kerala and is collected according to the provisions of Section 3 of the Local Authorities Entertainment Tax Act. Consequent on the recommendations of the first SFC, Additional Tax on Entertainment has been merged with Entertainment Tax and the Kerala Additional Tax on Entertainment and Surcharge on Show Tax Act 1963 has been repealed. Now, as per the unified Act, Entertainment Tax is fixed between 24 to 48% of the price of admission.

3.4A.3.2

Though Entertainment Tax constitutes a significant local government income it is to be noted that there are no theatres either temporary or permanent in 331 Village Panchayats. Although Entertainment Tax has grown by 48.98% in Village Panchayats, 54.95% in Municipalities, and 44.21% in Corporations over the last six years, it is seen that gross collection of Entertainment Tax declined

56

both in Village Panchayats and Municipalities during the year 1998-99 in comparison with the previous year. 3.4A.3.3

3.4A.3.4

There appears to be considerable 'escaped' tax in this item. This issue was considered in detail by the First SEC which recalled that both the earlier Municipal Finance Commissions viz., the Naha Commission 1985 and the Mohandas Commission 1993 had recommended that the collection of the Entertainment Tax be based on gross seating capacity and recommended optional switchover to taxation based on seating capacity. Analysis of figures given to SFC by the LSGIs shows that the average collection in Village Panchayats is equivalent to the average occupancy of 9.5%; the average occupancy for Municipalities and Corporations works out to 33% and 35% respectively. In spite of cinemas facing competition from Cable TV, it is felt that the occupancy would have been much higher. Though Entertainment Tax Act has been amended and an enabling provision introduced to tax on the basis of seating capacity the rules have not yet been framed. Also certain issues like general exemptions given to dramatic performances and circus shows, provision for blanket exemptions from tax etc, need a relook in the context of decentralisation.

3.4A.4

(iv) ADVERTISEMENT TAX. Advertisement Tax has relatively good potential in a consumerist state like Kerala. But the realization of revenue under this head has been quite low. It is seen that only 121 Village Panchayats are collecting Advertisement Tax. It constitutes only 0.34.% of own revenue in Municipalities and 0.62% in Corporations; in the case of Village Panchayats its share is a paltry 0.04% Advertisement Tax is collected as per the provisions of Sec-

57

tion 209 of the Kerala Panchayat Raj Act and 271 of the Kerala Municipality Act. The tax is collected based on bye-laws framed by the Village Panchayats and ULBs. There are no rules issued by the Government regarding minimum rates or the mode of collection. 3.4A.5

(v) SERVICE TAX: This tax exists only in Village Panchayats. In ULBs it is an inbuilt component of Property Tax. It is provided for in Section 200 of the Kerala Panchayat Raj Act as per which Government is authorised to fix the minimum rates. The revised rules are under examination by the Subject Committee of the Legislature and are expected to be issued soon. The accepted recommendation of the First SFC to have an independent Service Tax has not yet been operationalised. The total collection of Service Tax in all the 976 Village Panchayats for which the data is available comes to Rs.1.89 crores or 0.7% of the own revenue.

3.4A.6

(vi) SHOW TAX INCLUDING SURCHARGE: This tax is levied as per Section 200 of the Kerala Panchayat Raj Act and Section 269 of the Kerala Municipality Act, which empower the local governments to levy and collect Show Tax on every show which includes any entertainment, exhibition, performance, amusement game, sport or race, that is performed in their territory. The Surcharge was collected as per the Additional Entertainment Act and Surcharge on Show Tax Act 1963. Now with the repeal of this Act, Surcharge cannot be realized. But steps to increase the existing rate by 25% have not yet been taken. The present rates of Show Tax are indicated in Table 3.12.

58

TABLE 3.12. RATES OF SHOW TAX. a) Panchayats

b) Municipalities

The rates for Village Panchayats have not yet been revised in accordance with the recommendations of the First SFC. The collection figures of Show Tax including surcharge for the Village Panchayats and for the Municipalities and Corporations are shown in Table 3,13.

59

TABLE 3.13. Receipts from Show Tax & Surcharge on Show Tax. (Rs. in lakhs)

3.4A.7

(vii) CESS ON CONVERSION OF LAND USE: This is a cess which can be levied by local governments for conversion of land use from paddy field, marshy land, pond or water body into garden or building site subject to the provisions of Kerala Land Utilisation Order 1967 issued under the Essential Commodities Act. Since there are severe restrictions on conversion of land use in Kerala, the collection has been naturally low. In Village Panchayats it was only a meagre sum of Rs.0.64 lakh in 1998-99; in the case of Municipalities and Corporations it was just Rs.5.53 lakh during the same period.

3.4A.8

(viii)TAX ON ANIMALS, VESSELS AND VEHICLES: This is applicable only to ULBs and is levied as per Section 260 of the Kerala Municipality Act 1994 which allows the Municipal Council to levy, based on its resolution, tax on domestic animals etc. This is a very insignificant item and the total collection for Municipalities and Corporations during 1998-99 amounted to Rs.2000/- only.

3.4A.9

(ix) TAX ON TIMBER: This again is a tax applicable only to ULBs. It is collected as per Section 277 of the Kerala Municipality Act which allows the Council to collect in the manner decided by it a tax on timber brought into the Municipality at the rate of Rs.24/per tonne. This has also fallen into disuse and only Kozhikode 60

Corporation which has the traditional timber yard of Kallai within its area is realizing this tax which fetched it a revenue of Rs.97,000/- during 19,98-99. This item of revenue has been declining year after year.

3.4A.10

(x) SURCHARGES: Both the Village Panchayats (as per Section 208 of the Kerala Panchayat Raj Act) and ULBs (as per Section 230 of the Kerala Municipality Act) are empowered to levy Surcharges. In the case of Village Panchayats up to 5% Surcharge can be levied on the Property Tax subject to a maximum of two Surcharges and in the case of ULBs a Surcharge not exceeding 10% can be levied on any Tax other than Profession Tax. This Surcharge is to be levied for providing for any specific services or amenity in the case of ULBs and for meeting any extraordinary expenditure by way of implementation of a scheme, plan or project in the case of Village Panchayats. This item has not been tapped in any of the ULBs. For Village Panchayats the total collection during 1998-99 was Rs.5.29 lakh, which works out to just 0.15 % of the Property Tax collected during the same year. It is noteworthy that even with specific quid pro quo, LSGIs have been reluctant to impose Surcharges.

61

ASSIGNED TAXES 3.4B These taxes are collected by the Government but the entire revenue is assigned to local governments. 3.4B.1

(i) BASIC TAX. Kerala does not have a traditional system of land revenue. Instead it has a general tax on land known as the Basic Tax. The rates of Basic Tax are given in Table 3.14 TABLE 3.14.

3.4B.1.1

The entire collection is given to the rural LSGIs after deducting a collection charge of 3%. 3/8th of the Basic Tax is given to the Village Panchayats, 3/10th to the Block Panchayats, and l/5th to the District Panchayats. The remaining l/8th is credited to the Rural Pool. Except in the case of Rural Pool, the distribution is as per the area of the concerned Panchayat. Though Government had accepted the recommendation of the First SFC to give a share of Basic Tax to the ULBs this has not been operationalised so far.

62

3.4B.1.2

The Basic Tax collected and distributed during the last five years is shown in Table 3.15. TABLE 3.15. DETAILS OF BASIC TAX GRANT (Rs. in crores)

* Includes three instalments of old arrears distributed at Rs.8.41 Crore per instalment 3.4B.2

3.4B.2.1

(ii) SURCHARGE ON STAMP DUTY: Under the provisions of the Kerala Stamp Act 1959, for every transaction relating to land, Stamp Duty and Registration fee are levied. As per Section 206 of the Kerala Panchayat Raj Act and Section 270 of the Kerala Municipality Act, Village Panchayats and ULBs are entitled to levy 5% of the amount of the value of the property transacted. But in practice only the pre 1994 rates of Surcharge i.e. 4% for Village Panchayats and Municipalities and 5% for Corporations is levied.

The earlier and the present rates are given in Table 3.16.

63

TABLE 3.16. Rate of Stamp Duty and Surcharge under the 1960 and 1994 Acts

The above rates were introduced from 1-4-1971

* Registration fee is collected by State Government and is not shared with Local Bodies. ** 5% is the maximum rate permitted. At the time of the Report the rate collected remains at 4%

3.4B.2.2

In accordance with the recommendations of the First SFC, Government have introduced a system whereby the receipts are shown in the Budget under the Head of Account "0030-Stamps and Registration - 02 Stamps non-judicial 901 - Deduct payment to Local Bodies of net proceeds of Duty on Transfer of Properties" which enables direct payments to local governments of the amounts collected during the financial year. The amount collected and distributed during the last five years is shown in Table 3.17.

64

TABLE 3.17. DISTRIBUTION OF SURCHARGE ON STAMP DUTY (Rs. in lakhs)

NOTE:- There are time lags between collection and distribution.

3.4B.2.3

As per G.O. (Ms) 118/94/LAD dated 02.08.1994 the Inspector General of Registration is empowered to deduct dues to Kerala Water Authority from Village Panchayats, Municipalities and Corporations from the Surcharge on

65

Stamp Duty and pay them directly to the Kerala Water Authority (KWA). The amounts thus deducted and given to the Water Authority in the last five years are indicated in Table 3.18.

TABLE 3.18 STAMP DUTY DEDUCTED AND PAID TO KWA (Rupees in lakhs} Amount deducted

3.4B.2.4

Stamp Duty constitutes an important source of revenue of local governments and it constitutes 13.71% of the total Own revenue of Village Panchayats, 9.37% of Municipalities and 17.5% of Corporations during 1998-1999. The proceeds are distributed to ULBs according to the place of registration of the transaction and to Village Panchayats on population basis (other than the 25% credited to the Rural Pool).

66

3.4C 3.4C.1

SHARED TAX MOTOR VEHICLE TAX. This is the only shared tax and it is called Vehicle Tax Compensation (VTC) and is given to local governments as per Section 19 of the Motor Vehicles Taxation Act 1976.

3.4C.1.1

20% of the net collection of Motor Vehicles Tax is distributed among Village Panchayats and ULBs as per road length according to the formula based in unit length of roads given in the Table 3.19. TABLE 3.19 CALCULATION OF ROAD UNITS FOR DISTRIBUTION OF VTC

Actual collection of Motor Vehicles Tax and the actual distribution during the last five years can be seen in Table 3.20.

67

TABLE 3.20 COLLECTION AND DISTRIBUTION OF MVT TO LSGIs (Rs. in lakhs) Year

Gross Collection

Net Amount Percentage Collection Collection distributed

1995-96

21694

21043

2500

11.88

1996-97

22109

21445

4348

20.28

1997-98

27425

26602

5148

19.35

1998-99

29261

28383

4990

17.58

1999-2000

37120

36006

7885

21.90

3.4C.1.2

Over the years there used to be substantial arrears in the payment of Basic Tax, Surcharge on Stamp Duty and Vehicles Tax Compensation. Based on the recommendations of the First SFC, Government released Rs.150 crores in three instalments as a one-time settlement of dues under Basic Tax, Surcharge on Stamp Duty and VTC.

NON-TAX REVENUE 3.5

Non-tax revenue of Village Panchayats, Municipalities and Corporations could be classified as follows: (1)

Licence fee

(2)

Gate fee

(3)

Rent from Property

(4)

Income from Property other than rent,

68

3.5.1

(5)

Permit fee

(6)

Registration fee

(7)

Service/User charge

(8)

Other sources

LICENCE FEE : This constitutes the most important source of non-tax revenue. The following are the important items for which licence fees are collected by local governments. (i)

Trade Licences

(ii) Licences under prevention of Food Adulteration Act. (iii) Licences under the Kerala Cinemas Regulation Act. (iv)Licencing of Private Slaughter House. (v)

Licencing of Private Markets

(vi)

Licences under the Kerala Places of Public Resorts Act

(vii) Licencing of Private Parking and Halting Places (viii) Licencing of Private Burial and Burning Grounds (ix)

Licencing of Technical Experts

(x)

Licencing of Domestic Animals

(xi)

Licencing of Animal Stalls kept for commercial pur poses.

(xii) Licencing of Special Trades like Butchers, Fishmon gers, Poulterers, Commission Agents and Brokers.

69

3.5.2

3.5.3

3.5.4

GATE FEES : These are fees, which are normally farmed out by auction to the highest bidder who is then given the right to regulate entry based on certain fees. The major sources of gate fees are (1)

Public Market

(2)

Public Parking and Halting places

(3)

Public Slaughter Houses

INCOME FROM PROPERTY: Rent. This is an important item of non-tax revenue for urban local bodies and urbanized Village Panchayats. Rents could be classified based on the type of property. 1.

Rent from buildings

2.

Rent from lands

3.

Rent from cloak rooms and comfort stations

INCOME FROM PROPERTY OTHER THAN RENT: This can be classified into three.

3.5.5

(i)

Proceeds from sale of right to collect river sand,

(ii)

Proceeds from sale of right to fish,

(iii)

Proceeds from sale of usufructs.

PERMIT FEES: Permit fees are of two kinds. (1)

Fee for Building permits

70

(2)

Fee for permits for the construction, establishment or installation of factories, workshops or work places where electricity is used.

3.5.6

REGISTRATION FEES: This can be grouped as follows: 1.

Registration of Hospital and Para medical institutions.

2.

Registration of Tutorials.

3.

Registration of Births and Deaths.

4.

Registration of Contractors (only in ULBs)

5.

Registration of lodgings (only in Malabar area - un der the Madras Public Health Act).

3.5.7

SERVICE/USER CHARGES: These relate to charges collected for use of utilities and amenities provided by the LSGIs.

3.5.8

INCOME FROM FERRIES: As per the Kerala Panchayat Raj Act and the Kerala Municipality Act and as per the various Ferries Acts, function of providing ferries has been transferred to the Village Panchayats and ULBs. This income could be either by auctioning of the right to ply ferries or by charging from users.

3.5.9

FINES AND PENALTIES: These are realized by the LSGIs when there is a contravention of regulations or there are be lated payments. A study done in Municipalities shows that there is serious laxity in the enforcement of penal provisions [Annexure 3.2]

3.5.10

SUNDRY ITEMS: could be listed as follows:

These miscellaneous sources of revenue

71

(1)

Proceeds from auctioning of meat stalls (done in a few Village Panchayats only).

3.5.10.1

(2)

Interest on deposits.

(3)

Endowments.

(4)

Return on investments like shares.

(5)

Contributions/donations.

(6)

Hire charges of vehicles/machinery.

(7)

Income from cattle pounds.

(8)

Income from Libraries.

(9)

Sale of Forms.

(10)

Sale of unserviceable articles and fallen trees.

(11)

Other items which cannot be classified.

The details regarding the rates for each of the important sources of nontax revenue are given in the Annexures in Chapter IX relating to the existing and suggested rates. The percentage share of important items of non-tax revenue is given in Table 3.21.

72

TABLE 3.21. SHARE OF IMPORTANT ITEMS OF NON-TAX REVENUE IN TOTAL NON-TAX REVENUE.

3.5.10.2

Diagramatic depiction of shares of major sources of income in respect of Village Panchayats, Municipalities and Corporations can be seen in figures 3.1 to 3.6.

73

74

75

77

78

GRANT-IN-AID FROM GOVERNMENT 3.6

In the case of Village Panchayats, now there are only two Non-Plan Grants-in-aid from Government viz., Rural Pool and Level Crossing grantin-aid. Rural Pool has been created by pooling the 14 specific purpose grants-in-aid, which were in vogue earlier, 25% of the surcharge on Stamp Duty and l/8th of the Basic Tax. The amounts released to Village Panchayats after the constitution of Rural Pool are shown in Table 3.22. TABLE 3.22. GRANTS-IN-AID FROM THE RURAL POOL (Rupees in Crores.)

3.6.2

The grant for Level Crossing is given only to five Village Panchayats to meet the additional burden on them due to existence of manned Level Crossings whose establishment costs need to be shared with the Railways.

3.6.3

In the case of ULBs there are two grants - General Purpose Grant and Specific Purpose Grant. General Purpose Grant is a per capita grant calculated as follows:

79

It is governed by the General Purpose Grant-in-aid Rules 1962, The amounts released under this head during the last five years are shown in Table 3.23.

TABLE 3.23 DISTRIBUTION OF GENERAL PURPOSE GRANTS (Rupees in lakhs) 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 Municipalities 71.31

71.31

64.49

64.42

64.51

64.48

Corporations 30.17

30.17

30.17

30.17

30.17

30.17

3.6.4

Specific Purpose Grant is given for identified purposes like running of Maternity and Child Welfare Centres, Nursery Schools, Poor Homes, and carrying out Town Planning and Town Survey operations, And Mosquito operations etc. This is governed by the Specific Purpose Grant-in-aid Rules. Actually it is a commitment by Government to share a portion of the running expenses of the selected services mentioned above, at the rate of half for Corporations and Major Municipalities and 2/3rd for Minor Municipalities. Actually the amount provided for specific purpose grant is far less than what is required as per rules. Originally the Grant-inaid was given only with the prior approval of the Government. But during the last few years it is given more or less as a general-purpose grant. The amounts released to Municipalities and Corporations during the last five years are shown in Table 3.24.

80

TABLE 3.24. DISTRIBUTION OF SPECIFIC PURPOSE GRANT-IN-AID (Rupees in lakhs)

3.6.5

In addition to the above mentioned grants, there are two kinds of special grants given to both Village Panchayats and ULBs. 96 Primary Schools and 21 High Schools are run by Village Panchayats and 3 Primary Schools and 2 High Schools are run by ULBs. The Education Department gives a grant-in-aid for running these schools, which are treated as Aided Schools as per the Kerala Education Rules. The amounts given during the last three years are summarized in the Table 3.25. TABLE 3.25. Grant-in-aid given to local governments for running Schools (Rs. in lakhs)

Year

Village Panchayat

Municipality

Corporation

1996-97

1.36

NIL

NIL

1997-98

2.18

NIL

0.63

1998-99

4.16

NIL

0.23

81

Similarly, libraries run by Village Panchayats and affiliated to the Kerala Grandhasala Sangham, which gives grant-in-aid as per the size of the library. The grant –in-aid given during the last three years are noted in Table TABLE 3.26. Grant-in-aid given to local governments for running Libraries Year

Village Panachayat

Municipality

Corporation

96-97

5.29

1.94

0.52

97-98

14.99

1.92

0.58

98-99

4.95

2.34

0.73

LOANS 3.7

In the case of Village Panchayats, loans can be taken with prior Government permission from the Kerala State Rural Development Board (RDB) or Commercial Banks. With the acceptance of the recommendation of the First SFC, Government decided to restructure RDB. Now it does not give loans and is engaged in completing the construction projects taken up earlier. However, the Village Panchayats owe Rs.7.98 crores to RDB by way of overdues. In addition in the last two years Village Panchayats have been taking Housing Loan from HUDCO and Co-operative Bank, jointly with the Block and District Panchayats. LSGIs in Kollam have borrowed Rs.80 crores from HUDCO in 2000-2001. Similarly LSGIs in Thiruvananthapuram have availed themselves of Rs.89.62 crores from the State Co-operative Bank. These loans are for

82

house construction for families Below the Poverty Line. They are guaranteed by the Government and repayment of interest would be from future Plan funds and repayment of the principal amount is taken care of by fixed deposits which would multiply over a period to the amount needed for repayment. ULBs have also taken these special loans.

3.7.2

In the case of urban local governments the major sources of loans are the Kerala Urban Development Finance Corporation (KUDFC), HUDCO and Commercial Banks. In addition there are loans from Government, Institution-wise distribution of loans taken by ULBs during the last five years is given in Table 3.27.

TABLE 3.27. LOANS AVAILED BY ULBs Loan released by KUDFC (Rupees in lakhs)

Loan released by HUDCO

83

Loan Released by Commercial Banks

FUNDS NOT USABLE FOR ITS ROUTINE FUNCTIONING BY LOCAL GOVERNMENTS

3.8

Both Village Panchayats and Municipalities have certain items of funds, which cannot be used by them and are kept normally in the Debt Heads. The major items are, Earnest money Deposit, the Securities, Library Cess, Taxes deducted at source, contributions to Provident and Pension funds (for ULBs), Advances etc.

GOVERNMENT SRANTS-IN-AID FOR TRANSFERRED RESPONSIBILITIES 3.9

New forms of grant-in-aid are being given to all local governments since 1995 to discharge the new responsibilities transferred to them. These can be grouped into two. 1. General Plan grant-in-aid for local development projects 2.

Specific-purpose grant-in-aid for transferred responsibilities

Plan and Non-Plan.

84

3.9.1

GENERAL PLAN GRANTS-IN-AID. Government

have been giving

Plan Grants-in-aid for preparing local level development schemes. This is a practically untied grant, with the specification that at least 40% of the grant-in-aid given to Panchayat Raj Institutions should be spent on the productive sector and not more than 30% can be spent on infrastructure; in the case of ULBs, the figures are 30% and 40% respectively. (In addition, for taking up Housing and Water supply Schemes up to 10% can be diverted from the productive sector by any LSGI). The amounts given to various LSGIs during the last four years are shown in Table 3.28.

TABLE 3.28. PLAN GRANT-IN-AID DEVOLVED TO LSGIs (Rupees in crores)

* In 1996-97 Plan Grants were called untied Funds Since 1998-99 the grant-in-aid is devolved as per the formula given in table 3.29.

85

TABLE 3.29. FORMULA FOR DEVOLUTION OF PLAN GRANTS Weightage (Percentage)

3.9.2

SPECIFIC PURPOSE GRANTS-IN-AID FOR TRANSFERRED RESPONSIBILITIES: Kerala has followed a unique system of earmarking funds to various LSGIs as part of the budgetary process by introducing a minor Head '191' along with various Heads of Account operated by different departments. Thus a local government entitlement has been created. Once the minor Head 191 is shown, the funds are

86

non-divertible by the departments for other purposes. These funds could be broadly classified as follows: i Grant-in-aid for implementing transferred Plan schemes both State sponsored and Centrally sponsored. ii.

Grant-in-aid for implementing specific programmes under non-plan, particularly welfare pensions.

iii.

Non-plan grant-in-aid for running/maintaining institutions/offices transferred to local governments.

iv. 3.10

Establishment grants for Block Panchayats and District Panchayats. GRANTS IN- AID FOR STATE AND CENTRALLY SPONSERED PLAN SCHEMES

The State sponsored and Centrally sponsored schemes transferred to various local governments as provided for in the Budget for the year 20002001 are summarized in Annexure - 3.3. 3.11

GRANT-IN-AID FOR SPECIFIC PROGRAMMES UNDER NONPLAN The details of non-plan grant-in-aid for specific programmes as given in the Budget for the year 2000-2001 are summarized in Annexure - 3.4.

3.12

NON-PLAN GRANT-IN-AID FOR RUNNING/MAINTAINIG THE OFFICERS/INSTITUTIONS TRANSFERRED TO LOCAL GOVERNMENTS For the assets and institutions transferred to local governments, Government meets the salary component as well as the opera-

87

tional expenses like supply of medicines in hospitals. However, office expenses and maintenance costs are given as non-plan grants to LSGIs. The comparative figures for the last four years for Health, Education and Public Works Departments who have transferred most of their assets to LSGIs can be seen in Table 3.30.

TABLE 3.30 NON-PLAN GRANT-IN-AID TO LSGIs (Rupees in lakhs] Non-Plan Grant-in-aid for all local governments together

/. Health

2.27

2.59

2.69

3.10

2,78

2. General Education

367.00

481.00

484.00

484.00

536.(

3.PWD

1451.9 7

1597.1 7

1756.6 9

1932.1 6

2317.9 9

This clearly shows that the funds given to LSGIs are inadequate vis a-vis the maintenance requirements. This underlines the need to rationalize allocation of funds for establishment purposes and mainte nance purposes in respect of the institutions and offices transfers to local governments. NON-PLAN ESTABLISHMENT GRANT FOR BLOCK AN! DISTRICT PANCHAYATS. For meeting the establishment costs including salary and related expenses of staff from the Panchayat Department deployed specifically to the 88

Block and District Panchayats, honorarium and travel

89

expenses of elected members and other office expenses, a grant-in-aid is paid to them. This grant-in-aid, which was fixed in 1996, has not been changed since then, even though the salaries of staff have increased considerably after the 1997 Pay Revision and the honorarium of elected members was enhanced based on the recommendation of the Committee on Decentralisation of Powers. As of now each District Panchayat gets an annual grant of Rs. 16.43 lakh and each Block Panchayat gets Rs. 4.01 lakh. Figures collected from District Panchayats and Block Panchayats show that this provision is highly inadequate resulting in diversion of other grants-in-aid for meeting establishment cost. (Table 3.31).

TABLE 3.31 RECEIPT AND EXPENDITURE OF THE ESTABLISHMENT GRANTS FOR DISTRICT PANCHAYATS/BLOCK PANCHAYATS District Panchayat

Block Panchayat

90

EXPENDITURE OF LOCAL GOVERNMENTS

EXPENDITURE FROM TRADITIONAL SOURCES 3.14

Expenditure from the traditional sources of revenue can be classified into three. 1.

Establishment costs

2.

Expenditure on obligatory duties.

3.

Expenditure on development works.

The expenditure on these three categories and their sub-categories over the last six years for Village Panchayats, Municipalities and Corporations is summarized in Table 3.32.

TABLE 3.32 EXPENDITURE PATTERNS IN VILLAGE PANCHAYATS AND ULBs.

91

92

93

3.15

94

3.5

Relating to Village Panchayat

3.5.1

Total receipts (excluding grant-in-aid for peoples' plan campaign) of Village Panchayats 1993-94 to 1998-99

3.5.2

Abstract of Total receipts of Village Panchayats under own revenue

3.5.3

Percentage share of taxes to total Direct Tax Revenue

3.5.4

Percentage increase of taxes over previous year

3.5.5

Percentage increase of own revenue over previous years

3.5.6

Share of taxes in total own revenue

3.5.7

Share of each item under own revenue

3.5.8

Total expenditure of Village Panchayats for the years 1993-94 to 1998-99 (excluding plan grant-in-aid for peoples' plan campaign)

3.5.9

Per capita expenditure of Village Panchayats

3.6

Relating to Municipalities

3.6.1

Total receipts (excluding grant-in-aid for peoples' plan campaign) of Municipalities 1993-94 to 1998-99

3.6.2

Abstract of Total receipts of Municipalities under own revenue

3.6.3

Percentage share of taxes to total own tax revenue

3.6.4

Percentage increase of taxes over previous year

3.6.5

Percentage increase of own revenue over previous years

3.6.6

Share of taxes in total own revenue 95

3.6.7

Share of each item under own revenue

3.6.8

Total Receipts and Expenditure of Municipalities

3.6.9

Per Capita Expenditure of Municipalities

3.6.10

Total Receipts and Expenditure of Municipalities at; glance

3.7

Relating to Municipal Corporations

3.7.1

Total receipts (excluding grant-in-aid for peoples' phi campaign of Municipal Corporations 1993-94 to 1991 99

3.7.2

Abstract of Total receipts of Municipal Corporation under own revenue

3.7.3

Percentage share of taxes to total own tax revenue

3.7.4

Percentage increase of taxes over previous year

3.7.5

Percentage increase of own revenue over previous yeai

3.7.6

Share of taxes in total own revenue

3.7.7

Share of each item under own revenue

3.7.8

Total Receipts and Expenditure of Municipi Corporations

3.7.9 3.7.10

Per Capita Expenditure of Municipal Corporations Total Receipts and Expenditure of Municipi Corporations at a glance

96

3.15.1

For meeting the establishment costs as well as performing the obligatory duties the Village Panchayats and ULBs can use tax revenue other than shared tax, non-tax revenue, specific purpose and general purpose grants (in the case of ULBs) and Rural Pool (in the case of Village Panchayats). The degree of self sufficiency of various LSGIs can be gauged from Table 3.33.

97

3.15.2

General picture of self sufficiency for establishment as well as obligatory functions as revealed by expenditure percentage for various categories of establishment and obligatory functions is given in Table 3.34

TABLE 3.34 SELF-SUFFICIENCY OF LSGIs

3.15.3

The comparative trend of increase in revenue in relation to increase of expenditure on establishment as well as obligatory duties over the last six years is given in figures 3.7, 3.8 and 3.9 for Village Panchayats, Municipalities and Corporations respectively.

98

99

MUNICIPALITIES

Own Revenue Expenditure

• Own Revenue • Expenditure

100

101

CHAPTER 4

THE DECENTRALISATION PROCESS - A SUMMARY

4.1

Consequent

on

the

73rd

and

74th

Amendments

to

the

Constitution, Kerala passed two new legislations in 1994, viz., The Kerala Panchayat Raj Act 1994 and the Kerala Municipality Act 1994. They listed out the functional responsibilities of the three tier Panchayat Raj Institutions and the Urban Local Bodies in the Schedules of the Acts. However, most of the subjects listed were quite general in nature and it cannot be said that there was an attempt to consciously and clearly demarcate the functional domains of LSGIs in the sense of sharing developmental governance responsibilities with the State and Central Governments. 4.2

However, this deficiency was covered to some extent through the Government Order No.GO(P) 189/95/LAD issued in September 1995 which provided for the transfer of a large number of institutions and staff to the different LSGIs. This order indicated the policy framework for defining the functional areas to be assigned to local governments. Also the order brought out the key feature of decentralisation in the State i.e., the strengthening of Village Panchayats and the Urban Local Bodies. Only a limited number of institutions and staff were transferred to the Block Panchayats and District Panchayats. The details of the transfer are summarized in Annexure 4.1

4.3

But due to want of effective operational instructions and due to lack of.sufficient resources, the LSGIs could not realize their entitlements to any significant level.

102

The budget presented in 1996 February, can be considered as the next important milestone in the decentralisation process. It: expanded the concept of untied funds. It was in 1990 that foi the first time a small amount was set apart for Village Panchayafc as a plan scheme for which they could draw up their own schemes according to local priorities. This scheme, which had an allotmen; of Rs. 28.58 crores in 1995-96, was stepped up to Rs.155.71 crores and extended to all LSGIs, both urban and rural. The budget enshrined two important procedural innovations. First the idea of a separate budget document for local governments was brought into effect. To this was added the innovation oi giving the specific Head of Account "191" which indicated gram to LSGIs and which allowed Heads of Department to transfei credit the amount only to the LSGIs. Any other way of drawing the grants was prevented by this procedural device. Thus th; local governments got legislative approval for their resoura allocation and a separate sub system of grants in aid, which couli flow only to LSGIs, was created. The second innovation relate to bringing certain departmental Plan schemes into the sped system and they were the forerunners of the so called "State sponsored schemes" which still constitute about a tenth of Ph grant-in-aid to LSGIs. Such schemes are implemented by LSGIs according to the guidelines issued by the State or Centra Governments. 4.4

The most important landmark in the decentralisation process of the State is of course the momentous decision taken in July 199f to earmark 35 to 40% of the Plan resources to LSGIs and th launch of the People's Plan Campaign in August 1996 to provid a framework for decentralisation, flesh it out and infuse life into it.

103

4.5

Thus considerable resources were handed down to the LSGIs through this policy decision of the Government and proper utilisation of the resources was attempted through the mechanics of People's Plan Campaign. The funds transferred to LSGIs as part of this government decision are indicated in Table 4.1 TABLE 4.1

TOTAL PLAN GRANTS TO LSGIs

Year

State Village Block District MuniciPlan Panchayat Panchayat Panchayat pality Size (inlakhs)

Corpora- Total tion

1384.58

Percent of Plan Size

1997- 285500 98

50686.42

38715.98

18885.64

1525.1

1998- 310000 99

61460.7

23245.15

17061.74

10174.08 5848.23

117799

38.00

1999- 3251010 2000

63925.3

20049.28

16973

8953

114335

35.10

4435.72

111197.7 38.96

2000- 353500 63637.38 18459.61 16667.47 9802.56 5673.79 114240.8 32.32 2001 4.6 The availability of resources enabled the local governments to realize their functional responsibilities by formulating and implementing developmental projects in respect of functions assigned to them. 4.7

PEOPLE'S PLAN CAMPAIGN: Decentralised local level planning has been used as the engine for harnessing public action in favour of decentralisation. In order to shake the system and force the process, a campaign approach has been followed. This campaign has succeeded in setting the agenda for decentralised development.

104

4.8

The People's Plan Campaign has succeeded in providing concrete methodology for participatory plan for local lei development. The salient features of this methodology described below, stage by stage.

4.8.1

4.8.2

Needs identification: Through a meeting of Grama Sabi Ward Sabha (in the case of urban local bodies), the felt ne« of the community are identified. There is a period of environs creation to mobilise maximum participation in the Srama/Wn Sabhas. Statistics reveal that about 10 to!2 percent of population has participated in the 6rama/Ward Sabhas Kelt part of the People's Planning Campaign. The Grama/Ward sab meetings are held in a semistructured manner with pier sessions and subgroup sessions dealing with sped developmental issues. The decisions are minuted and forwarc to the Village Panchayats and ULBs. Situation analysis. Based on the demands emanating ft the Grama/Ward Sabha and based on developmental data, primary and secondary, exhaustive Development Reports been prepared and printed in the case of every IS&I in State. These reports describe the status in each sector development with reference to available data, analyze problems and potential and point out broad strategies for ft development.

4.8.3

Strategy setting: Based on the Grama/Ward Sabha feed I and the Development Report, a one day seminar is held at I local government level in which participation of experts, elect members, representatives nominated by 6rama/Ward Sato and practitioners from among the public is ensured. Thi Development Seminars decide the broad priorities andf general thrust of developmental projects to be taken particular year.

105

4.8.4

Projectisation:

The

ideas

thrown

up

by

the

above

three

stages are translated into projects by Task Forces at the LSGI level. For each LSGI there are about 12 Task Forces dealing with different sectors of development. Each Task Force is headed by an elected member and is convened by the concerned government official. The Vice Chairman of the Task Force is normally a non-government expert in the sector. The projects are prepared in the suggested format outlining the objectives, explaining the benefits, describing the funding and detailing the mode of execution and the phasing of the project. 4.8.5

Plan finalisation: From among the projects, based on the allocation communicated, the concerned LSGI finalizes its plan for the year and this plan is submitted to the District Planning Committee (DPC) through the Expert Committees.

4.8.6

Plan vetting: The Expert Committees at the Block/Municipal and District level vet the projects for their technical viability and consonance with the government guidelines on planning and costing and forward them to the DPC,

4.8.7

Plan approval: The DPC gives the formal approval to the plans after which the LSGI can start implementation. It is to be noted that the DPC cannot change the priority of an LSGI. It can only ensure that government guidelines are followed. Administrative approval for implementation is given project-wise by the concerned LSGI. Every local government has unlimited powers of Administrative Sanction subject only to the limits of its financial resources.

4.8.7.1

The most noteworthy feature of the decentralised planning process is the freedom to plan and prepare projects according to

106

local priorities using the Plan grant-in-aid, which is devolved the LSGIs in a practically untied form. The only restriction ( the LSGIs is that they have to spend at least 40% (30% in tl case of ULBs) on the productive sector meaning agricultui and allied activities, industries, self-employment etc., and nc more than 30% (40% in the case of ULBs) on infrastructure.] general stipulation that 10% of the funds have to be spent 01 women's development projects is also there. The Specia Component Plan/Tribal Sub-Plan component for each LSGIii indicated clearly. Also upper-limits of subsidy for beneficial oriented schemes has been fixed by Government after consultation with the LSGIs. Thus one third of development schemes in tit State are conceptualized, formulated and implemented by LSGIs, The physical achievements of LSGIs in the three years starting from 1997-1998 are captured in Annexures 4.2.1, 4.2.2 and 4.2.3. 4.8.7.2

Another important feature of the People's Planning Campaign has been the effective capacity building efforts taken up. In the( first year a cascading system of training was introduced to enable quick outreach to the cutting edge level. About 600 Key Resource Persons (KRPs) were identified at the State level both frou Government and outside, representing various disciplines. Ai the district level about 10,000 District Resource Persons (DRPs) and at the local government level about 100,000 Local Resource Persons (LRPs) were selected. All the DRPs and LRPs and a good number of KRPs were selected by the LSGIs themselves from government officials, professionals and activists. Thel massive training programme ensured that at the level of a Village Panchayat or ULB, there would be nearly 100 persons sensitized on the objectives and methodology of decentralised planning, These Resource Persons have taken an active part in spearheading the campaign as well as intervening in critical stages of the Plan preparation and implementation cycle.

107

4.8.7.3

In order to fortify and simplify the training system from the second year, handbooks on various development sectors were prepared by expert panels and circulated widely among the LSGIs and Resource persons. These handbooks outline the problems and possibilities of the sector and contain model projects, which can be adapted according to local needs. Thirteen such sectorspecific handbooks have been prepared so far; in addition twelve handbooks have been prepared on topics dealing with operational procedure.

4.8.7.4

Now the focus is on strengthening the capacity of the Task Forces on various sectors. Institutions like Medical College, Agricultural University, Centre for Water Resource Development and Management (CWRDM) etc., are being utilised to provide high quality technical training to members of Task Forces in their respective disciplines. In addition, LSGIs, which have evolved successful models, are now utilised to train sister LSGIs by exposing them to the models evolved.

4.8.8

PROCEDURAL REFORMS

With the objective of promoting people's participation and introducing transparent and norm - based decision making to reduce prosibilities of malfeasance, certain basic procedural reforms have been introduced. Three such reforms deserve special mention. 4.8.8.1

(1) EXPERT COMMITTEES A major innovation is the setting up of Expert Committees. Originally a Volunteer Technical Corps (VTC) was set up as part of the People's Planning Campaign at Block and District levels.

108

This consisted of experts in various fields who responded to tl call of Government to render voluntary professional services i the cause of local level development. These VTCs were converts into Block/Municipal Level Expert Committees (BLEC/MLEC and District Level Expert Committees (DLEC) by adding to it membership professionals from Government. These Exper Committees are given a three-fold role. Firstly they are expectei to provide technical advice to the LSGIs whenever requested. I: this respect they act as Technical Resource Groups for LSGIs t tap. Secondly they are empowered to technically vet the project of the LSGIs before they are sent to the DPCs for approva Here the Expert Committees function as the Technical Advisor Groups of the DPC. However these Expert Committees are m empowered to change the priority of an LSGI; they can on! insist on following of technical standards, adherence t mandatory Government instructions and proper costing an phasing of various programmes. The third function of the Exper Committees is to give Technical Sanction for works, which requir such approval. In this role they function as the Technical Suppor Group of the LSGIs. For technical sanction, sub groups consists of at least three experts are formed in which as far as possibl the Government professional is the Convenor and the non government professional is the Chairperson. This system c technical approval is faster, cheaper and more transparent, I; the case of Village Panchayats without engineers, the engine? members of these Expert Committees are allowed to perforr the role of the engineers on payment of a small fee not exceedini 2.5% of the estimate of a work for the full range of functions, (2) SELECTION OF BENEFICIARIES

4.8.8.2

Selection of beneficiaries for various individual and grou: oriented development programmes, particularly relating to ant

109

poverty and minimum needs programmes for people below poverty line is an important activity of LSGIs. Without infringing on the basic autonomy of LSGIs, the Government have prescribed a due process for beneficiary selection. The key elements of this process are fixing of definite and transparent eligibility criteria for each scheme as well as prioritisation criteria among those eligible for such scheme. The prioritisation criteria have to be given weightages in the form of points or marks. These criteria have to be published and application forms invited after widespread publicity. In fact, full-page advertisements are issued by Government alerting the people about impending beneficiary selection and exhorting them to approach the LSGIs. Each application received has to be acknowledged. Thereafter it has to be enquired into either through officials or preferably through a committee of officials and non-officials and marks awarded for each criterion and totalled. A draft priority list based on these marks has to be prepared and taken to the Grama/Ward Sabha in which the applicants from that particular ward also participate. The marks have to be justified in the Grama/Ward Sabha and altered if decided by the Grama/Ward Sabha. Once the Grama/ Ward Sabha approves the list, the priority cannot be changed by the LSGIs. In order to ensure equitable distribution of benefits among the different wards of a Village Panchayat/Urban Local Body, ward-wise physical target is prepared in proportion to eligible applicants. Even for selection of beneficiaries to schemes sponsored by Block Panchayats and District Panchayats it is the Grama Panchayat, which is to perform the function through its Grama Sabhas in the manner prescribed above. All records relating to selection of beneficiaries have been declared as public documents. This insistence on due process has considerably reduced patronage and nepotism in the selection of beneficiaries. (3) EXECUTION OF PUBLIC WORKS

4.8.8.3

In a fundamental shift from the existing method a set of rules

110

for execution of public works by LSGIs was issued. It providt for community contracting of works through committees (I beneficiaries along with stringent provisions to guard again" benami contractors masquerading as conveners or nominees I beneficiary committees. The rules provide for compulsor transparency with all records relating to a public work right fro; preliminary estimates, up to final bills and payment vouchee being declared as public documents for any one to peruse or tat copies. The rules also insist on preparation of a summary of tt estimate in layman's language and exhibition of this summaryi well as details of execution at the work site. In addition th process of technical approval is sought to be demystified so th; government could, through an executive order, bestow powei of technical sanction on institutions as well as committees ( government or nongovernment professionals. This radic; feature provides for easy access to technical expertise, ll pursuance of these rules the government have decided on programme of preparing a separate public works manual for loci governments with updated specifications and standards and mor accountable and people-friendly methods of preparation c estimates, taking measurements of public works and finalizini bills. This ambitious programme when it is carried to its logic; conclusion is expected to improve the execution of public wort by reducing chances of corruption and facilitating social audit 4.9

ISSUES TO BE ADDRESSED Even while a comprehensive methodology for local planning am a system of procedural safeguards have been put in place, theft are issues of concern which need to be addressed. The settins up of institutions of genuine local self governance is still in A nascent stage. It is in this phase that a careful nurturing is needed which includes weeding out undesirable elements and rectifyiting distortions which creep into the implementation process, despit the safeguards in place. In this respect, the important issue which are relevant for the long term sustainability of th

111

decentralisation process, some of them interrelated, are summarised below. 1.

There is a need to enhance the quality of peoples' participation. Gram Sabhas and Ward Sabhas have to move away from being primarily 'benefit deciding' mechanisms to institutions for meaningful dialogue on developmental priorities and for channelising public contribution for the common good. All sections of the public have to be attracted to these institutions.

2.

The

elaborate

provisions

for

transparency

are

being

only

minimally utilised. Unless there is a powerful check from below, there is every likelihood of misutilisation of the vast powers conferred on the local governments. Hence there is an urgency for setting up systems of social audit. 3.

The persistent malfeasance and corruption is disconcerting. A major threat to decentralisation is the corruption involved in the execution of public works through 'benami' contractors, defeating the very purpose of participatory development. It has to be recognised that while on the one hand, decentralisation increases the number of players involved in governance and thereby deepens democracy, on the other hand, there is a risk of new collusive practices emerging if the procedural safeguards are not strictly enforced.

4.

The quality of planning needs to be upgraded to prevent thin spreading of resources, to reduce beneficiary oriented schemes, to foster productivity increasing schemes, to better inter-tier integration of plans and to mobilise additional resources through credit linkages.

5.

Though most of the officials have been transferred to local governments, their active involvement in the planning phase

112

is rather limited. Unless these officials, especially tf professionals take an active interest in the planning proa and assume ownership of the plans and serve as the vita link between the people and the plan, it will not be possibli to consolidate and iteratively refine the quality of the plflfi in their areas of expertise. 6.

More than implementation of schemes using Governmen funds, decentralisation implies improved quality of service This would mean that LSGIs are able to manage the staf under their control in such a way that there is a improvement in the quality of services rendered by the to the public. Such a thing has not happened so far. It; on the performance of LSGIs in this area that the publi will ultimately judge the gains of decentralisation.

7.

The

managerial

efficiency

desired. There is management, human management in LSGIs. 8.

Local

resource

of

tremendous resources

mobilisation

by

LSGIs

leaves

scope for management

LSGIs

much

to

improving offic and finandi

is

an

area

wher

further improvements are definitely possible. 9.

For

achieving

good

governance

through

LSGIs,

created institutions like Ombudsman have to expectations with which such institutions and put in place. This would require that acquire greater sensitivity to problems of move closer to them.

live were these the

the up

totdesign; institutio peopleo

REDEFINITION OF FUNCTIONAL DOMAINS OF LOCAL GOVERNMENTS

4.10 4.10.1

As the People's Planning Campaign progressed and empirical evidence flowed in from the field on the areas of strength or

113

net

LSGIs, the Government accepted the recommendations of the Committee on Decentralisation of Powers (popularly known as the 'Sen Committee5 named after its Chairperson late Dr. S.B.Sen) and decided on a rational allotment of functional responsibilities among them. Thus the Kerala Panchayat Raj and Municipality Acts were radically restructured to go beyond the llth and 12th Schedules of the Constitution by attempting to define clearly the functional areas of the different tiers and types of LSGIs as precisely as possible. 4.10.2

The llth and 12th Schedules of the Indian Constitution actually do not carve out the functional domains of LSGIs. They only list developmental areas where, if so decided by the state government, LSGIs could have a role in planning for economic development and social justice and in the implementation of such plans. But Kerala has demarcated the functional domains of LSGIs with a great degree of clarity. The Kerala Acts classify functions as mandatory functions, general functions and sector-wise functions. The functions assigned to the three tier Panchayats and Urban Local Bodies are given in Annexure 4.3. In areas related to infrastructure and management of public institutions, the functional differentiation is sharp and clear, but in productive sectors it is difficult to clearly earmark functions separately for each tier. Only through experience can the natural functional area in such sectors get defined. There is a clear recognition of the existence of a rolerange for LSGIs - Agent, Adviser, Manager, Partner and Actor - with the objective being to reduce the agency role and expand the autonomous - actor role.

4.1.1

FURTHER TRANSFER OF STAFF TO LOCAL GOVERNMENTS After the amendments to the Acts the Government decided to

114

transfer the district level offices to the District Panchayats rationalise the staff structure for better service to other tien local governments. Of particular relevance, is the decision provide additional engineering support as per which, there wot be three Engineering Circles under Superintending Enginet each District Panchayat will get an additional division under Executive Engineer, all the Block Panchayats would get Assistant Executive Engineer each and 573 Assistant Enginet would be deployed among Village Panchayats in such a man; that 203 large Village Panchayats would get one engineer a and others at the rate of one engineer for two Panchayats. i the Urban Local Bodies one Superintending Engineer each woi go to the two new Corporations, one Executive Engineer tod of the 12 Grade I Municipalities and one Assistant Execuc Engineer to each of the remaining 41 Municipalities. 4.12 4.12.1

4.12.2

EXTENT OF DECENTRALISATION –AN ASSESSMENT The quantum of resources transferred and the range of responsibilities assigned to LSGIs and the strength of staff pk under their control give an idea of the extent of responsibilif assigned to LSGIs. As each year progresses there is clear evidej of Government withdrawing from areas allotted to the LSGIs so that the constitutional mandate of setting up institutions off government is realized within a short period of time. The extent of decentralisation is encapsulated in the statements. (1)

In

the

Health

sector

all

institutions

colleges and big regional speciality placed under the control of the LSGIs. (2)

other hospitals

In the Education sector, in rural areas the high schools

115

than

med

have

I)

have been transferred to the District Panchayats and the primary and upper primary schools have been transferred to Village Panchayats; in urban areas, all schools have been transferred to the ULBs. (3)

The entire responsibility of poverty alleviation has gone to the LSGIs; all the centrally sponsored anti-poverty programmes are planned and implemented by them.

(4)

As

regards

Social

welfare,

barring

statutory

functions

relating to juvenile justice, all the responsibilities have gone to LSGIs. The ICD5 is fully implemented by Village Panchayats and Urban Local Bodies. Care of the disabled, to a substantial degree, has become a local government responsibility. (5)

In

the

Agriculture

become the functions.

de

and

allied

facto

and

sectors, de

the

jure

following

local

have

government

a) Agricultural extension including farmer - oriented support for increasing production and productivity. b) Watershed management and minor irrigation. c) Dairy development. d) Animal Husbandry including veterinary care. e) Inland fisheries.

(6)

Barring highways and major district roads, connectivity has become a local government responsibility.

(7)

The whole of sanitation and almost the entire rural water supply have moved over to LSGIs. 116

(8)

Promotion of tiny, cottage and small industries is mostly local government task.

(9)

All the welfare pensions are administered by the LSfili

Thus it is clear that, in terms of governance, more than halil with the LSGIs. 4.12.3

As of now government pays the salary and meets other operational costs particularly in health institutions. All the other responsibilities of providing new infrastructure and equipments to attain the minimum standards and of maintaining the transferred have become the burden of the LSGIs. For examples 282 Krishi Bhavan offices, 2561 Lower Primary Schools; 962 Upper Primary Schools, and 6911 Anganwadis have transferred to the Village Panchayats alone. In addition the Village Panchayats have to provide new buildings to 2040 fu Welfare Centres, 207 PHCs and 9199 Anganwadis.

4.12.4

Thus, in Kerala, LSGIs now share several responsibilities varying degrees with the state government. And naturally perform these responsibilities, they deserve the proportioinate share of state government resources.

117

CHAPTER 5

THE FIRST STATE FINANCECOMMISSION INTRODUCTION 5.1

The first State Finance Commission which was set up along with the enactment of the Kerala Panchayat Raj Act 1994 and one month before the enactment of the Kerala Municipality Act 1994 started functioning from 23rd April 1994 and submitted its report on 29th February 1996. The context in which the First SFC functioned needs to be noted. Till October 1995 there were no elected bodies. The Village Panchayats and Municipalities were run by Administrative Committees, which consisted of the elected members who were there before the expiry of the term of office; and in the Corporations, District Collectors were posted as Administrators. And in Kerala there were no District Panchayats or Block Panchayats before 1995.

5.2

Elected local governments assumed office on the 30th of September 1995 and powers and functions as envisaged in G.O.(P)89/95/LAD were transferred on 2nd October. The fact that the First SFC had to give its Report within five months of the functioning of the newly elected local governments and before the contours of Government policy on decentralisation became clear notionally placed several constraints on it. It was too early for the Commission to determine the quantum of responsibilities which actually would move out of the State Government into the hands of the local governments.

118

SIGNIFICANCE OF THE RECOMMENDATIONS OF THE FIRST STATE FINANCE COMMISSION

5.3

In spite of the constraints, the first SFC broke new ground in several ways. They are listed below: (1)

It made a number of suggestions with the objective of increasing the magnitude of financial devolution from the State Government to local governments. A very significant recommendation was the one to earmark one percent of the State Government's current revenue for transfer the rural and urban pools to be set up for the purpose Even though the recommendation as such was not acceptet by the State Government, this idea of a fixed percentage from the State Government revenue being devolved to local governments was a novel one in the Kerala context and it constitutes an important principle informing the Report of the Second State Finance Commission.

(2)

Implicit in the suggestion for setting up the rural and urban pools was an attempt to change the inter se distribution of resources among the LSGIs. It attempted to move away, even though in a small manner, from the 'place of collection' to the population criterion, which was a step towards greater equity.

(3)

The First SFC highlighted the importance of thei maintenance of assets of LSGIs, both own and transf errec assets. The problem of reduced allocations fo?| maintenance due to the squeeze on non-plan allocationi<| becoming acute day by day. This would be very critical for; local government functioning in future as most of the social infrastructure assets having direct interface with the public have been placed under the control of LSGIs.

119

The Commission had laid down the principle that the maintenance requirements should be calculated on the basis of the current replacement cost and not on historic cost. Though the State Government did not accept the suggestion it has certainly influenced the Second SFC in its assessment of the maintenance needs, to quantify the devolution required for reasonable maintenance of assets transferred to LSSIs as well as of new assets created by them using plan funds. (4)

The

First

SFC

made

innovative

recommendations

for

rationalization of tax collection to avoid inefficiency and leakages. Taxing of buildings on plinth area, levying entertainment tax related to seating capacity and occupancy ratio, preparing tax maps etc., are very significant recommendations, which the Second SFC fully endorses. (5)

The

First

SFC

enunciated

the

principle

of

moving

away

from tied non-plan grants to untied non-plan grants, a very essential ingredient of financial autonomy for LSSIs. By virtue of its recommendations 16 tied grants were amalgamated into the Rural Pool and a similar attempt has been initiated for urban areas. (6)

Though the First SFC confined itself largely to non-plan devolution, significantly enough, it suggested transfer of at least 25% of the Centrally Sponsored Anti Poverty Programmes, thus hinting at the principle that local governments could implement plan programmes and the SFC could deal with plan transfers.

(7)

A very important contribution of the First SFC was laying down transparent formulae for various kinds of devolution.

120

Thus grants to local governments were brought into ti realm of entitlements and all forms of discretion whi; were used earlier to discriminate among LSGIs, were tate away with the acceptance of the report of the First SFC (8)

The First SFC had rightly stressed the need for continues data gathering on local government finances. The Secor SFC reiterates this need.

(9)

The First SFC gave a comprehensive picture of the local government finances by providing an update, which was: very difficult thing to do in the absence of proper datu The analysis of the finance of Village Panchayats ans Municipalities - the distinguishing features and thei rationale, the problems and the potentialities, tJ distortions and their correctives - has proved very useful.

5.4

5.5

STATUS OF IMPLIMENTATION OF THE RECOMMENDATIONS OF THE FIRST SFC The recommendations of the First SFC could be classified intt four groups. (1)

Devolution of funds to local governments.

(2)

Augmenting resources of local governments.

(3)

Rationalisation of fiscal systems of local governments,

(4)

Miscellaneous issues.

Out of the 69 important recommendations, 63 were accepted by the Government. A good number of recommendations involved amending the concerned legislations and rules. Naturally this

121

has proved to be time consuming. Also some of the recommendations had to be implemented by departments other than the Local Self Government Department. Therefore at this point of time some of the recommendations of the First SFC including very important ones like rationalization of property tax, tax mapping etc., have not been fully operationalised even though they were accepted by the Government. The status of implementation of the various recommendations of the First SFC can be seen in Annexure 5.1. RECOMMENDATIONS OF THE SECOND SFC FOR OPERATIONALISING THE RECOMMENDATIONS OF THE FIRST SFC

5.6

The Commission strongly feels that the accepted recommendations of the First SFC should be operationalised immediately with no further delay. It is necessary to implement them in full, as some of the recommendations of this Commission are built on the recommendations of the predecessor Commission. This Commission would therefore reiterate the following recommendations of the First SFC and call for quick, special follow-up to carry the implementation process to the logical end. (1)

The rules for levying Property Tax may be notified and the assessment work started in January 2001 itself. Some general suggestions in this regard are given in Chapter 9.

(2)

In the case of Profession Tax in respect of self-employed professionals like Doctors, Lawyers, Accountants etc., the First SFC had suggested slab rates. This has not been implemented. Second Finance Commission has separately recommended slab rates for presumptive taxes, which would cover these categories.

122

(3)

Service Tax may be levied as an independent tax by the urban and rural local governments. Further legislative action is needed.

(4)

Operational instructions need to be given in the form of rules and guidelines in respect of collecting Entertainment Tax based on seating capacity. The Second SFC would further elaborate on this in the second part of its Report.

(5)

Rules for levy of Advertisement Tax in Village Panchayat and Municipalities may be issued at the earliest along model byelaws. A few guidelines are indicated in Chapter 9.

(6)

The First SFC had suggested revision of rates of fees and other similar non-tax sources. This has been partially implemented. The Second Finance Commission recommending thorough revision in Chapter 9.

(7)

Steps to finalise the minimum land registering sales may be taken immediately.

(8)

Further action may be taken to charge licence fee from Cable TV Operators. As regards the question of collecting Entertainment Tax from Cable Operators the Second Finance Commission's view is that it should be done through necessary legislative amendments.

(9)

The suggestion for amending the Building Tax Act to ensure that the tax is paid to the concerned local government would become infructuous once government accepts this Commission's recommendation for a general sharing of tax revenue.

(10)

The tax mapping should be done immediately in all local 123

value

for

use

governments and the unique premises numbering system followed. (11)

The First SFC had suggested that the Rural Development Board be made into a financing agency and that soft loans should be given both by the Rural Development Board and the Kerala Urban Development Finance Corporation. This matter will be dealt with in detail by the Second Finance Commission in the second part of its Report. However, it is suggested that a single financing agency would do for all LSGIs, both urban and rural.

(12)

Though building exemption has been taken away, compounding is still being resorted to in the process of regularization of constructions made on or before 1-12000. 50% of the fee thus realized should go to the concerned Village Panchayat and Municipality.

(13)

The

question

of

Village

Panchayats

and

Municipalities

levying daily fee for use of poramboke may be examined and decided by Government without further delay, (14)

The rationalization of Revenue Village and Panchayat/Municipality boundaries may be done in

Village such a

way that each such LS6I has one or more full revenue villages within its boundary i.e., no revenue village would lie within more than one Village Panchayat or Municipality. (15)

As suggested by the First SFC a special Cell has been created in the Finance Department. This Cell should be revamped and assigned the task of regular monitoring of the finances of LSGIs, both income and expenditure.

124

(16)

The recommendations of the First SFC were accepted! 1997. Strictly speaking they should have been maJ effective from 1-41996. However they are legally in fon since 1-4-1997. Therefore any shortfall in devolutioi below the accepted level in respect of assigned and shari taxes should be made good by the government.

125

CHAPTER 6

6.1

THIS DEVOLUTION AND INTER SE DISTRIBUTION OF PLAN FUNDS

T he decision to transfer 35-40 percent of plan outlay to LSGIs,who are

then left left free to spend the amount on plan projects formulated by themselves, has been a historic one. While panchayats as active institutions exist in several other states in the country, notably in West Bengal which played a pioneering role in activating them and in Karnataka, the Kerala model of democratic decentralisation is unique in so far as it has three specific features not found elsewhere: the first is the quantitative magnitude of devolution; nowhere else is such a high proportion of plan funds handed over to the LSGIs. The second and related feature is the freedom accorded to LSGIs to make plans according to their own priorities. There exists of course a system of vetting of local plans at higher levels, which is essential for avoiding unnecessary duplication, for ensuring complementarities, and for enforcing compliance to state government guidelines. But subject to such general constraints, the priorities informing any local plan are respected. The third feature has to do with the fact that there is a clear demarcation of responsibilities between the state Government and the LSGIs These three features make the Kerala practice the first authentic attempt, anywhere in the country, at planning from below. Not surprisingly, it has unleashed, by all accounts, unprecedented enthusiasm among people, attracted much attention from other states, aroused a great deal of curiosity all over the world, and earned wide acclaim in intellectual circles as representing a breakthrough in conception, a breakthrough

126

which has even been hailed as "a synthesis of Gandhi and Marx” 6.2

There can be little doubt that Kerala's ability to achieve this breakthrough can be attributed to the fact that it was a part of the Peoples' Plan Campaign. The significance of this Campaign, and the array of measures of democratic decentralisation which followed in its wake (of which the devolution of 35-40 percent of plan outlay to LSGIs is only one), have been described in an earlier chapter. Here we would like to reiterate our belief that minimum share of plan funds of this order of magnitude should continue to be transferred to the LSGIs every year. While we recommend this for the next five years which constitute our jurisdiction, we hope this practice would be carried forwar thereafter too. To be sure, there are several problems associated with the present practice of decentralised planning. Some of these are discussed below. But these in no way negate the worth and legitimacy of the experiment, which should be seen not merely in narrowly economic terms as an alternative, more effects model of planning, but more importantly as a means of deepening democratic structures in our country.

6.3

Any estimate of the actual percentage of devolution of plan funds to the LSGIs is sensitive to the definitions used. In 1999-2000 for instance the plan grant-in-aid as a proportion of state plan outlay was supposed to be 31.4 percent (Rs.1020 cr. compart to Rs. 3250 cr.). But this ratio goes up, if we include stati sponsored schemes, to 35.5 percent (Rs. 1154.4 cr, compared to Rs. 3250 cr.). The term "state-sponsored schemes" came to be used from 1997-98 to denote two categories of schemes. Each of these categories is a part of the state plan but is implemented by LSGIs. The first category consists of certain national and state level schemes especially in health, poverty alleviation etc, These are likely to continue for some time. The second category consists of those schemes which were originally covered under the departmental allocation in the state plan but were transferred

127

to LSGIs in the transitional phase. These would decline naturally with the passage of time, and have been doing so. The total outlay on state-sponsored schemes has in fact been declining, from Rs.276 cr. in 1997-8 to Rs.166.50 cr.in 1998-9, to Rs.134.40 cr.in 1999-2000 (RE). As long as state sponsored schemes exist the outlay on such schemes should not be counted as part of total devolution, but should be treated as an additionality: counting them as devolution causes a hiatus between the actual and apparent magnitudes of funds left to the domain of LSGI decision-making. (What appears for instance as 35 percent devolution actually means less, as we have seen for 1999-2000). Our recommendation is that a minimum of one-third of the state's plan outlay in any year should be statutorily transferred to the LSGIs, and that in computing this ratio the transfers on account of state-sponsored schemes should be excluded from the numerator. This is convenient for framing appropriate legislation and corresponds on present reckoning to over 35 percent plan outlay, including state-sponsored schemes in both the numerator and the denominator1 6.4

We now come to the problems associated with transferring such huge amounts of plan funds to LSGIs. Among the many problems that can be identified we would focus on four broad sets of problems here. Two of these will be discussed here only cursorily since they would be taken up in the second part of our report. The first of these is the absence of an adequate permanent institutional framework for decentralised planning, which makes the exercise a "voluntaristic" one, not de-linked from a

1.

The figure 35-40 percent was originally arrived at through some studies

which showed, on the basis of historical data for the state, that the proportion of plan outlay which could in principle fall within the province of district-level planning (including planning by tiers below) was around this. It has acquired an added legitimacy from practice which induces us to stick to this figure.

128

"Campaign mode". An example of this absence of an institutional framework is the fact that the decision to transfer 35 percent or plan funds to LSGIs has itself till now been only an administrative decision, reversible at any point of time. It has been without any statutory basis whatsoever (a lacuna that we hope o recommendation would remove). But more generally, planning of any kind required personnel. A carde of trained personnel appropriate for this kind of planning, has not yet bet fully created. Decentralised planning has had to make do win whatever personnel are available from voluntary organisatloi and the ranks of locally available experts. Some no doubt wouli see a virtue in the present state of affairs: the Campaign mod; arouses popular enthusiasm, while shrouding decentralised planning within an institutional framework would lead n bureaucratisation, ossification, and "routinisation", all of what are inimical to the spirit of popular participation. In short tt: fear may be expressed that the very process of institutionalisinf decentralised planning would rob it of its authentic democrat character, i.e. would make people passive objects all over again. from being, in howsoever limited a fashion, active subjects. Whil this fear is not without justification, it is nonetheless the can that voluntarism is essentially impermanent, that the "Campaign mode" can never be sustained for long, so that eschewicf institutionalisation eventually means throwing the baby out wit the bathwater. The need is to combine active popular participate with an appropriate institutional framework which would mail the existing government staff, both professionals and generalisti fully involved. The process of bringing into being an appropriate institutional framework for decentralised planning is currentli underway in the state. Ensuring that active popular participate in planning is not destroyed as this framework comes into bein will be one of the challenges before decentralised planning i the coming years. 6.5

The second problem relates in a broad sense to the issue of

129

corruption. Corruption, without a doubt, exists in several different forms in the decentralised planning system. But then so it did, even earlier, i.e. prior to the increased devolution of plan funds. There is no reason to believe that the scale of corruption in the use of plan funds has increased in any way after devolution; indeed several knowledgeable observers have the impression that it might have decreased. Its continued existence nevertheless is a source of concern. The fact of popular participation, and hence vigilance, should have the effect of reducing at least certain types of corruption. On the other hand however the absence of an appropriate institutional framework for decentralised planning would provide scope for corruption. Putting it differently, a comparison of the earlier planning system with an alternative system of decentralised planning with popular participation would associate a much lower level of corruption with the latter. It follows that if corruption exists on a by-no-means-modest scale in the present dispensation, then this is at least partly due to the fact that the system of decentralised planning, complete with its own institutional framework with its new checks and balances, has not yet been put in place. Once the institutional framework for decentralised planning is erected, the scale of corruption should come down significantly. The recent appointment of an Ombudsmen is an example of an institutional framework gradually coming into place, which should reduce the scope for corruption. A more elaborate discussion of these issues together with specific suggestions will be made in the second part of our report. 6.6

The third problem springs from the type of plan projects which small bodies, such as the panchayats, are intrinsically capable of undertaking on their own. These typically are tiny projects catering to local needs. Transferring substantial plan funds to them would necessarily result in a proliferation of such projects. While this would not be a bad thing at all for a certain period of time (since centralised decision-making typically ignores local

130

needs, and has done so in our country), a continuous replication of such projects, with progressively lesser and lesser soc usefulness, can scarcely be justified, especially when resour are being taken away from larger statelevel projects which migli be essential for the state's economic health. Putting it different a devolution of 35 percent of plan funds continuing not jir into the immediate, but also into the more distant, future woif be justified only if the composition of projects on which tk amount is spent can be made to keep changing in consonan; with the changing requirements of the people. This in tuJ requires that the LSGIs should be capable of overcoming the narrow, "small bodies'" horizon. Village panchayats, for instant should in the next phase be prepared to collaborate with one another to undertake meso-level projects, or even macro-level projects. In short the transfer of resources to the lower level should not mean a perpetual entrapment in mini-projects a progressively decreasing rationale. One can go further. The LSGI have to break out at some stage not only from their narrow micro project preoccupation, but also from their almost exclusive rol of being purveyors of welfare goods and services to the people. To be sure, the need for such goods and services can hardly bj overemphasised, but the word to note is "exclusive". Even fit providing a larger flow of welfare goods and services to the peopt at a later date, the LSGIs may have to take on a more diversify, role, aimed at augmenting the means at their disposal. Many of them of course provide help at present to deserving private individual producers in their respective areas, but this has nc generally been a source of revenue for them. It has been a: extension of the welfare-purveyor role. They have to pay greatr attention to means augmentation possibilities while renderta such help. In addition, LSGIs can also boost their resources by eliminating the wastes and "leakages" that entrusting public work programmes to middlemen entails, and by undertaking innovate output augmenting local projects which can yield larger revenues as well. Taking up government contracts for civil construction

131

for a reasonable centage charge is a possibility work exploring. The third problem for decentralised planning would arise therefore if the LSGIs do not show sufficient flexibility to transform and broaden their nature. If they continue to remain mere conduits for distributing welfare goods and services, then even this role cannot be sustained in the not-unlikely event of a worsening of the fiscal squeeze experienced by the central or the state government, for then, as this squeeze gets "passed downwards", they would find themselves increasingly bereft of resources. 6.7

The fourth problem concerns the inadequacy of the LSGIs' own tax effort. It is often asserted that there has been a slackening of the LSGIs tax effort as larger plan funds have been made available to them. While hithertopublished research attempting to establish this slackening hypothesis is not convincing, the view that such a slackening has actually occurred is widely held in knowledgeable circles. Time-series data do show a lower level of revenue in recent years compared to what a long-term trend fitted to earlier data would project, but this per se does not constitute proof of slackening. Besides, this shortfall relative to trend predates the increase in devolution that came with the Peoples' Plan Campaign. But whether or not there has been an actual slackening on account of the larger devolution, the fact remains that LSGIs5 tax collections are way below potential. This makes them almost entirely dependent on devolution from the state government and hence extremely vulnerable to the fiscal travails afflicting the state, and hence by implication the central, government. In the absence of adequate local-level resource mobilisation the base for decentralised planning remains extremely fragile. We recognise of course that resource mobilisation is not synonymous with raising larger tax revenue: the former can take several forms, such as for instance mobilisation of voluntary labour by LSGI, of which tax effort is only one. It has also been brought to our notice that not an inconsiderable amount of additional resource

132

mobilisation has occurred in LSGIs, even when conventional indices like tax revenue have shown unimpressive increase! Nonetheless, given the indubitable fact that tax collections by LSGIs have been much below potential, our Commission has felt the need to recommend the introduction of a system of rewarl for tax effort through an amendment in the formula for the inter se distribution of plan funds. The first Finance Commission had suggested the following criteria for the 6.8

inter se distribution of plan funds.

ULBs RLBs Population in 1991 Census SC/ST Population in 1991

75 10

70 1O

Total Workers Excluding Workers in Manufacturing, Processing, Servicing, and Outside household industry Proportion of Agricultural Workers among Workers

15

10

Nil

10

100

100

Total

6.9

The Finance Commission had not explicitly demarcated between the different tiers of the PRIs and ULBs, the presumption being that the above criteria would apply within each tier, while the division between tiers would continue in the same ratios as were prevailing at the time. The Cabinet Subcommittee set up to examine the First SFC report felt that, instead of the formula recommended by the Commission, plan funds may be distributed according to a simple formula giving 90 percent weight to population and 10 percent to area. The distribution of funds in

133

1997-8, the year when plan grant-in-aid was greatly increased, was however entirely on the basis of population alone. The Planning Board set up a Working group in October 1997 to look into the matter and evolve a fresh formula for the inter se distribution of plan funds. This formula, on the basis of which plan funds are distributed at present is the one set out in Chapter 3 above. 6.10

The

total

amount

of

transfers

to

local

bodies

is

distributed

between the General Sector, claiming about 75 percent, the SCP about 21 percent, and the TSP about 4 percent. The distribution of General Sector funds between the PRIs and the ULBs is in the ratio of 85 and 15, and within the former the distribution between the GPs, BPs, and DPs is in the ratio of 70, 15 and 15. SCP and TSP funds are shared between urban and rural LSGIs on the basis of the SC/ST population. The ratio of distribution between tiers however is somewhat different here compared to the General Sector funds: for SCPs it is 60, 20, 20, while for TSPs it is 40, 20, and 40. The inter se distribution of General Sector funds across institutions within each tier is now undertaken, as already mentioned, on the basis of the formula given in Table 3.2.9 of Chapter 3. 6.11

While suggesting that the tax effort, or more accurately the revenue effort, criterion should be introduced in addition to the above, we propose not to disturb the current pattern of distribution of plan funds among the various tiers. The revenue effort criterion should be introduced only at the stage of inter se distribution within a tier. It follows that this criterion can be introduced only in the Grama panchayats and ULBs which alone have significant revenue raising capacities. To see how we propose to introduce the revenue effort criterion into this scheme, let us

134

first look only at Grama Panchayats. We wish to earmark a maximum of 10 percent out of the plan funds destined for Grama panchayats for distribution on the criterion of revenue effort. This percentage, which is not a fixed one but varies from year to year, has to come out of the 65 percent currently distributed on the (Non-SC/ST) population criterion. This percentage should be arrived at as follows. In any particular year some panchayats will show an increase in their revenue (consisting of all revenue from taxes, fees and other sources1) over the previous year, whilt others will show either a decline in revenue or the same level of revenue. Let the number of panchayats showing an increase it revenue be n, while the total number of panchayats is N. The percentage of plan funds distributed on the revenue effort criterion in the following year (by which time the relevant data regarding revenue collections by the panchayats would haul become available) will then be 10.n /N. If for instance out of 990 village panchayats in a particular year only 371 show at increase in revenue (over the previous year) then the proportion of plan funds distributed on the revenue effort criterion in ths following year will be (10 multiplied by 371) / 990. We recommend that in actual calculation, 990 should be roundeo: off to 1000 for simplicity. Adopting this procedure, the proportion distributed on the revenue effort criterion would be 3.71 percent, and the proportion distributed on the Non-SC/ST population criterion would be 61.29 percent. Once the amount of plan funds to be distributed on the revenue effort criterion in any particular year is so determined, this amount has to be

1

There have been instances, where due to some government or Court order

revenue has not been collected for some time under some particular head, and the lifting of the ban causes a sudden jump in revenue under that head. Since jumps of this sort would cause a distortion in the application of our proposed criterion, we suggest that in all such cases the increase in revenue under this head in the year of the jump should be ignored. This head should begin to count only from the next year onwards.

135

distributed among the panchayats which did raise their revenue, i.e. the 371 panchayats in the above example. For this we recommend the following procedure. For each of the 371 panchayats there is a certain percentage increase in revenue in the year just completed over the preceding year. This percentage for any panchayat multiplied by its population gives a number for that panchayat. The share of that panchayat (in the total amount available for distribution on the revenue effort criterion) is this number divided by the sum of such numbers for all the 371 panchayats. If the share for panchayat i is denoted by q i, the percentage increase in its revenue is given by r . and its population by P i then qi

6.12

= ri .Pi / Σ ri .Pi

A simple example will clarify the proposed procedure. To do so however let us take a smaller number of panchayats showing a revenue increase. Let the number be 10. Then 10 times 10 divided by 1000, i.e. only 0.1 percent of plan funds will be distributed on the revenue effort criterion and 64.9 percent on the non-SC/ ST population criterion. Suppose the plan grant-in-aid earmarked for Grama panchayats is Rs.1000 crores; then Rs.l crore will be distributed on the revenue effort criterion. How will it be distributed? Suppose the percentage increases in the revenue of the 10 panchayats are respectively, 1, 2, 3, 4, 5, 6, 7, 8, 9, and 10. And suppose their populations are respectively 100, 200, 300, 400, 500, 600, 700, 800, 900, and 1000. Then the share of the first panchayat

6.13

will be (1 times 100) /(1 times 100 + 2 times 200 + 3 times 300 + 4 times 400 +...........).The respective shares of the ten panchayats in the pool of Rs.l crore work out in this fashion to: 1/385, 4/385, 9/385, 16/385, 25/385, 36/ 385, 49/385, 64/385, 81/385, and 100/385. These shares add up to 1. In the actual application of the formula however we suggest a modification. Since we are taking percentage increases, a Panchayat with a low base can show a phenomenal increase in a particular year and hence get unduly rewarded by our formula. Likewise a Panchayat which shows a negative increase in year and a large increase in the following year would stand to gain by our formula (since we are not directly penalising negati increases). To avoid such quirky results, we propose to count all percentage increases of 30 or above as 30. The reason for taking 30 as the ceiling is the following. From 136

simulations carried out on data for 1998-9 and given in an Annexure, it turns out that the difference made to the big losers from alternative ceiling negligible. This being the case, since the incentive effect for the others would get blunted if we take a very low ceiling, say 10 or percent, we have decided to take 30 percent as the ceiling, 6.14

We recommend an exactly analogous procedure for incorporating revenue effort into the criteria for the distribution of plan funds among the ULBs. Here too a maximum of 10 percent of the plan funds earmarked for ULBs can be set aside for distribution the revenue effort criterion. The actual percentage would be given by this maximum multiplied by the proportion of ULBs showing revenue increases, and this percentage would come out from the 75 percent currently earmarked for distribution on the populatio criterion. Likewise the inter redistribution of this amount among the ULBs would be on the basis of the following formula: the share of any ULB = percentage increase (subject to a maxim of 30 percent) in its revenue during the previous year times its population / the sum of the percentage increase in revenue tim population of all such ULBs (which show revenue increases). Revenue in this entire discussion, we wish to emphasise, includes only taxes, fees and license fees, and other incomes, which are the result of the LSGIs' own effort. It excludes what they get from shared and assigned taxes, the other non-plan grants, and of course the plan grants, from the state government. In short, the term”revenue” used in this context is synonymous with “own colelcted revenue”.

137

6.15

Let us now turn to the rationale of the above formula. Ideally, revenue effort should be evaluated by looking at the actual revenue collections in comparison to some notion of potential revenue generating capacity. Unfortunately we simply do not have the data to calculate this potential capacity for each and every LSGL Looking at Increases in revenue as an indicator of effort is only a convenient proxy. Here, introducing explicit penalties for LSGIs showing reductions in revenue would be unfair, and would inevitably result in appeals to discretion on pleas of special circumstances, which would have the effect of undermining the entire system. We have therefore introduced penalties indirectly, not merely through an exclusion from reward for revenue increases, but through consignment to a group that only shares a reduced amount available for distribution on the population criterion. The precise formula of course has been dictated by the need to have "well-behaved" properties (which also constitute a reason for the exclusion of "negative" transfers, i.e. of explicit penalties for reduced revenue collection), and the need to avoid absurd results. For instance, a variable proportion of plan funds is supposed to be distributed on this criterion, as opposed to a fixed proportion on other criteria, because of the need to avoid absurd results. If in a particular year, say, only 10 panchayats happen to show an increase in revenue, then, with a fixed 10 percent distribution on revenue effort basis, they would walk off, in the above example, with nearly Rs.100 crores between them, which would be extremely unreasonable (especially since we are using ordinal terms like "increase" and "decrease"). As for the actual formula for the inter se distribution from the pool earmarked for rewarding revenue effort, it satisfies the property that if all panchayats showing revenue increases showed the same percentage revenue increases, then the pool would be shared among them exactly in the same ratio as their non-SC/ST

138

population, which is perfectly reasonable. On the other hand the above formula also says that if all panchayats showed a reduction or constancy in revenue collections, then again the size of the pool would be zero, so that the entire 65 percent of plan funds would be shared among grama panchayats (75 percent for ULBs) on the non-SC/ST population criterion, the same as is the practice now. In such a case in other words, all being delinquent, none would be singled out for punishment, which too is reasonable. 6.16

The real limitation of the above formula arises from the fact that we are taking percentage increases. This gives rise to two different kinds of problems: the first is the "low base" effect. For example if a panchayat had zero (or very low) revenue in one year and some increase in the next year, then its rate of growth would be infinitely large, giving it an enormous, illegitimate advantage. One way of avoiding this problem is to divide the absolute increase in revenue by the total income of the inhabitants of a panchayat (or some similar variable). But we do not have data on the total income of the inhabitants of a panchayat. Taking the expenditure by panchayats as the denominator, while it would get rid of the low base problem, would work against the poorer panchayats. All things considered, therefore, there is no easy alternative to taking percentage increases in revenue as the proxy for revenue effort. And it may not be a bad proxy in practice. Nonetheless, to guard against anomalies, we are suggesting a maximum figure of 30 for the percentage increase in reveue. The second problem with taking percentage increases is the fact that the revenue raising capacity of panchayats and ULBs is subject to a limit that does not move up much from one year the next. It does not even go up in tandem with price increases or real income increases of residents within their jurisdiction since a good part of this revenue is supposed to come from property taxation, and the revenue to be raised from a particular property can be adjusted only at discrete intervals. As a result

139

even with the best of intentions some local bodies will find it difficult to raise their revenue beyond a point. Any criterion that looks only at percentage increases in revenue therefore is potentially discriminatory against them. This no doubt is an important consideration, but its practical relevance over the next five years may not be all that much. The current level of revenue mobilisation relative to potential is too low in the case of all Panchayats and ULBs for us to worry about the implicit discrimination against those that have hit or are close to their revenue-raising capacity. What is true however is the fact that this formula, though adequate for the coming five years, should not be continued ad infinitum. True, the low base effect would disappear over time, but the other factor mentioned above would introduce serious biases as some local bodies approach their revenue-raising ceiling. 6.17

Let us now turn to the practical problems of using the above formula. While the mechanics of making the necessary computations are quite simple and nontime consuming once the data on tax and non-tax revenue collections by the local bodies are available, the real problem lies in obtaining reliable revenue collection data. To overcome this, our recommendation is that it should be made mandatory for all local bodies to have a separate account with the treasury where collections from all items constituting their own income, and only such collections, are deposited. Then these data would be easily available to the state government from the treasury, and would be useful for a number of purposes quite apart from the employment of the revenue effort criterion for determining the inter redistribution of plan funds. Of course even if this statutory provision is introduced, local bodies would not necessarily comply with it immediately. To goad them into doing so before more drastic action is taken against the deviants, a particular date should be fixed from which the revenue effort criterion should be introduced into the distribution of plan funds; and all local bodies for whom there

140

is no treasury-authenticated information on revenue collection should Ipso facto be treated as if they have not had any revenue increases and thereby excluded from any distribution under this head. Announcing such a date in advance would also be useful for another reason, namely, any sudden drops in plan funds for particular LSGIs can be avoided if they intensify revenl collection effort owing to prior warning. (And if they do not then they can scarcely claim injured innocence). For an early introduction of the revenue effort criterion, it is essential that the government should bring in this statutory provision as soon as possible. Since the criterion is based on increases, time-laga intrinsic to it. 6.18.

A simulation exercise on the basis of the data given to us on PRI and ULB revenues has been carried out to determine what would have been the distribution of plan funds in 1998-9 if the revenue effort criterion had been applied in that year. Some results from a comparison of this distribution with the actual distribution is given in an Annexure 6.1.

141

CHAPTER 7

THE PROBLE OF MAINTANANCE OF ASSETS 7.1

A substantial number of assets has been transferred from the state government to the LSGIs as part of the functional devolution under the Panchayat Raj and Municipal Legislations. A good number of assets were transfered through a Government order in September 1995 and some more assets were transferred in the wake of the Peoples' Planning Campaign. As a sequel to this Campaign, the devolution of plan funds to the LSGIs was substantially increased, and this in turn was used for building up further assets. The LSGIs today have thus become the custodians of a vast array of assets, and the problem of the maintenance of these assets has acquired a degree of urgency. For convenience of discussion, the assets existing under LSGI jurisdiction at present can be divided into three categories: assets which the LSGIs owned and maintained prior to the transfers following the September 1995 Government Order (for the maintenance of some of these assets they had access to specific revenue sources such as VTC, and grants such as VRM); assets which have been transferred to the LSGIs following the Government Order; and assets which have been built since 1997-8, the year in which enlarged devolution began. Within this last category not all assets have been financed out of plan funds alone; surplus from own revenue and public contribution have also gone with in. The maintenance requirements as well as the sources of funds for maintenance for these three different types of assets need to be discussed separately. But let us first see what exactly is being referred to under the concept of maintenance. 7.2

142

7.2

THE CONCEPT OF MAINTANANCE

7.2.1

"Maintenance" is by no means a simple concept. It gets invariably enmeshed with three other concepts, operational costs, depreciation, and investment, in the sense that it is difficult to demarcate its boundary from those of these three other concepts. The difficulty has a conceptual dimension: we simply cannot tell in many situations how much of an expenditure is maintenance and how much of it is, say, investment. In addition it has an even more overwhelming practical dimension: we often do not know how to tell what is maintenance expenditure, and what is, say, investment expenditure. Strictly speaking the term maintenance refers to the expenditure required to keep an asset running with unimpaired productive potential during its life-time, Operational expenses refer to the expenditures on all other current inputs that are combined with this asset for producing the final good. The term depreciation refers to the amount that has to be set aside during each period, so that when the asset has reached the end of its life-time, a new asset can be purchased to take its place. Finally, (net) investment refers to any addition to productive capacity, unlike either depreciation or maintenance.

7.2.2

Of course the life-time of an asset is not independent of the maintenance expenditure that is undertaken upon it; or, putting it differently, different levels of maintenance expenditure, while maintaining approximately the same level of productive potential (or quality of service) of an asset, may cause different lengths of life-time. There is in other words a trade-off between depreciation and maintenance Not withstanding this trade off however, there would be some "optimum" level of maintenance expenditure at which the depreciation cum-maintenance expenditure would be the least. The concept of "maintenance norm" is ideally derived from this consideration. To give an example, if an asset costs Rs.100 (we ignore inflation in this example), and can last 10 years with an annual maintenance expenditure of Rs.l0 and 12 years with an annual maintenance expenditure of Rs.15, then clearly the former option is preferable. This is because the expenditure

143

on depreciation-cum-maintenance is Rs.20 per year in the former (10 + 10), and Rs.23 1/3 per year in the latter (15 + 8 1/3). 7.2.3

The logic of this argument is not affected even when there are no explicit depreciation provisions, as is the case with LSGI assets. This is because at the end of 12 years in the above example, following the first option (where the asset is replaced after 10 years), we would have spent a cumulative sum of Rs. 120 on maintenance and would be having a 2-year old asset with a depreciated value of Rs.80 (which comes from 100 original value minus 20 loss of value owing to depreciation); on the second option we would have spent a cumulative sum over the 12year period of Rs.180 on maintenance and would be having a brand new asset worth Rs. 100 at the end of it. By following the second option then we would have, compared to the first option, spent Rs.60 extra as maintenance over the 12 years and ended up with only Rs.20 worth of extra asset value. This being patently irrational, the first option should be adopted. It follows then that the comparison between the two, or several, options is unaffected by whether depreciation provisions are actually made each year or not. There would be some optimum option on the basis of which the maintenance norms can be ideally calculated.

7.2.4

Of course the concept of life-time of an asset is not unambiguous (since an asset does not just drop dead); nor is the proportion of maintenance expenditure to the value of the asset constant through its life-time. This magnitude typically increases with the age of the asset, and at some point quite steeply. The point at which this steep increase occurs can be taken approximately as the end of its life-time corresponding to that particular stream of maintenance expenditure. (The logic of the example discussed in paragraphs 3 and 4 can be restated in terms of such rising streams instead of the constant streams assumed there). Though in practice the maintenance norms we have are given to us by engineers, and their economic underpinnings are not always clear and not necessarily what they should be, the notion of "maintenance norms" is at least conceptually well-founded.

144

7.2.5

7.3 7.3.1

The conceptual basis of actual estimates of maintenance expenditures however is shaky because it is invariably mixed up with net investment. When the roof of a school building is repaired, this does not occur in pristine purity. Sometimes a boundary wall is added at the same time While the repair constitutes maintenance expenditure, the addition constitutes net investment. But the two are frequently reported together as maintenance expenditure. This is not just due to lack of knowledge about the distinction. Sometimes drawing the distinction is practically impossible, since it entails a separation that is either impossible or tedious. An example of impossibility of separation is when sow maintenance expenditure raises the quality of service of the asset compared even to what it was when the asset was newly installed: here maintenance has got inextricably merged with net investment. A more common case however is where disaggregation is possible but tedious For instance if in the process of adding a new wing to a hospital which has to be whitewashed, some existing walls also get whitewashed, tha keeping track of the latter as maintenance in contrast to the formar which is net investment requires a degree of disaggregation that is too tedious to be practically possible. All this, somewhat abstract discussion has practical implications to which we shall return later. MANITANACE EXPENDITURE OUT OF PLAN ASSISTANCE It can be argued that of the three categories of assets, clearly the maintenance requirements of those assets which were with the LSGls earlier and for whose maintenance specific revenue sources were assigned, such as VTC, should be maintained by them; the state government should have no responsibility in this regard. As for the assets transferred after the 1995 Government Order, the responsibility of meeting the maintenance expenditure must fall on the state government. This is because if these assets had not been transferred and had remained with government departments, then the responsibility of maintaining these assets would have fallen on the state exchequer Since these are not income-earning assets, so that their transfer to the LSGIs has not been accompanied by any corresponding transfer of

145

income, the task of meeting their maintenance expenditure must still fall on the state government1. When it comes to assets constructed by LSGIs from 1997-8 onwards, clearly the responsibility for the maintenance of the assets whose construction has been financed by the larger devolution of plan funds should also be borne by the government. The reasoning again is that if these funds had not been transferred to the LSGIs then the departments would have used them for their plan projects, for which the government would have had to provide maintenance. (Of course a distinction may be drawn between the assets built out of the increased devolution, and assets that would have been constructed out of those plan funds which would have come to the LSGIs anyway, and the government's responsibility for providing maintenance confined only to the former. But, without the increase, the plan funds with LSGIs would have been so meagre that we can ignore this distinction). As for the assets whose construction in the period starting 1997-8 has been financed by sources other than plan funds, clearly the LSGIs would have to look after the maintenance requirements of these assets on their own. 7.3.2 As a matter of fact however even with regard to the assets existing with the LSGIs earlier to the large-scale transfers, the actual maintenance expenditure was woefully small. The first State Finance Commission had noted that with respect to roads, the most important

1

While this principle is perhaps accepted at present, the amount of actual maintenance expenditure undertaken is too minuscule to confirm this acceptance. The total maintenance grant to LSGIs in the budget during the four years 1996-7 to 2000-1 has been, respectively, Rs.3.74 cr., Rs.5.05 cr., Rs.5.77 cr. and Rs.3.53cr.

146

asset owned by LSGIs in the pre-1996-7 period, against the maintenance expenditure requirement of Rs. 102.88 crores, on Rs.30 crores were being spent.2 Of these Rs.30 crores, Rs.23 crores came from VTC and VRM. The LSGIs' own resources contributed only about Rs.7 crores. Thus, for the proper maintenance even of these assets, the state government has to meet the bulk of the maintenance requirement, while ensuring that the LSGIs do not spend in other ways what it provides maintenance. In return it need not make any VTC payments to the LSGIs. (The first Finance Commission's recommendation that the VTC and VRM should be merged has been accepted by the government).

7.3.3

Of course it may be argued that with such a large share of plan funds being set aside for the LSGIs, they should now meet their own maintenance requirements. But this argument is wrong for several reasons: first, using plan funds for purposes of meeting non-plan current expenditure, which is what maintenance expenditure amounts to, is wrong in principle and would set an unhealthy precedent. Secondly, it would defeat the very purpose of democratic decentralisation, which is to let people prioritic investments allocation based on local needs. Maintenance expenditure, though essential, does not really involve any choice. If financed out of plan funds it precludes plan projects, and ipso facto any choice in the matter of plan projects. Thirdly, plan,

2

The fact that the "norm" used by the Commission relates to 1996-7 while the actual expenditure figures relate to 1993-4 makes little difference to the arguments Likewise the questions raised in the text below about the accuracy of the estimate of Rs. 102.88 crores do not invalidate the Commission's general point about the inadequacy of the actual maintenance expenditure undertaken

147

assistance from the state government to the LSGIs, as a proportion of the state government's total tax revenue, has already shown a decline in the last couple of years: from 19.12 percent in 1997-8 and 19.52 percent in 1998-9 it came down to 15.6 percent (RE) in 1999-2000 and 13.3 percent (BE) in 2000-01. As the state government has faced a somewhat tighter fiscal situation owing to a stagnation in central grants-in-aid and increased expenditure on implementing the Pay Commission recommendations, its plan outlay has suffered, and even though the 35 percent "norm" has been maintained, the devolution of plan funds to LSGIs as a proportion of tax revenue has gone down. If in this situation, maintenance requirements on LSGI assets have to come out of the plan funds, then the size of the LSGI plans would in effect become a sort of residual which would mean an attenuation of local planning. Fourthly, since maintenance requirement on LSGI assets is going to increase in the coming years, relative to other variables, owing to the fact that maintenance expenditure on some of the newly constructed LSGI assets, negligible till now, will have to begin and be sustained on a rising scale, the attenuation of local level planning involved in making LSGIs finance their maintenance needs out of plan funds, would be far greater than appears at first sight. The following paragraphs highlight some of the issues. 7.3.4

If a certain proportion x of the value of an asset has to be spent each year for its maintenance, then the total maintenance expenditure Mt upon this asset in any year t is given by M,

= x. (I1+ I2+ I3+..........................It-1)

where I denotes gross investment, the subscript refers to the year when a particular addition to the asset (represented by the corresponding investment) started functioning, t-1 the previous

148

year ( the asset's life-time T is assumed to be not less than t),3 There are however some assets, of which roads are a prime example, for which the pattern of maintenance expenditure has a singular complexity. Roads too require a certain amount of expenditure on repairs every year; but, in addition, surfaced roads require re-topping every three to five years. Since, with such maintenance and re-topping, surfaced roads can last a very long time, both these types of expenditure should be counted as maintenance expenditure. Our perception of maintenance expenditure then has to be modified in the case of surfaced roads 3 With this definition we have two formulae representing simple logical truisms a universe where gross investment grows at a steady rate g. If the asset (assmued for simplicity to be a single homogeneous one), which it creates, has, as before a life of T years and requires x percent of its value as maintenance expenditure each year, then the ratio of total maintenance expenditure to gross investment any year becomes a constant M1/It=(x/g).{1-1/91+g)T-1} after a minimum period of T years of operating the asset has passed. Before T years have passed, the ratio of maintenance expenditure to gross investment during any year t , such that 1 < t
which, for any x and g, keeps increasing until it reaches the value given in the first formula. The first formula therefore gives an upper limit for the ratio. If the ratio of maintenance expenditure to the value of the asset increases over the life of the asset, then x in the first formula has to be interpreted as a weighted average. In the second formula maintenance expenditure as a proportion of gross investment would then rise even faster, both because t rises and because x also rises with time. Now, even if gross investment creates an assortment of assets and not just one single asset, as long as they have similar life-spans and simihi patterns of maintenance requirement (as proportion of value of asset) through life, both formulae remain valid.

149

(whose maintenance is of overriding practical importance in Kerala). If a surfaced road needs re-topping every T years, if the expenditure on re-topping per unit of investment (however measured) is given by y, and the expenditure on repair per unit of investment is given by x, then the total maintenance expenditure on surfaced roads in any year t is Mt= x. (I, + I2 + ...................It-1 ) + (y-x).I t.T For unsurfaced roads of course the first definition of maintenance givenabove would continue to hold. 7.3.5

Now, on the basis of "norms" mentioned below, the maintenance expenditure at 2000-1 prices for the road length that existed with the LSGIs prior to September 1995, or has been transferred to them after September 1995, comes to about Rs.109 crores (the calculations are given below). In addition, on the basis of assuming that about 5000 kms. of surfaced roads are, on average, newly constructed each year by the LSGIs out of plan funds from 1999-00 onwards (we know that about 8000 kms. were constructed in the two years 1997-8 and 1998-9), and that all such new roads are constructed entirely by converting existing un-surfaced roads into surfaced roads (an assumption that turns out to be not very consequential), the additional maintenance requirement for this road length comes to about Rs.159 crores for the year 2005-64. In that year in other words, Rs.268 crores would be needed for the maintenance of roads alone. The maintenance expenditure on assets, either already with LSGIs 4

The assumption of SOOOkms of extra roads each year is perhaps on ihe high side. Knowledgeable persons we have spoken to believe that 4000 km. is a more plausible figure. On the other hand however Planning Board estimates suggest that 17600 kms of new roads have already been built in the three-year period 1997-8 to 1999-00, as against 13000 assumed by us. If 4000 km is taken to be the average annual addition after 1999-00, the number of extra kms of road-length assumed by us for the terminal year 2005-6 still remains valid (though its distribution over time would be different from what we assume).

150

prior to Septemebr 1995 or transferred to them thereafter, comes to about Rs.30 crores at 2000-1 prices. On the assumption that plan assistance to LSGIs in 2001-2 would be raised one percentage point to 14.2 percent of total tax revenue, and would grow (like total tax revenue) at 5 percent per annum in real terms thereafter, the magnitude of maintenance expenditure (at 2 percent of capital cost) on newly created, plan-assistance-financed assets would be a further Rs.88 crores at 2000-1 prices in 2005-6. The total maintenance requirement of the LSGIs for these particular assets in that year would thus be Rs.386 crores which would absorb 25 percent of plan assistance on our assumptions, Moreover if LSGIs are allowed to use plan assistance for maintenance, then they would use such funds even for maintaining those assets which have been constructed in the post-1997-8 period out of funds other than plan assistance. In such a case the share of maintenance in plan assistance would go up to 41 percent. The conclusion is inescapable that if LSGIs are given the freedom to use plan assistance for maintenance, and if they are serious about maintenance, then they will end up using up to twofifths of such assistance even as early as 2005-6, and still higher and higher proportions beyond that date. This clearly is an untenable situation. On the other hand if they are not serious about maintenance, then that too becomes an untenable situation The object is both to prevent erosion in plan size and to ensure the maintenance of assets. And this can be served only if the state government takes the responsibility of financing the maintenance requirement of the bulk of the LSGI assets. The only exception would be those assets which have been constructed I in the post-Campaign period by LSGIs with funds other than what the government has provided. Even as the government takes I the responsibility of financing the maintenance expenditure onal whole range of LSGI assets, it must be emphasised to the LSGIs that the maintenance of the remaining assets would have to be I financed from their own sources, other than plan assistance. In other words the habit of treating plan funds as a cornucopia that

151

can finance all kinds of expenditures should be actively discouraged5. We shall return to this issue in the second part of our report. 7.3.6

According to our perception then, what the government has to meet by way of maintenance expenditure, consists of two components: one component for a fixed stock of assets either possessed by LSGIs earlier or transferred to them after the 1995 GO; this would be a constant component (except to the extent that the maintenance requirement itself might grow with the age of the assets). The other component is for assets constructed out of plan assistance in the period since 1997-8; this would be a growing component since the stock of assets whose maintenance has to be covered would itself be growing.

7.4

ESTIMATES OF MAINTANANCE REQUIREMENTS

7.4.1

There is a serious paucity of reliable data for making a proper estimate of maintenance requirements. Even though a comprehensive list of assets transferred to the LSGIs is now available, the age-structure of the transferred assets is not known. What is more, even on the road length owned by the LSGIs there are vastly differing estimates. Thus, the first Finance Commission had shown a total road length of 112491 kms. with the LSGIs

5

. This argument also applies to the view that re-topping of roads should be counted as part of plan, rather than maintenance, expenditure. This view is both conceptually questionable, given the meaning of the term "maintenance" discussed earlier, and practically inadvisable, since it would entail a big drain on plan outlay. To be sure, if the maintenance expenditure undertaken by LSGIs on roads is separately met by the State government, as we suggest, then this would only encourage still more extravagant road building. But this problem has to be addressed separately, by placing tighter constraints, if need be, on road-building. If LSGIs are both left free (within the 30/40 percent ceiling) to go on building roads and have to re-top these roads from plan outlay, then the problem of unwise use of plan funds would only get compounded.

152

as on 31.3.1996 (including 3437 kms. of PWD roads transferred), of which 105553 kms. were with Grama Panchayats. On the other hand data given to us by the Directorate or Panchayats show that Grama Panchayats own only 77359.49 kms. of road length as on 31.3.1999. This decline of 28000-odd kms, in four years is wholly inexplicable. Under the cirucumstances we have assumed in our estimates that the total roadlength shown by the first Finance Commission is correct and that the increase in the road-length of surfaced roads that has occurred since 31.3.1996 has been through the surfacingi hitherto un-surfaced roads6. 7.4.2

The first Finance Commission had estimated the maintenance expenditure required on the 112491 kms. of roads with LSGIs at Rs.102.88 crores on the basis of maintenance norms for different road surfaces which were derived from figures given by the Ministry of Surface Transport of the Government of lndia There are however two problems with the estimate of the first Finance Commission. First, it does not take into account the question of re-topping at all. Its estimate relates exclusively annual repairs in the sense of patchwork. Secondly, the norm takes for the maintenance of un-surfaced roads, which is Rs7500 per km. per year at the prevailing prices, is extremely high.We have been told by several knowledgeable persons that even today's price a sum of Rs.2000 would be quite adequate for the annual maintenance expenditure per km. of earthen and gravelled road. We attempt to rectify the estimates on both these coun For re-topping, the PWD rates are Rs.6.5 lakhs per km. of Blac Topped road, and Rs.7.25 lakhs per km. of WBM road when the road width is 15 metres. Since village roads are 3.8 metres wide, we have, with proportionate adjustment, Rs.1.65 lakh 6

. Dropping this last assumption and taking the entire increase since 31.3. as a net increase (consisting of surfaced roads) would not make much diffem to our estimates

153

per km. of B-T road and Rs. 1.84 lakhs per km. of WBM roads as the retopping expenditure. As for costs of repair, we take the first Finance Commission's figures for B-T and WBM roads adjusted for a 30 percent price increase7, and Rs.2000 per km. for un-surfaced roads at today's prevailing prices. Applying these norms to the figures given by the first Finance Commission's data on road lengths, taking four years as the interval for retopping (and making allowance for the fact that if a road is being re-topped in a given year, it does not need repairs in addition in the same year), we get a total annual maintenance requirement of Rs. 108.6 crores at 2000-1 prices on the road-length existing with LSGIs on 31.3.1996, i.e. prior to the 1997-8 plan assistance increase. 7.4.3

As regards the assets transferred, the first Finance Commission had quite rightly suggested that the basis for calculating maintenance expenditure should be, not the original cost of the building but its current replacement cost. We have accordingly tried to calculate the current replacement cost of this list of buildings on the basis of certain assumptions: an LP School has seven rooms (20' by 20') and a veranda 5' wide running its entire length; a UP School has 8 such rooms with a corresponding veranda; a High School has 2 labs (40' by 40') in addition to what a UP School has; and PHCs, Dispensaries, Veterinary Centres and Krishi Bhavans have 4 rooms each (20' by 20'). We have assumed Rs.400 per sq.ft. as the current construction cost, 2 percent of capital cost as maintenance expenditure for schools and hospitals and 3 percent for other buildings. What our 7

This is not too far from an alternative estimate we can make. That is as follows. For annual repairs we can take the PWD norms of Rs.150 per sg.metre as the cost of patchwork, and 4 2/3 percent of surface area as the necessary extent of patchwork per annum. This gives us an estimate for repairs on B-T roads which is Rs.26619 per km. of road length. Our estimates based on adding 30 percent for price increase to the first FC's figure assume Rs.2509Q per km.

154

illustrative calculations indicate is that the total amount of maintenance requirement on this part of the asset stock of the LSGIs is very small compared to that on roads. We surmise in the basis of our calculations that a sum of about Rs.30 crores would perhaps be adequate for the maintenance needs of the transferred assets (i.e. more accurate information on the age structure would not add all that much to the total). This sun (of Rs. 140 crores approximately) is unlikely to increase much in real terms in the coming years. True, there would be soni increase in the maintenance requirement with the ageing of the assets. But it is only for schools and hospitals that we have assumed a 2 percent maintenance cost; for the others we havt taken 3 percent which is the government's norm for ordinary old buildings. The increase in maintenance requirement owing to asset aging will add only a small sum. 7.4.4

What would increase is the maintenance requirement of asse newly constructed after 1997-8 out of the increased plan assistance. Let us take the State Planning Board figure of about 8000 km. of new roads in the first two years of the increased devolution8, and assume 5000 km. of extra roads each year thereafter. If we take a re-topping interval of four years for thesi roads (taking cognisance of the view held by many that they are of slightly inferior quality compared to the old PWD-built roads then the extra amounts needed for the maintenance of these newly constructed roads (after deducting the saving in expenditun arising from the fact that the un-surfaced roads, now converted to surfaced roads, would no longer need to be maintained), come to as follows.

155

2001-2 2002-3 2003-4 2004-5 2005-6

7.4.5

On

the

Rs. 69.95 crores Rs. 129.97 crores Rs. 134.91 crores Rs. 147.25 crores Rs. 158.70 crores

assumption

that

approximately

40

percent

of

the

total

plan assistance has taken the form of assets whose maintenance would require about 2 percent of capital cost per annum we get a figure for the maintenance of such assets at around Rs.35 crores in 2001-2 and Rs.88 crores in 2005-6 at 2000-1 prices (the latter on the assumption, already stated, that plan assistance as percentage of total tax revenue goes up by one point from its current level to 14.2 percent in 2001-2 and remains there, while total tax revenue grows at 5 percent per annum from 2000-1 onwards). It follows then that the extra maintenance requirement on account of the newly-constructed assets goes up from Rs. 105 crores in 2001-2 to about Rs.247 crores in 2005-6. 7.4.6

Taking the two components together we can say that the total maintenance requirement on account of all the LSGI assets whose maintenance should in our view be the responsibility of the state government, goes up from Rs.245 crores in 2001-2 to Rs. 387 crores in 2005-6 at 2000-1 prices. If we assume the state government's total tax revenue at 2000-1 prices to grow at about 5 percent per annum from 2000-1 onwards, which is roughly equivalent to the SDP growth rate, then the maintenance requirement on account of all these assets, new as well as old, as a proportion of the tax revenue of the state, would increase from 2.72 percent in 2001-2 to 3.55 percent in 2005-6. The former figure is more firmly based than the latter. In arriving at the latter figure we have had to make assumptions about the size of

156

plan assistance in the years to come which may not materialise. On the other hand, the assumption that the ratio of plan assistance to total tax revenue can be raised by at least one percentage point during the next year and kept at that level until 2005 appears to be an eminently reasonable one, in view of the fact that this ratio was as high as 19.1 percent in 1997-98 and 19.5 percent in 1998-99. Likewise the assumption that real revenue would grow at 5 percent per annum is by no means a far-fetched one. If this happens then the government’s maintenance commitments as visualised by us would increase from an estimated 2.72 percent of the total tax revenue in 2001-2 to 3.55 percent in 2005-6. 7.5

7.5.1

RECOMMENDATIONS REGARDING MAINTANANCE EXPENDITURE To keep the procedure simple, we are of the view that each year the government should set aside an amount equivalent to 3 percent of its total tax revenue for distribution among LSGIs for meeting their maintenance requirements8. Since it was felt

8. This would mean a slight surplus relative to requirements in the first couple of years but a deficit in the later years. And if it is felt that the correct re-toppimg interval on newly-constructed LSGI roads should be five rather than four years (so that the re-topping exercise in effect gets postponed by a year), then the surplus would be larger for the first couple of years. On the other hand however it should be remembered that our estimate of Rs.140 crores as maintenance expenditure on transferred assets assumes a steady state of maintenance, i.e the absence of any backlog with regard to maintenance. Given the fact that there is actually likely to be a backlog, the surplus may be only illusory. Moreover,if there is any surplus, as long as it is spent on the assets for which it is meannt, even if it entails some capacity addition (which, as mentioned earlier, is often indistinguishable from maintenance), there can be no possible harm in it. It is the diversion of funds, destined to be spent on assets, towards sundry curm expenditures that is questionable, not diversion of the reverse kind (after current expenditures are met). Besides we are also allowing the expenditure of up to 10 percent of the Maintenance Transfer for meeting operational costs. See paragraphs 7.5.13 and 7.5.14 below.

157

by the Commission that earmarking a share of total tax revenue including the share in central taxes might not be appropriate, we would like to present our recommendation in terms a share in the tax revenue raised by the state. On average an approximate ratio of 3:1 has been maintained in recent years between the state's own tax revenue mobilisation and its share of central taxes. Given this fact we would like to recommend that the state government should put aside 4 percent of the tax revenue raised by itself each year over the next five year period for distribution among the LSGIs for meeting their maintenance requirement. LSGIs should not accordingly have the option, that they now enjoy of spending 10 percent of their plan funds for purposes of maintenance. 7.5.2

We would however like to present our final recommendation in yet another way. Since it is important that LSGIs know at the beginning of the financial year the exact amount of maintenance funds they are going to get, it would be more appropriate if we relate these to the latest audited Actuals. These, at the time of preparing the budget for the year t-2 , are known only for the year t-2 . On the basis of the projected trends it turns out that 4 percent of the current year's revenue of the state government amounts to about 5.5 percent of the own revenue two years back. Our precise recommendation therefore is that the state government should make available to the LSGIs each year an amount of maintenance grant amounting to 5.5 percent of the latest audited Actuals of own tax revenue.

7.5.3

This amount consisting of two parts, one constant and the other changing, must also be distributed according to two distinct criteria. Of the total amount so earmarked, Rs. 140 crores at 2000-1 prices should be distributed in accordance with the distribution of old and transferred assets among the LSGIs, for whose maintenance it is meant. The remainder has to be distributed in accordance with the distribution of newly created

158

assets out of plan assistance among the LSGIs. Since the latter would correspond roughly to the distribution of plan assistance itself, the distribution of this part of the maintenance transfer should mirror exactly the distribution of plan assistance.Or course we are introducing a break in the pattern of distribution of plan assistance, by bringing in the revenue effort criterion in addition to those being used earlier. As a result, the distribution henceforth would be somewhat different from what it has been till now, so that if this part of the maintenance fund is distributed according to our criterion then it may diverge from the maintenance requirement on newly constructed assets whic would have been determined till now by the way plan assistance has been distributed so far. But this divergence is unlikely to be very significant and may in fact provide further inducement for undertaking a revenue effort. Besides, simplicity has to be an important consideration. Our recommendation for the inter se distribution of the maintenance fund then is as follows: an amount equivalent to Rs.140 crores at 2000-1 prices has to be distributed keeping in mind the distribution of a stock of assets The remainder is to be distributed in exactly the same way as plan assistance. The adoption of this dual criterion would ensure that neither the Block and District Panchayats whose share in the stock of assets is larger than their share in plan assistance nor Grama Panchayats for whom the opposite is true, would have any cause for complaint. 7.5.4

At present 3437 kms. of roads which have been handed overt to the District Panchayats are being maintained by the PWD. If the entire maintenance of the transferred assets is going to be the responsibility of the LSGIs themselves, then the District Panchayats should get the amount equivalent to the maintenance expenditure on these 3437 kms of roads. Likewise at present while assets have been handed over to the LSGIs, the maintenance of these assets often remains with the respective Departments. The responsibility for the maintenance of all such transferred

159

assets should from now on be transferred to the LSGIs, since we are asking for funds to be made available to them for this purpose. 7.5.5

While the distribution of a part of the maintenance fund in accordance with that of plan assistance is easy to arrange, the distribution of the other part, the Rs.140 crores at 2000-1 prices, in accordance with the maintenance requirements of old and transferred assets, would be more difficult to effect. We would therefore suggest the following procedure only for the fixed component of the maintenance transfer. Out of the total of Rs.140 crores at 2000-1 prices (which has to be translated to current prices every year), oneseventh should be kept aside for the District Panchayats and Block Panchayats. Five percent of this amount (i.e. 1 /140 th of the total amount) should be given to the Block Panchayats for equal division among them. The other 95 percent should go to the District Panchayats which would now have the responsibility of maintaining 3437 kms of surfaced road-length (including re-topping at four year intervals). The remainder of the Rs.140 crores (at 20001 prices) should be distributed among the Grama Panchayats and the Municipalities. The mode of distribution of the respective amounts among the District Panchayats and among the Grama Panchayats and Municipalities will be initially according to the following formula. The maintenance amount for District Panchayats should be split between road and non-road assets on a 50:50 basis. The former should be distributed on the basis of road length and the latter on the basis of certain "norms" (given below) applied to the value of non-road assets. For Grama Panchyats and Municipalities, exactly the same formula should hold except that the distribution of the maintenance amount between road and non-road assets should be in the ratio 7:1 (correspondingly roughly to their estimated requirements). For the distribution of the maintenance amount on roads the existing criteria based on Babu Paul Committee report should be followed. For the other part, the "norms" mentioned below could be applied to the data on the

160

magnitude of transferred assets to get an inter se distribution To be sure, what any particular LSGI would get out of Rs.140 crores (at 2000-1 prices), distributed in this manner, may be very different from what it objectively needs for the maintenance of the old and transferred assets at its command in accordant with the given "norms". Ideally, to get at a genuin correspondence between the two vectors, namely, what the LSGIs get for the maintenance of these assets and what they objectively need, there should be an iterative procedure of the following kind. 7.5.6

In the first year, as the total maintenance expenditure amounting to Rs.140 crores (at 2000-1 prices) is distributed according to the above criteria, the government can simultaneously announting these maintenance expenditure "norms" (e.g. rupees per sq.ft of buildings and per km. of road length etc.) on the basis of which those LSGIs which feel that they have got less than theij due would put in claims for more. At that point, the validity of their claims will have to be verified by the government (and in the process a proper inventory of their pre-existing an transferred assets built up). Now, suppose the sum of valid exte claims comes to Rs.10 crores. Then, in the second year, since tk total maintenance transfer would increase to a larger figure owini to price increase (say to Rs.154 crores, if prices rise by 10 percent), these extra claims can be met out of this increase. In the second year then Rs.10 crores would be given to thos: particular LSGIs which had got less in the first year, and Rs.144 crores (154 - 10), distributed among all the LSGIs (including those who have been given the extra Rs.10 crores) in a new ratio (where the Rs.10 crores get added to the weights of those wb have been given this sum). If on the other hand the sum of extra claims exceeds the increase in the provision in the second yea. say the valid extra claims come to Rs. 20 crores against an increase in provision of Rs.14 crores, then the Rs.14 crores would have to be rationed out among the claimants, with each getting 70

161

percent of the extra claims, and being asked to put in fresh claims for the remainder next year. When the available funds exceed the claims at the old norms, this excess can be distributed in accordance with the latest prevailing weights. And at this point the norms can be revised to take account of price increases in the interim, on the basis of which fresh claims would be put forward. 7.5.7

When a situation arises where all LSGIs put in valid extra claims, we have reached the end of the iterations. Once these claims have been accommodated in the manner described above, the pattern of weights prevailing at that point can be used for all subsequent distribution of the fixed amount (of Rs.140 crores at 2000-1 prices). In this manner we start with incomplete information, and hence only a rough and ready index of weights for inter sc distribution, but we keep revising the index as we go along on the basis of information provided by the LSGIs themselves (and verified as authentic by the government), and simultaneously building up the information base. This way eventually we should get at the “true" index of weights (i.e. the iterations will converge to the "true” index), provided we start in the neighbourhood of the "true" index.

7.5.8

In case this procedure, which relies heavily on the assumption that a posteriori verification would be authentic, is found to be administratively infeasible, the more simple and obvious alternative is to cut out iterations, and take the initial inter sc distribution as the final one as well. In this case a careful a priori calculation, based on the available data on transferred assets, supplemented by further verification through visits and the eliciting of additional information through questionnaires, may be made of the maintenance requirements, especially of the transferred non-road assets. Rs.30 crores can be distributed on the basis of these calculations and the Rs.110 crores (both figures at 2000-1 prices) can be distributed on the basis of the Babu Paul Committee recommendations, and the matter can be left at that. 162

7.5.9

The scheme of iterations has several additional advantages: first, it is flexible in the sense that it can be stopped after any round if we are not too finicky. For instance when the very first round of excess claims have been accommodated, and available funds have shown an excess over claims (and hence distributed according to the latest prevailing weights), the iterations may be stopped. The latest prevailing weights can then be taken as final, for the safe of convenience. Secondly, it is flexible in yet another sense: the upward revision in the maintenance norms (to reflect price increases) can be calibrated in accordance with the capacity of the administration. Since all claims have to be verified by the administration, a sharp increase in the norms would put a greatcj burden on the administration than a small increase in the norms Thirdly, the scheme works even if the original estimate of Rs.140 crores (at 2000-1 prices) as maintenance expenditure requirement on old and transferred assets is inaccurate. What the schemt achieves is the following: if the amount is "too little" or "too much", this "too little-ness" or "too much-ness" is evenly distributed across LSGIs. Notwithstanding the advantages of the scheme of iterations however, it was felt by us that on practical considerations a once-for-all formula of inter se distribution would be better. We would therefore recommend the latter.

7.5.10

A

possible

criticism

of

our

proposal

is

that

it

requires

an

identification of pre-existing or transferred assets separate froir those newly constructed. But even though by looking at a house one cannot say whether it is newly-constructed or whether it has been transferred, or looking at a road-length one cannot be sure whether it was pre-existing with the LSGI or has been constructed out of the plan assistance (especially since such assistance might have been used to re-top an old road), nonetheless records are available on the basis of which the authenticity of maintenance claims on pre-existing or transferred assets can be verified. Besides, this whole system of dual criterion that we are suggesting is a transitional arrangement anyway: in

163

the future when the weight of the maintenance expenditure on pre-existing or transferred assets in the total would have gone down (it being a fixed part of a growing amount), this dual criterion can be replaced by a single one, viz. distributing maintenance assistance entirely in the same proportion as plan assistance. 7.5.11

It remains to identify the verifying authority and to fix the initial norms. This authority should vest with the Ministry of Local Self Government of the state administration. The initial norms can be as follows

i.

3% of capital cost

Maintenance on Buildings Constructed Before 1.4.67

ii. Maintanace on Buildings Constructed After 1.4.67

2% of capital cost Rs.400 per sq.ft

iii. Current Construction Cost

Rs.400 per sq.ft

iv. Frequency of Re-topping of Surface Roads

Once in Five Years

v. Repair Expenditure: B-T Roads Annually

Rs.25090 per Km

vi. Repair expenditure:(WBM) Raods Annually

Rs.23140 Km

vii. Reapir Expentiure: Unsurface Raods Annually

Rs.2000/Km

viii. Cost of Re-topping B-T Roads(3.8 m.width)

Rs.1.65 lakhs/km

ix. Cost of Re-Topping WBM Roads (3.8m width)

Rs.1.84 lakhs/km

164

These figures would have to be updated from time to timet to take account of inflation. 7.5.12

The procedure we are suggesting can be summed up forconvenience as follows: (i)

Set aside, in each year's budget, 5.5 percent of the tax revenue raised by the state government during the latest year for which audited accounts are available, for transfer to LSGIs as a maintenance fund.

(ii)

On the basis of a price-index work out what Rs.140 crores at 2000-1 prices amount to for the coming year for whichthe provision is being made in the budget. (The deflator for the construction sector employed in SDP calculations can be used for the purpose and the Department of Economics and Statistics can be asked to give a quick estimate of its increase during the preceding 12-montr period at the time of the formulation of the state budget, and this increase can be assumed to hold over the next twelve months).

(iii) Of this sum, one-seventh is to be kept aside for District and Block Panchayats, and divided between them in the ratio of 19:1. The Block Panchayats should have the amount equally divided among them. The District Panchayats shout have half the amount divided among them in exactly the same ratio as the 3437 km. road length is distributed, and the other half on the basis of "norms" applied to estimated nonroad asset values. (iv) The remaining six-sevenths of this sum is to be distributee among the 6rama Panchayats and the Municipalities ano Corporations; seveneighths of this is to be distributee on the basis of the Babu Paul Committee recommendations

165

and the remaining one-eighth on the basis of "norms" applied to estimated asset values. (v)

7.5.13

The remaining part of the maintenance fund, i.e. the excess of 5.5 percent of the state's own tax revenue two years ago over Rs.140 crores at 2000-1 prices, is to be distributed exactly in the same ratio as the plan assistance.

The LSGIs should not in general be allowed to spend the amount they receive as maintenance transfer for any other purpose. There is however a problem here. Since, as argued earlier, the expenditure on maintenance cannot be distinguished from net investment in many cases, the LSGIs would perforce get embroiled in tedious, almost theological, hair-splitting if they seek scrupulously to follow this injunction. The only practical way of avoiding this and yet ensuring that the maintenance transfer is not illegitimately used, is to insist that the total amount of such transfer should be spent exclusively (subject to one qualification mentioned below) on the assets for which they are meant. Ideally, the amount meant for the maintenance of transferred and old assets should be spent on these assets alone and on nothing else, and the amount meant for the maintenance of newly constructed assets should be spent on only these assets and on nothing else. But, ensuring that maintenance transfers within each category are spent exclusively on assets belonging to that category, would be practically impossible. What can however be ensured is that the total amount transferred for maintenance is spent only on assets that require maintenance. (Of course, in the process, some of the maintenance transfer would be used for the maintenance of assets newly-constructed from sources other than plan funds. But this is a problem which can be ignored for the time being). What is most important is that maintenance transfers to LSGIs should not be diverted either towards entirely new projects or for arbitrary current expenditures. If this much is assured through proper audit, then it can be left to the peoples'

166

intervention to ensure that the maintenance amounts are spa as far as possible on maintenance. Once it is known that adequa amounts are available for the maintenance of assets, thenal observed poverty in the quality of these assets would aroJ popular anger which is the best means of ensuring that the LSfl follow the straight and narrow path of rectitude. 7.5.14

We now come to the qualification mentioned in para 7.5.11 There is a widespread feeling that the present practice of making LSGIs rely exclusively on the supplies of medicines and books and consumables made available by the state government is an inefficient one; likewise the practice of making the state government meet a host of current costs such as rent, telephone bills, the repair and fuel consumption bills on vehicles, electricity and water charges etc. is both cumbersome and inefficient. I this context we propose in Chapter 8 that the state governmel should be freed from the obligation of having to meet any operational expenses other than on medicines and books and consumables. To meet these other costs, the LSGIs should make their own provisions; and even in the matter of medicines an books and consumables where we recommend a continuation of the present system, the LSGIs should be allowed to make their own additions! purchases at the margin. For all this, howevei the LSGIs need some funds. We recommend that they shouldm allowed to spend up to a ceiling of 10 percent of the Maintence Transfer for meeting current expenses. While we strongly oppose the practice of diverting maintenance transfers for current uses we make this exception only as a transitional arrangement, to provide a bridge from the existing system to a new one. By thj time the next Finance Commission conies into being, how the proposed system works would have become clear, and appropriate rectifications can be made so that operational expenditure and maintenance expenditure are kept strictly separate, and the former does not lay claim to what is earmarked for the latter.

167

7.5.15

To recapitulate, we are allowing LSGIs to use maintenance funds for operational expenses up to a ceiling of 10 percent; in addition we are allowing them some leeway in selecting the assets for maintanance expenditure in a particular year. This is because maintenance too is undertaken in practice in a bunched manner. It is not as if little bits are spent regularly on the repair and maintenance of particular assets; rather, sizeable sums are spent every once in a while for the maintenance of particular assets. The candidates on whom such sums are spent differ from year to year.

7.5.16

Earmarking a part of the state's own tax revenue for transfer to LSGIs for the maintenance of their assets would no doubt entail a certain additional strain on the state's finances. The whole purpose of the exercise however would be lost if this strain is sought to be met by cutting back on plan outlay. If we disapprove of the use of plan funds for maintenance at the LSGIs' level, then we are equally opposed to the use of what in effect would have been the state's plan outlay for the purpose of maintaining LSGI assets. Any such reduction in the state's plan outlay would also entail a reduction in plan assistance to the LSGIs (under the one-third formula suggested by us), so that a part of what the latter would gain through maintenance transfers would be lost through reduced plan assistance. The funds for the maintenance transfers therefore have to be found independently. One way of ensuring that plan assistance to LSGIs is not adversely affected by the maintenance transfers, is to suggest that a certain minimum proportion of tax revenue should go as plan assistance, in the same way as we have done for maintenance assistance. But if we do so, then, together with our stipulation of one-third transfer of plan outlay to LSGIs, it would amount to fixing the minimum size of the state's plan outlay itself (as a proportion of its tax revenue) which is outside our terms of reference. Our expectation is that plan assistance to LSGIs which has fallen to 13.3 percent of total tax revenue in 2000-01 (BE) would be raised 168

by at least one percentage point and whould be kept at least! that level for the next quinquennium. 7.5.17

That still leaves the question: how is the state government to find the resources to make this extra transfer to the LSGIs? The amount is not much, since against payments to be made as maintenance transfer we have to offset the savings the government would be making by not paying VTC, by not paying the PWD for the maintenance of 3437 km. of road-length, by not paying the (very small amount of) maintenance grants currently used by Departments for maintaining assets falling within the jurisdiction of LSGIs, and by not paying the operational expenses except for the purchase of medicines, books and consumables. Even so, funds have to be found for this. How the government can do so, is an issue that falls outside our terms of reference. It seems to us nonetheless that that if the service sector in Kerala, which has been the fastest-growing sector, could be brought under the ambit of taxation to a greater extent than has been the case till not then the state which has a good record of revenue mobilisatioin would do still better.

169

CHAPTER 8

NON-PLAN, NON MAINTANANCE TRANSFERS

8.1

Traditionally, transfers from the state government to the LSGIs have been grouped under two separate heads: plan transfers and non-plan transfers. We have discussed plan transfers in Chapter 6. In Chapter 7 we have introduced a new category, namely transfers for the maintenance of certain LSGI assets, or "maintenance transfers" for short. In the current chapter we shall discuss what was traditionally referred to as "non-plan transfers" and what we shall call "non-plan, non-maintenance transfers" to emphasise that we are no longer discussing "maintenance transfers" (which logically must also fall under the general rubric of "non-plan"). At the time of the first Finance Commission Report, the bulk of the "non-plan transfers" referred exclusively to the transfers of shared and assigned taxes and a host of specific and general purpose grants to LSGIs. And these "non-plan" transfers were divided into two parts: statutory transfers and non-statutory transfers. The former referred to the transfers on account of the assigned taxes (Basic Tax, and Surcharge on Duty on Transfer of Property) and shared taxes (Motor Vehicle Tax), while the nonstatutory transfers included a host of grants (a possible 18 in the case of panchayats and a possible 10 in the case of municipalities). Now, on account of the shifting of a whole array of assets and responsibilities to the LSGIs whose operational costs have to be financed by the state government, there is an additional and significant element of transfers whose magnitude even exceeds what conies to LSGIs through shared and assigned taxes and sundry grants. An entirely new category,

170

which had appeared only in an embryonic form at the time the first Finance Commission has now grown to an extent when it even dwarfs what traditionally constituted "non-plat transfers". This category in turn has two distinct parts: one is listed in the budget under the Minor Head "191: Assistance Local Bodies and Municipalities/ Municipal Corporations". We shall refer to this part as the "191 Non-Plan Transfers" (since Plan Transfers are also listed under 191). The other part consists of the amounts that are made available to the LSGIs on account of meeting the operational costs, i.e. the salaries and material input costs, on transferred assets. We shall refer to these transfers as "Operational Cost Transfers". Finally, we shall refer to thtl transfers on account of tax devolution and minor grants as "Tai-CumMinor Grants Transfers". It follows then that we are talking! of four distinct kinds of "non-plan transfers": the "Tax-Cum- Minor Grants Transfers" (which were the predominant element! until 1995-6), "191 Non-Plan Transfers" (which are a resulto! the shifting of several responsibilities to the LSGIs), "Operational Cost Transfers" (which are a result of shifting assets to LSGIs), and "Maintenance Transfers" (which we wish to bring into being). 8.2

At the time of the first Finance Commission, the transfers through these minor grants, or what the Commission had called "the non-plan, nonstatutory transfers", were many in number, minuscule in amount, and divided, in addition, into general and specific purpose grants. The Commission had therefore made a number of suggestions for simplifying the system and making it more meaningful. One was to make all of them general purpose grants. The other was to ensure that the total of such transfers should constitute 1 percent of total state revenue (appropriately defined for the purpose), and should go into two pools, the rural and the urban, according to the weights of the rural and urban populations in the total population of the state. In addition, the rural pool was to have 25 percent of the Basic Tax from panchayat

171

areas, and 25 percent of the Surcharge on Stamp Duty from panchayat areas, while the urban pool was to have 100 percent of the (newly-proposed) Basic Tax and 25 percent of the Surcharge on Stamp Duty collected from urban non-Corporation areas (the Corporations were to be simply given the taxes collected from their areas). In the event the government accepted the other suggestions but not the one relating to 1 percent of total state revenue, which essentially meant retaining the tail without the sting. It accepted the idea of the rural and urban pools, but these pools could not be nourished by 1 percent of state revenue. 8.3

8.4

Today we once again have a complex and intricate system of "TaxCum-Minor Grants" transfers whose complexity and intricacy is entirely unnecessary. There is a rural pool, which undoubtedly had a rationale at the time of the first Finance Commission's report, but whose rationale is much reduced after the ushering in of democratic decentralisation. It represents, besides, a rather meagre sum. To make up this meagre sum, even more meagre streams from various tax transfers have to be joined together; and their respective sizes too are determined by elaborate formulae. This is not all. Quite apart from the question of complexity and intricacy, the whole conception of assigned taxes and shared taxes is open to question. If the financial relationship between the state government and the LSGIs is to be characterised by sharing, then it is not clear why this sharing should take the form of some particular taxes being destined for LSGIs and others for the state government, and why the revenue of only some particular taxes should be shared between the two in certain ratios. This conception, apart from its complexity and lack of rationale, is also foreign to the underlying philosophy of democratic decentralisation. This visualises not a tussle between the state government and the LSGIs, not an antagonistic relationship, but a relationship aimed at constituting a total

172

democratic structure more meaningful than what exists now. We are talking after all of two entities, each of which has ai administration headed by elected representatives of the people The conception of success of the overall structure must be defind in terms of the degree of empowerment of the people. An important component of the index of success of institutions at one level therefore must be the degree to which they strengths the institutions at the other level. We have to get over the mindset of visualising the problem of resource sharing between the tw levels as if two self-centred, self-absorbed, hedonistic entities an squabbling over shares in a piece of cake (with the role of the Finance Commission being that of an arbitrator reconciling thestl conflicting claims). In short the old formulae for sharing, which meant assigning particular tax revenues to particular levels, haw to be replaced. 8.5

There is an additional reason for our suggesting this. If we look into the fiscal future of Kerala, there can scarcely be any doubil that the state will have no option but to rely increasingly on taxation of the service sector. It is more than likely that such shift would give a greater buoyancy to the tax-revenue ofthJ state government, compared to the tax revenue of the LSGIs, ii the latter continue to depend exclusively on a certain limitcil number of assigned taxes. An overcoming of this dichotomy will inevitably come on to the agenda. Sooner or later in other words we have to move away from the system of basing LSGI financal on a set of assigned taxes, towards one where the LSGIs and the state government share the proceeds of the entire tax revenue raised by the latter. If this be so, then we may as well move toi system of tax-sharing right from now. We are basing on: recommendations on the existing set of taxes. We hope that future State Finance Commissions would take into account new taxes which may get imposed, so that the principle of total tax sharing is continued.

173

8.6

The magnitudes of non-plan transfers to LSGIs which have occurred under two of the several heads, viz.191-Transfers and Tax-Minor Grant Transfers, are given in table 8.1.

Table 8.1 Non-Plan transfers to LSGIs (Rs.Crores) 1995 -6

19967

1997-8

1998-9

199900 RE

2000-1 BE

(i)Under 191

17.1

151.2

178.0

229

236.0* 245.2*

(ii) Others

87.4

148.8

160.4

155.8

199.3

a. Basic Tax

5.25

14.2

11.6

16.0

7.0

7.7

b. V.T.C.

20.8

32.8

50.9

50.2

78.9

58.6

c. Surcharge on Duty on Property Transfer

54.3

83.5

77.9

75.9

100.0

100.0

179.7

Ofwhich

* See footnote 1. Source: Budget Documents Note: Comparison across the years is problematical because of systemic changes over the period and also because figures for the last two years represent only estimates.

8.7

The category "others" in Table 8.1 comprises what we have referred to as "TaxCum-Minor Grants Transfers". For the last three years, when the VRM grant was discontinued, this category consists of the following items:

174

(i) (ii)

the three main tax sources a grant of Rs. 8.4 crores (in 1999-00 and also in 2000-01) to District Panchayats (who got Rs. 2.3 crores) and Block Panchayats (who got Rs.6.1 crores) for meeting their revenue expenditures1

(iii)

Rs. 3.5 crores as "Grant-in-Aid Assistance to Panchayats", and several minor grants for the maintenance of minor irrigation, water supply, railway crossing etc. whichl together came to Rs. 1.49 crores in 1999-00 and Rs.1.54 crores in 2000-01.

8.8

These figures exclude, as they rightly should, the expenditure on account of the state government's Panchayat administration at the state and district levels, and the expenditure on Panchayat publication and training programmes undertaken by the state government.

8.9

In view of what has been said above, we recommend that in lieu of the present arrangement of specifically assigned and shared taxes and of sundry grants, a certain proportion of the state government's own tax revenue (excluding its share in central taxes) should be set aside for transfer to the LSGIs. In the preceding chapter we have already provided for "Maintenance Transfers", i.e. non-plan assistance from the state government to the LSGIs for the maintenance of transferred assets, of old assets which were with them, and of newly constructed assets from 1997-8. While doing so the state government need not pay any VTC to the LSGIs, since the purpose of VTC and VRM was to finance maintenance expenditure for roads under the jurisdiction of the LSGIs. Now, if the state government did not have to pay VTC, then the amount of "Tax-Cum-Minor Grant

1

. Since this particular item also appears under the non-plan expenditure listed in Appendix 4, in order to avoid double counting we have removes it from our total of "191 Non-Plan Expenditure". For 1999-2000 and 2000-1 therefore the totals of "191 Non-plan expenditure" do not correspond to the figures available in published official statistics. 175

Transfers" that it would have made available to the LSGIs during the last six years is given in Table 8.2 Table 8.2 Tax-Cum-Grants Transfers (Excluding VTC) Year

(ii)/(iii) %

(i)

Tax-CumSate’s TaxGrants Revenue(excluding Transfers(Rs.Cr) share in Central taxes)Re.Cr (ii) (iii)

1995-96

66.6

3383

1.97

1996-97

116.0

3899

2.98

1997-98

109.5

4501

2.43

1998-99

105.6

4650

2.27

1999-00(RE)

120.4

5472

2.20

2000-01(BE)

121.1

6440

1.88

(iv)

8.10 The average figure for the percentage of the state's own tax revenue transferred each year on account of taxes and minor grants comes to 2.29 percent for the entire six-year period. In fact if we leave out 2000-1, for which we have only budget estimates anyway, then the figure for the preceding two years is remarkably close to this average. It would appear then that an amount approximately equivalent to 2 ¼ percent of the state government's own tax revenue (excluding its share in central taxes) has been handed over each year, in recent years, to the LSGIs on account of tax assignments, tax sharing and the minor

176

grants (other than through the VTC). We recommend that 2,51 percent, of the total tax revenue of the state government (excluding its share in central taxes), should henceforth be sell aside for distribution to the LSGIs. On the other hand the government should retain the entire tax proceeds from those taxes which it either collects on behalf of the LSGIs or shares with them currently. The reason for our suggesting a slightly higher percentage (2.5 as opposed to 2.25 ) of own tax revenue for devolution to LSGIs under the head "Tax-Cum-Minor Grants! Transfers" (which we wish to re-christen as "General Purpose Transfers" or "General Purpose Grant") will become clear later, But the increase is marginal. Our main concern is simply a rationalisation and simplification of the existing system. 8.11

It is more convenient however if the transfer on this score is expressed as a percentage not of the current year's tax revenue of the state government, but of the tax revenue of the latest year for which the Actuals are available (which in effect means the tax revenue two years ago), so that a precise figure appears in the current year's budget of the state government. Assuming a 16.8 percent growth rate of own tax revenue (which happens to be the "norm" prescribed by the CFC for the state), 2,5 percent of the current year's own tax revenue would amount to 3.5 percent of the own tax revenue two years ago. Our precise recommendation therefore is that an amount equivalent to 3.5 percent of the state's tax revenue (excluding its share in centrA taxes) of the latest year for which certified accounts by the Accountant General are available should be transferred each yean by the state government to the LSGIs in lieu of the current system of transfers of taxes and grants to them.

177

8.12

The Commission's recommendations amount to a radical departure from assigning and sharing of specific taxes to sharing of revenue from all the own taxes of the State Government. Of course assigned taxes and specific shared taxes have a certain sanctity coming out of their long history and universal practice. And more importantly they are legal entitlements, which over a period of time have come to be seen as a matter of right for LSGIs enshrined as legislation and protected by it. The LSGIs have a historic as well as legal right over these sources of revenue. They have been used to it for so long that it has become an integral part not only of their fiscal system but also of their expectations of revenue. Thus any move away from this system has to be done with caution and care. Not even in the slightest way should there be any erosion in the legal entitlement of LSGIs. In fact there should be a strengthening of them. In deciding the quantum as well as in the precedure of sharing the state taxes there cannot be any discretion whatsoever; it cannot be in the nature of a grant left to the executive to decide nor can it be left even to the annual Finance Act. It has to become an unambiguous part of the Panchayat Raj and Municipal legislation, additionally safeguarded by policy commitment to allay all misgivings. There fore, when the commission recommends a shift away from the present system of specific taxes assigned or shared to a general sharing of all taxes, there need not be any doubt or fear about the potency of the new entitlement. In fact by suggesting a general share of all taxes, the entitlements are broadened and deepened. It has the added symbolic significance suggestive of LSGIs standing shoulder to shoulder with the State Government in sharing responsibilities and revenue. It is as if the local governments have grown in importance to claim a general share of all taxes rather than just three specific taxes.

178

8.13

We recommend the following principle of Inter se distribution of this amount between the different tiers of the LSGIs. The I District Panchayats and the Block Panchayats, which have no sources of income as yet, rely exclusively on state government grant for their house-keeping expenditure. Since the size of the household to be kept is not uniform their share should be I determined on a normative basis. The total amount earmarked for them should be set apart and distributed among them according to their genuine requirments which should be determined on the basis of prescribed norms. The share of Municipalities, Corporations, and Village Panchayats, each taken as a group, should in principle be fixed at the levels which have been observed in recent years. There is however an important additional consideration, namely, the significant boundary changes that have taken place of late. Two new Corporations, Kollam and Thrissur, have been created out of Municipalities, with the addition of certain Panchayats. Likewise the Thiruvananthapuram Corporation has been expanded with the addition of certain Panchayats. And there have been other changes involving the incorporation of Panchayat areas into Municipalities. In view of these changes, the distribution of the General Purpose Grant across tiers can no longer conform to the historically observed shares; suitable adjustments have to be made. Taking this fact into account we recommend the following

179

distribution of the General Purpose Grant across tiers2, after setting apart the share of District and Block Panchayats. Table 8.3 Proposed Distribution of General Purpose Grant Between Tiers

Tier

Share in Total (%)

Grama Panchayats

75.5

Municipalities

8.5

Corporations

13.0

2. The basis of these calculations should be clarified. Since each of these tiers would be getting a separate grant for the maintenance of their old assets and transferred assets, there would be no need to transfer VTC to them any longer. As far as the Municipalities and Corporations are concerned, they get very little government (non-tax) grants of the sort that Panchayats get. The first Finance Commission had recommended that urban local bodies too should be eligible for Basic Tax Grants which should then be put into the urban pool. Though this suggestion was accepted by the government, appropriate legislation is in the process of being enacted, so that no actual Basic Tax has yet accrued to the urban LSGIs either directly or indirectly (via the urban pool). Likewise since the urban pool has not yet taken shape, the deduction of 25 percent of the Surcharge on Stamp Duty in urban areas, which is supposed to go into this pool, has not yet taken place. It follows that for the urban LSGIs, once VTC is excluded, the surcharge on stamp duty coming their way is the sole form of "Tax-Cum-Minor Grants Transfer", The budgetary allocations on this score, as a proportion of the total "Tax-Cum-Minor Grants Transfers" excluding VTC, were on average about 18 percent over the period since 1997-8, and these were approximately evenly divided between Municipalities and Corporations. The observed shares of the different tiers obtained on this basis are then adjusted to take account of the boundary changes to give us the figures of table 8.3.

180

8.14

As regards the inter sc distribution among tiers, GPs, Municipalities, and Corporations, our recommendation is the following. For Municipalities and Corporations the inter se distribution should be entirely on the basis of population. As regards Grama Panchayats, out of the total amount earmarked, Rs.10 crores should go towards filling the deficits of certain poor GPs in meeting establishment expenses (as is the practice now). The remainder should be distributed on the basis of population. For District and Block Panchayats, they may be grouped. based on requirements, and allocations made on normative basis. including expenditure ceilings for certain categories like telephon; charges, P.O.L, travelling allowance and extraordinary items.

8.15

The really novel element in our recommendations in this chapter is the proposal that the inter se distribution, within the group of Grama Panchayats, to the individual Panchayats should be on the basis of population; and the same principle should be adopted for Municipalities and Corporations. At present, 75 percent of the basic tax collected in the Panchayat areas is distributed according to where it is collected from, and only 25 percent goes into the rural pool from which the criteria of distribution are in keeping with certain specified norms. The entire surcharge on stamp duty collected from urban areas is distributed according to where it is collected from (since the urban pool into which 25 percent of it should go, has not yet come into existence). And the distribution of VTC is supposed in principle to be in keeping with maintenance needs. The tax revenues transferred for nonmaintenance purposes at present are therefore distributed, toil significant extent, on the criterion of place of collection. The shift to population as the basis of distribution marks a radical departure. This shift can be justified as follows. Once we move away from the notion of "assigned taxes", the criterion of place of collection ceases to be relevant. True we could still mimic that criterion (as we have implicitly done in fixing the share of

181

Corporations and Municipalities), but the only justification for doing so would to avoid any sudden financial hardships to any particular local bodies, such as a sudden shift to a different criterion of distribution would entail. But this is an argument of pragmatism not of principle. If the pragmatic concerns could be taken care of in some other way, then we could move to some alternative criterion which is more reasonable in principle. Since plan assistance which constitutes the bulk of the transfers is already being distributed according to a set of complex and carefully-worked out norms, population is the obvious simple basis for distributing the "General Purpose Transfers". 8.16

But the move to this simple criterion may create hardships for particular LSGIs in the transitional period. They may suddenly find themselves with reduced incomes. True, they are getting substantial plan assistance and would be getting, on our recommendations, a significant amount of funds for the maintenance of assets. It may therefore be thought that a certain transitional reduction in incomes should not be a cause for concern. But precisely because we are of the view that maintenance grants should not be used indiscriminately for other purposes, and that plan funds should not be used for current expenditure needs, we feel it necessary to ensure that no income fall occurs in the period of transition; otherwise we would be condoning, indeed encouraging, financial impropriety. It is for obviating any such hardships that we have recommended a small rise in the proportion of "Tax-Cum-Minor Grant Transfers" (excluding VTC), now christened "General Purpose Transfers", from its current figure of about 2 ¼ percent of the state's own tax revenue to 2 l/2 percent. This extra ¼ percent would come to about Rs.15 crores (out of a total own tax revenue estimate of Rs.6440 crores) in 2000-1, but it would result in a streamlining and simplification of the system in a relatively painless manner,

182

in the sense that no individual LSGI would experience an absolute shortfall in its receipts on account of these transfers. 8.17

One consequence of our recommendations is that the rural and the urban pools would have to go. In fact they would no longei be necessary. The rationale of having the rural and the urban pools was precisely to provide some relief from the relentless logic of the "place of collection" criterion in distributing these tax transfers. Many LSGIs, from whose territorial jurisdiction not much tax could be collected, required succour, and the pools were meant to provide such succour. By providing for these pools. the first Finance Commission had already taken a few steps awan from the "place of collection" criterion which in turn derives from the logic of "assigned taxes". We have only taken that movement to its logical conclusion. Of course, a certain practical awkwardness is introduced in the process. Several legislations to give effect to the recommendations of the first Finance Commission have already been enacted or are in the process of being enacted. Our recommendations being introduced at this stage would make many of these legislations irrelevant, unnecessary or infructuous. But the awkwardness here is in parti an inevitable product of the inordinately long time-lags witlj which Finance Commission's recommendations are implemented, and in part a result of the peculiarity of any period of transition, such as what characterises the process of decentralisation ill Kerala. Many things have happened between the first Finance Commission and the second, and in taking cognisance of these our report necessarily has to differ qualitatively in many spheres from that of the first Commission. But once this remarkable period of transition is over, subsequent Finance Commissions can build on their predecessors' reports to a greater extent (and thus provide greater continuity) than we have been able to do.

183

8.18

We now come to the question of "191 Non-Plan Transfers" which is yet another component of "Non-Plan, Non-Maintenance Transfers". An idea of what this component covers can be had from Table 8.4 which gives information on the budgeted expenditure for 2000-1 on some important items under this head. Table 8.4 Some Important items of 191 Non-Plan expenditure 2000-1 Item 1. Special Pension Scheme for Physically and Mentally handicapped

Expenditure (Rs.Crores) 13.97

2. Destitute Pension

19.78

3. Agricultural Workers Pension

37.20

4. Old Age Pension

3..07

5. Mid- day Meals

29.50

6. Unemployment Allowance 7. Flood Damage Repairs, Renewal of Communications etc 8. Medical materials and Supplies 9. Production Incentive to Paddy Growers

70.00 23.25

10. Assistance to BP’s and DP’s

8.40

8.40 10.00

Total of these items

223.57

Total 191 Non-Plan

253.63

8.19 Clearly the bulk of the 191 non-plan transfers consists of social expenditure of different kinds, for which the responsibility has now been shifted to the LSGIs. These, with the sole exception of the "Assistance to BPs and DPs" (for whom we have made alternative provisions), should continue exactly as before. We refrain from making any recommendations regarding the

184

minimum provisions on these heads, though the stipulation of such a minimum is essential to take account of both inflation and the inevitable increase in the number of intended beneficiaries, in the belief that the pressure of public opinion would automatically enforce such a minimum. 8.20

The "Operating Cost Transfers", as mentioned earlier, have two components: the payment of salaries to the staff employed on assets transferred to LSGIs, and the provision of current input e.g. medicines, books and consumables in schools, electricity and water charges, rent, telephone charges etc., for the transferred assets. The salaries, for reasons discussed in paras 2.9 and 2.10 must continue to be paid by the state government; we do noil wish to change the current system in any way. As regards til transfers for current inputs there are at least three separate problems with the present system: first, in the health anil education sectors, the transfers to a significant extent are man in kind rather than in cash, which introduces inflexibility intt the system (and hence irrationality of the sort where there m; be too much of one kind of medicine and too little of another ). Secondly, even apart from such micro-level disproportion the very fact of having to depend on a distant entity, namely tbl state government department, for supplies, introduce inflexibility into the system which is undesirable. Thirdly, sine in a whole range of other sectors, the transfers, though the may not be in kind, are many but minuscule, the system has, cumbersomeness which is avoidable. Having said all this however we also recognise that messing about with a system which m already in place and working with some degree of success, is always a risky affair. Besides, the transfers in kind, in the health sector at least, have some rationale in terms of the advantages ofl bulk purchase, and of providing a centralised direction and thrust to the public healthcare system. There is also a danger in allowing the state government to wash its hands completely of vital socid sectors like education and health by entrusting the task of

185

purchasing current inputs entirely to the LSGIs. Taking all these considerations into account, we recommend the following with regard to "Operating Cost Transfers": first, the state government should continue to provide for medicines and books and consumables in schools exactly the way it has been doing till now; secondly, the LSGIs should be permitted to make extra purchases of medicines and books and consumables which they may consider necessary at any point of time; thirdly, the state government should be absolved from the responsibility of meeting all other current costs such as telephone, electricity and water charges, vehicle operating costs and rents in these two sectors as well as and in other sectors, and for these costs the LSGIs should make their own provisions; fourthly, these provisions and the extra expenditure on health and education materials, can be financed, upto a ceiling of 10 percent, from the "Maintenance Transfers" made available to the LSGIs. 8.21

These recommendations have the virtue of introducing a degree of flexibility into the system at the margin while retaining its basic existing structure. They also reduce its cumbersomeness by absolving the state government from the responsibility of having to meet current costs in a whole range of sectors, a move which has the additional merit of providing it slight fiscal relief. Above all however our recommendations are designed to anticipate a problem that is likely to arise in the future, which has to do with the operational expenditure on assets that the LSGIs would be constructing out of their enhanced plan assistance. Until now the newly-constructed assets of the LSGIs have generally not been of a kind that requires any large-scale operational expenditure. But this is going to change in the coming years. At that point not only would some provision have to be made for such expenditures, but steps taken to ensure that the LSGIs' demand on this score does not become too heavy: this would require some constraints on their choice of assets and some fixing of norms to avoid profligacy in operational expenses for any given

186

choice of assets. An alternative course, more in tune with democratic decentralisation, might be to have a certain sum, earmarked for operational expenditures and arrived at according to certain macro norms, distributed among the LSGIs in the samt ratio as plan assistance. The LSGIs can then be left free to choo« their assets, i.e. make their plans, keeping two budget constraints (in the sense of state government assistance) in mind, one relating to plan assistance, and the other relating to operational assistance, (Needless to say, they can use their own funds to spend in excess of these constraints). These issues of course are not of great immediate concern: in the next five years, which constitute time-horizon, the LSGIs are likely to continue emphasising the construction of those assets, e.g. roads, bridges, houses etc, which do not require any significant operational expenditure (as distinct from maintenance for which we have mad provisions); it is only future Finance Commissions that woul be exercised over such issues. Nonetheless we have opened window towards a possible "two-constraints" solution b allowing LSGIs (for the time being) to spend up to 10 percen of the Maintenance Transfers for meeting operational costs. Sine Maintenance Transfers are to constitute approximately 4 percen of the state government's own tax revenue in any year (which have translated as 5.5 percent of the state government's ownta revenue two years ago), we are implicitly putting in place a syste where a certain percentage of the state government's current ow tax revenue (0.4 in this case) is transferred to LSGIs for meetiti their operational costs. Future Finance Commissions may we consider building on this foundation while changing the ratios in question.

187

CHAPTER 9

ENHANCING OWN REVENUES OF LSGIs 9.1

As of now, only the Village Panchayats and the ULBs have the power to levy taxes, fees and fines. Though, theoretically Block and District Panchayats can realize user charges, donations and contributions, the scope for raising any significant amount from these sources is rather limited now. The Commission is not recommending any additional sources of revenue for these LSGIs now.

9.2

However

there

is

every

reason

to

improve

the

revenue-raising

capacity of the Village Panchayats and ULBs, for own income gives full freedom of use. In order to improve civic services, an obligatory function of these LSGIs, own funds are essential. Also own funds could be used to take up innovative programmes, which may not be possible under Plan guidelines. 9.3

A peculiar feature of the local government legislation of Kerala is that there is a striking similarity between the Kerala Panchayat Raj Act 1994 and the Kerala Municipality Act 1994. In fact after the fundamental amendments made in 1999, there is hardly any difference between the two Acts. This is true of financial matters relating to the urban and rural local governments. Therefore the State Finance Commission would be making recommendations common to both urban and rural LSGIs, and in those special cases, which relate only to urban or rural LSGIs, they will be suitably denoted. The recommendations are arranged in the same order as the description of the sources of own revenue in Chapter3.

188

9.4

TAX REVENUE 9.4.1

(1) Property Tax: With the change over of Property Tax assessment from rental value calculation to plinth aret based assessment, it is expected that instances of underassessment and corruption in assessment would be reduced considerably. Empirical studies are being done to determiiu the rates, factor values and suitable methodology assessment; which would then be issued in the form rules. The Commission would recommend a transparent system of self-assessment with a proviso that for concealing or under-reporting of plinth area, there shouk be a penal provision to collect tax at ten times the normt rate. This penal provision should be equally applicablelt any misreporting by verifying or inspecting authorities even if detected later by a supervisory or vigilance authority.

9.4.1.1

The Commission would urge the Government to complete tin switch over to the new system latest by 1st June 2001. Early action is warranted because of the fact that new LSGIs have jus assumed office and at this point of time they would have th moral authority to take difficult decisions regarding tax assess ment. The Commission would suggest the following schemefo classifying buildings and fixing the tax. (a) Zone - Four zones based on location. (b) Type of Building

189

(1)

Ordinary Building.

(2)

Medium Type Building.

(3)

Luxury Building

(c)

Type of use

(1)

Commercial

(2)

Non-commercial

(d) The relative weights for Zones could be 1, 1.5, 2,2.5

(e) The relative weights for the types of building could be 1:1.5:2 (f)

Relative weights between non-commercial and commercial use could be in the ratio 1: 3.

(g) The deductions for age and owner occupation may be as provided for in the Kerala Municipality Act. 9.4.1.2

It is possible that when the changeover happens some of the existing underassessed buildings would have to pay taxes several times the existing amounts. It is also possible that a few of the buildings would have to pay much less tax than at present. The Commission would strongly recommend that on no account should there be a cap on increases or limit to decreases in respect of any building, for what is due as per law has to be paid. Past failures in assessment cannot be legitimatized when a new system is designed. In order to avoid unnecessary and ill-informed criticism, it is suggested that massive publicity campaign be initiated immediately, pointing out the virtues of a simplified taxation system, which would free the citizen from dependence on the mercies of the taxing and appellate authorities.

190

9.4.3

(3)Entertainment Tax. Here again, the Commission would reiterate the recommendation of the First SFC to go in for tax assessment on the basis of seating capacity and occupancy ratio. Detailed suggestions on the assessment procedure would be given in the second part of the Report after conducting a quick field study and after evaluating the systems prevalent in Tamil Nadu and Andhra Pradesh.

9.4.3.1

In the meanwhile the Commission would suggest implementation of the recommendation of the First SFC to make Cable TV liable for Entertainment Tax and also to bring Internet Services within the definition of entertainment.

9.4.4

(4) Advertisement Tax. The Commission feels that there is much scope for collection of Advertisement Tax in a state like Kerala where marketing of consumer goods is quite widespread even in rural areas. But the collection figures show that this source of tax is not even partially tapped by the LSGIs. The Commission recommends the following: (I) Government may fix the minimum rate of taxation for different types of advertisement for different locations. (ii) Advertisement Tax Rules may be issued by Government setting out the guidelines for the LSGIs to assess the tax, (iii) Penal provisions for 'escaped tax' should be at least five times the normal tax.

192

Show Tax The unified Show Tax may be revised as follows Minimum Tax (in Rupees) Panchayat

ULB

(1) Regular cinematograph exhibitions at licenced theatres

15/-

25/-

2) Other cinematograph exhibitions

30/-

40/-

3) Regular shows other than cinemas.

30/-

40/-

4) Other exhibitions

75/-

100/-

There should be a system of authenticating advertisement by the LSGIs so that unauthorised advertisements can easily be detected. 9.4.5

9.4.5.1

(5) Land Conversion Tax. Conversion of land use imposed additional burden on LSGIs, which have to provided civic services and other basic amenities. Therefore the Commission recommends expansion of the existing Conversion Cess into a Land Conversion Tax. For the purposes of this tax conversion may be defined as change of land use from agriculture to nonagriculture, which would include conversion for the purpose of house plots, building construction etc. It is recommended that Conversion Tax, which is essentially a one-time charge, may be collected on the capital value of the land converted as indicated by the minimum value to be fixed by the Government. (Till such time the minimum value is notified, the valuation may be got done by the Tahsildars). In the case of

193

authorised conversion of paddy fields as per provisions of the Kerala Land Utilisation Order five percent of the capital value may be realized as Conversion Tax. However, exemption from the Land Conversion Tax may be given if the extent of paddy land converted is five cents or less and the building put up is less than 50 sq. metres in area. If no building is put up within six months of the conversion, then no exemption need be given. 9.4.5.2

In respect of other kinds of conversion the tax may be fixed as two and a half percent of the capital value with the same kind of exemption as suggested for conversion of paddy land.

9.4.6

(6) Service Tax. At present the tax is optional for Village Panchayats and it is an integral part of the Property Tax in the case of ULBs. In the context of decentralisation, which enjoins LSGIs to perform certain functions declared as mandatory. Service Tax should be made compulsory and made an independent tax. It could be assessed as a percentage of the Property Tax linked to the recurring cost of performing the mandatory functions.

9.4.7

(7) Surcharges. As per Section 208 of the Kerala Panchayat Raj Act and as per Section 230 of the Kerala Municipality Act, Village Panchayats and ULBs are permitted to levy surcharges on Property Tax. Now the upper limit is statuto-rily fixed as 5% for Village Panchayats and 10 % for ULBs. Since the surcharge is to be specifically used for taking up new development projects, it is felt that the ceiling may be removed and the LSGIs be given the freedom to decide tne percentage which can be varied every year as decided by them to meet the cost of the selected new projects.

194

9.5

NON-TAX REVENUE

9.5.1

The major items of non-tax revenue in the case of Village Panchayats and ULBs have been described in Chapter 3.

9.5.2

Non-tax Revenue constitutes 51 percentage of the total own collected revenue of Village Panchayats, 42.62 percentage, in the case of Municipalities 24.39 percentage, in the case of Corporation. (Own revenue here, means own revenue less assigned and shared taxes and grants-in-aid) It is an important source and it needs to be enhanced.

9.5.3

The main issues related to the collection of Non-tax Revenn are: (1)

In the case of ULBs, most of the Non-tax Revenue rote have to be determined by themselves. This is as Section 492 of the Kerala Municipality Act. Due to inexperience, lack of awareness and weak political wl these rates do not often get fixed and even if they fixed they are pegged at very low levels, f or the Municipality Act or Rules do not fix a minimum or maximum Another problem is that once fixed these items are rarek revised.

(2)

The problem in the case of Village Panchayats is the reverse one. Here in most cases the rates are fixed in Rules either as minimum or maximum or by giving a range between the minimum and maximum. Since Rules are not fied after receiving proposals from the Director Panchayats, examining them in the Local Self Government Department and Law Department and sending them for the views of the Subject Committee and finally gazetting them, amendment to rules is a cumbersome process and

195

most of the rates do not get revised. This issue was pointed out by the First SFC, but solutions have not been fully found. (3)

As regards auctions, which fetch good amounts, particularly in the case of river sand, gate fees in public markets and usufructs from local government properties, the auctioning process is often not very transparent, resulting in poor competition. In most of the cases the same person bids during successive years and develops a permanent interest which is difficult to dislodge due to practical and humanitarian considerations like efficiency of operation, labour security, etc. Thus a kind of monopoly develops.

(4)

As far as rent is concerned, in spite of Government in structions, the fixing of rent amount is not very rational and does not appear to have any relation to the market rent or the investment made. A Government circular cap ping annual increase of rent at 5 percentage has further compounded the problem. Similarly, fixing of rent for tem porary occupation is also found to be unreaiistically low.

(5)

There is a general unwillingness on the part of LSGIs to collect user charges or service charges even to the ex tent of the amount required for routine operation and maintenance. This affects the sustainability of various services.

(6)

Since LSGIs are very close to the people, there is a natu ral limitation in imposing penalties and fines. Even if, for the sake of deterrence, prosecution is to be resorted to, it is not done due to the cumbersome litigation process,

196

which would take away a lot of valuable time from senior officials of the LSGIs. This causes laxity in collection of dues. 9.5.4

Against this background the general recommendations of Second SFC are spelt out as follows: (i)

In the case of ULBs, the Government should take the responsibility of fixing the minimum fees for various kinds of licences. This could be done through notifications. Similarly, in the case of Village Panchayat the Rules may be amended to ensure that only minimum is fixed; but the minimum should be fixed in such a way that it is a reasonable one because it noted that LSCIs tend to take the minimum as the general rate.

(ii)

As far as possible the fees, rents etc., are to be to dexed to take care of inflation. Necessary enabling provisions have to be made in the Kerala Panchayt Raj Act and the Kerala Municipality Act to allow for automatic two-yearly increases based on a genm government notification.

(iii) In the case of Licences and Permits, which need to be renewed deterrent penal provisions have to be /ncor porated for delayed renewal. It is suggested that after a period of grace of ten days, 25 percentages the Licence Fee may be collected as fine for delayed payment. This has to be increased by 25% for every further fortnight of delay. (iv) Wherever auctions are held there should be transparent procedures. The Panchayats and the Municipal

197

ties should disclose the various items which are given by auction, the likely time of auction and the amount received during the previous years, during Grama Sabha, Ward Sabha and Ward Committee meetings. There must be a compulsory display by all LSGls indicating the various items, which are auctioned, the name of the successful bidder and the amount. This should be permanently exhibited at the site like the sand mining place, market, slaughterhouse, shop building etc. This transparency provision should be enshrined in the Kerala Panchayat Raj Act and the Kerala Municipality Act and detailed rules issued. (v)

9.5.5

It is recommended that every year before the end of December all the Village Panchayats should inform the Deputy Director of Panchayats the auctions, which they have to conduct in the coming three months. This should be advertised in at least three newspapers having largest circulation in the district as a general advertisement. As far as ULBs are concerned this advertisement could be given for a group of ULBs in every district. The Joint Director of Municipalities could facilitate this.

In addition to these general recommendations, the Commission recommends enhancement and modifications in the following categories of non-tax revenue.

9.6 9.6.1

LICENCE FEES

Trade Licences. In the case of Village Panchayats licensing of trades is done as per the Kerala Panchayat Raj D & O Trades Rules. These rules as of now fix the maximum fees related to turnover. It is suggested that instead of this, minimum fees alone

198

be fixed by Government. This may be converted into flat rate! based on the size of the trade as in the case of ULBs, with septl rate rates for large, medium and small sizes. 9.6.1.1

In urban areas it is the local government, which set the retes under Section 492 (5) of the Kerala Municipality Act. The analysis made by the Commission shows that most of the ULBs have fixed relatively low rates and have been tardy in revising them Since revision does not take place for very long periods of tin it acts as an inhibitor when a Municipality wants a change, as these revisions after long intervals would invite protest due to the inevitable steep increases. The Commission would recomend that the minimum rates alone should be fixed by the Government through notification. In ULBs, since milk trade can be licensed under Section 447 there is no need to retain Section 456.

9.6.1.2

The rationale for shifting to trade-wise notification in the case of Village Panchayats is the difficulties encountered in assessing turnover of trades, which have resulted in gross under assessment. A three-fold broad classification conforming manufacturers, wholesalers and big retailers as Group A, medium sized trades as Group B and small retailers as Group C is suggested. This classification has to be made by LSGIs themselve based on transparent criteria relating to nature of activity, siz/ volume of activity, location, investment, etc.

9.6.1.3

Under Section 448 of the Kerala Municipality Act, rules were issued in 1966 viz. 'Construction or Establishment of Factorie and Installation of Plants or Machinery Rules'. But the rates have not been revised for nearly three and a half decades.

9.6.1.4

The existing rates and the suggested rates for each kind of trade including factories, plants and machinery are given separately for Village Panchayats and ULB’s in Annexure 9.2. 199

9.6.1.5

In order to get a clear idea of the trade establishments functioning within a local government area, to keep track of renewal of licences, to serve as a guide for assessment of profession tax and to help in the discharge of other local government obligatory functions it is suggested that a separate numbering system should be adopted for trade establishments. This would be in addition to the building number assigned for Property Tax assessment. Every year the new establishments should be given supplementary numbers before the first of March.

9.6.2

Theatre Licence. Theatre machinery are governed by the It is recommended that the rates given in Kerala Building Rules rates are shown in Annexure 9.3.

9.6.3

Private

Market

licence.

construction and installation of Kerala Cinema Regulation Rules. be brought on a par with those 1996. The existing and revised

Licence

fees

for

private

markets

may be revised as indicated in Annexure 9.4 Departing from past practice it is recommended that the minimum rates be set and for renewal of licence either the license fee or one-third the gate collection of the previous year whichever is higher could be fixed. 9.6.4

9.6.5

Licences under Kerala Places of Public Resort Act.The fees for these licences issued under Rule 28 may be revised and the minimum rates be fixed as indicated in Annexure9.5. Private

Slaughterhouse.

These

are

regulated

under

Section

230 of the Kerala Panchayat Raj Act and Section 453 of the Kerala Municipality Act. The licence fees may be enhanced from the existing rate of Rs.300/- to Rs.1,000/- per year and for renewal it can be based on one-third the gate collection of the previous year or Rs.1,000/- whichever is higher.

200

9.6.6

Licence fee for Brokers, Commission Agents, Weigtmen, Measurers etc. Licence fee is fixed as per the provisions of Rule 13 of the Kerala Panchayat Raj Public and Private Market Rules issued under Section 221 and Section 222 of the Kerala Panchayat Raj Act and Section 458 (2)(e) of the Kerala Municipality Act. It is suggested that the minimum licence fee should be fixed as Rs.lOO/-per year.

9.6.7

Licensing of premises where animals are kept for commercial purposes. These licences are issued as per Section 444 of the Kerala Municipality Act. The minimum suggested rates are given in Annexure 9.6 Similar provision for licensing may be made in the Kerala Panchayat Raj Act and the same rates may be made applicable.

9.6.8

Licensing of Butchers, Fishmongers, Poulterers etc, This is done under Section 469 of the Kerala Municipality Act. It is suggested that the minimum license fee for butchers may be fixed at Rs.100/- per year, Fishmongers at Rs.50/- per year and Poulterers at Rs.30/- per year. The same rates may be made applicable to Village Panchayats also by including them in the D & O Trade Rules.

9.7 9.7.1

GATE FEES Market Fee.

The various fees for using public markets may

be increased as given in Annexure 9.7. 9.7.2

Public Halting and Parking Places. Fess for the use a public halting and parking places is levied as per Section 227 d the Kerala Panchayat Raj Act and Section 472(1) of the Keral Municipality Act. Minimum rates may be fixed both for Munici palities and Panchayats as given in Annexure 9.8.

9.7.3

Slaughterhouses. Entry fees to slaughter houses are collected as per Section 229 of the Kerala Panchayat Raj act and

201

Section 452 of the Kerala Municipality Act. The rates may be revised as suggested in Annexure 9.9. 9.8

AUCTIONING OF MEAT STALLS/RIGHT TO FISH IN WATER BODIES etc.

These may be auctioned every year by the concerned LSGIs after giving adequate publicity. 9.9

SERVICE AND USER CHARGES

LSGIs must broaden and deepen their collection of service/user charges. A list needs to be made of all services provided and utilities maintained by LSGIs with the cost of providing/running them. A policy decision may be taken by each Village Panchayat or ULB on the proportion of the cost to be realized from the users. Thereafter the users may be classified, and the rates for each class of users determined. As a rule of thumb full cost may be realized from commercial concerns and exemption need be given only to the families below the poverty line. It is suggested that service charges should be collected compulsorily from users of burial grounds, burning ghats and electric crematoria, which are maintained by the LSGIs. In the case of electric crematoria the fee should be fixed to meet the operation and maintenance cost of the machinery. 9.10

FINES AND PENALITIES

The data available with the Commission show that realization by way of fines and penalties is extremely low. Of course at the local government level it would be rather difficult to exercise regulatory powers with an iron hand. However in certain cases of public nuisance like pollution, strewing of solid waste, occupation of public land etc., in the larger public interest, it is necessary to be as strict as possible through realization of fines and even prosecution.

202

9.10.1

9.11

It is seen that there is a discrepancy between the Compounding of Offences Rules applicable in Village Panchayats and those applicable in Municipal bodies. It is suggested that the same provisions applicable to the ULBs could be included in Villagt Panchayat Rules also. This will bring larger number of offences within the compounding powers of the Secretary enabling ii mediate punitive action to be taken.

GROUP RENT FOR FAIRS AND FESTIVELS

Now there is a practice in ULBs to auction right to set up temporary shops etc. in porambokes as per Section 376 of the Kerali Municipality Act. It is suggested that a similar practice be followed in Village Panchayats also.

203

CHAPTER 10

STATE FINANCES DURING THE DECADE 1990-2000

10.1

Our Commission has been guided by two major considerations while analysing the State Finances. Firstly, the issue that we have addressed is whether the state finances are in a position to accommodate the scale of transfers that we have suggested in our recommendations. Secondly, we have also examined whether there are significant pointers that we need to highlight on the evolving trends in the overall financial position. This becomes necessary because such movements accumulate to impinge on delivery of services to the people of the State and thus affect the LSGIs directly. In this process we would also like to capture broadly what the current trends reflected by the figures mean for the future development of the State, with reference particularly to the expenditure on maintenance services on assets, whose benefits directly accrue to the poor. A snapshot of expenditure and receipts figures, be it on the revenue or capital side, at the end of a particular year, will not serve the requirements of such an examination. To facilitate this discussion on the finances of the State Government, an analysis of the trends of a reasonably long period becomes necessary.

10.2

We feel that for three reasons, the decade of the nineties would afford a sufficiently long enough spectrum for the analysis. Firstly, data from this decade can be expected to capture the years when the world saw liberalisation and globalisation characterising international economies in general. Secondly, given the fact that trends in the nineties continue to firm up in various economies of the world as is reflected by subsequent developments, data from the nineties may broadly reflect the shape of things at least in the short term, and expectedly, for the

204

period that will be covered by the Second State Finance Commission, Finally in the limited arena of the State public finances too, this period has witnessed a good mix of alternative socio-economic policies and approaches. 10.3

This Commission has been asked to suggest the measures needed to improve the financial position of the local governments. However, it is not in our charter to delve into aspects of financial management of the State Government itself. Our Commission would, as is required, strictly choose to stay within the confines of our Terms of Reference, Hence we do not intend to make this assessment of the State's finances a prescriptive exercise. Where we may be perceived to trespass this rule would be only to make an occasional remark on aspects of the State finances that clearly impinge on the services rendered by the local bodies. Here we would think that we have a role to play as a linesman overseeing the interplay of forces and factors having an influence on the financial relations between the State and the local governments.

10.4

There is perhaps no one 'locus classicus' on the subject of contemporary State Finances. Every year some light is thrown on the subject in the Report on Currency and Finance published by the Reserve Bank of India. The report for the year 1998-99 (Chapter V-7), in this genre, would serve as a useful reference. Public finance experts, in general, have been pointing out the inadequacy of receipts of State Governments in meeting expenditure requirements. This structural imbalance has been particularly a phenomenon since the mid-eighties. Huge revenue deficits have become a persistent feature since 1987-88. The resultant gaps between receipts and expenditure have worsened since the midnineties. States have resorted to financing non-plan expenditure through cutbacks in their outlay on development. Faced with these constraints, State Governments have diverted high cost borrowing towards current expenditure. Hence capital investment programmes of States in general have suffered from a very acute resource scarcity. This in turn has two direct and deleterious consequences. Firstly, it prevents potential gains in output and productivity from being realised. Secondly, it leads to

205

starkly rising internal debt and interest payment liabilities on the borrowing State. The resource base of States is far too limited to meet growing expenditure commitments. State Governments account for a third of the combined receipts of the Union and the States, while they incur three quarters of the entire social service expenditure and half the economic service expenditure. Tax receipts in the States have exhibited a certain degree of rigidity during the nineties as compared to the eighties. States' tax base has remained narrow with greater dependence on sales tax in particular. States' own tax revenue receipts finance only 32-34 per cent of the total expenditure. Losses of the State Public Sector Undertakings (particularly the Electricity Boards and the Road Transport Corporations) have also contributed to the pressure on State Finances. Resource gaps are financed by vertical resource devolution from the Centre apart from direct borrowings by the State Government and its Public Sector Undertakings. The fiscal consolidation measures initiated by the Union Government since the early nineties have also had their effect on state finances. There has been a definite falling trend in the resource transfer from Central Governments particularly in the form of loans and advances to States. In the last two decades, debt-SDP ratio of States rose from an average level of 17.6 per cent in the eighties to 19.4 per cent hi the nineties. Gross Fiscal Deficit and Revenue Deficit of States have recorded all time high levels of 4.3 per cent and 2.3 per cent of their State Domestic Product respectively. The additional expenditure arising out of implementation of the revised pay scales of the State Government Employees in 1996-97 continues to affect the deficit levels of most State Governments. The gross expenditure of the States in 1998-99 peaked at an annual growth rate of 22.4 per cent while the average decadal growth rates for the eighties and nineties have been of the order of 15 per cent only. Development expenditure accounted for 70.7 per cent of the total expenditure in the eighties. This fell to 65.4 per cent during the nineties. The high level of debt of all the State Governments put together raises questions about its sustainability, especially since its utilisation for capital investment is declining.

206

10.5

It is in the general background of the finances of State Governments that our assessment of the State finances for Kerala is conducted. We first look at trends in Revenue Receipts and Expenditure, the debt burden of the State, the Gross Fiscal Deficit, the growth of standard overheads like Salaries, Pension, Debt Servicing. Finally we trace the patterns of actual maintenance expenditure in specific services like Health, Education, and Public Works to help our own understanding of the problem that Local Bodies would face on maintenance expenditure. REVENUE RECEIPTS

10.6

Revenue receipts of the State Government consist mainly of tax and non-tax revenue of Government and receipts from Government of India. Revenue receipts have registered a growth rate of 14.18 per cent over the nineties. There has however been a marked decline in the growth of revenue receipts in the latter half of the nineties. The growth rate of revenue receipts touched an unprecedented low of 1.12 per cent in 1998-99. Overall, tax revenues of the State registered a healthy growth of 16.24 per cent per annum in this period. However for the years after 1995-96 the growth rate is only 11.4 per cent, with a very sharp drop to 3.3 per cent in 1998-99. Sales tax is the main source of tax revenue for the State accounting for 70 per cent of the total tax receipts, Non tax revenue registered an annual average growth rate of 12.36 per cent from!990-91 to 1999-2000. But here too the growth rate has shown a downward trend, with a negative figure of (-) 4.05 per cent for 1996-97. The growth rate has shown an extremely significant decline over the years 1996-97 to 1999-2000.

10.7

Total transfers from the Central Government consist of transfers under the Finance Commission award, the Plan grants and the Non Plan grants. The total transfers have shown an annual growth of around 11.12 per cent alone during the nineties. It is relevant to mention here that this is much lower than the rate of growth of revenue receipts of the Government of India. In 1998-99, there was a sharp downward

207

trend of (-) 14.00 per cent in total transfers. This is explained by the fact that the increase in 1997-98 was on account of the share of proceeds to the State from the earnings of Government of India under the Voluntary Disclosure Scheme (VDIS) - which was an isolated and one time revenue enhancing measure. 10.8

Overall, the own tax revenue of the State (OTR), reckoned as the sum of the tax and non-tax revenues of the State Government excluding all transfers from Government of India have grown annually at 15.78 per cent over the decade. The sharp dip in both tax revenue and non-tax revenue in 1998-99, mentioned earlier, is reflected in the low growth rate of 3.05 per cent in OTR for that year. REVENUE EXPENDITURE

10.9

Revenue expenditure has been growing at a steep rate of 16.82 per cent per annum over the nineties. The Pay Revision granted by Government for its employees in 1997-98 led to a sharp spurt with expenditure registering a sudden jump of 21.4 per cent. Revenue expenditure in the year 1999-2000 increased by 24 per cent. Increase in the salary bill accounted for the major share of the increase in 1997-98. In 1999-2000, the increases in non-plan expenditure on account of interest payment (34.99 per cent), pension (56.65 per cent), police (38.35 per cent) and education (33.51 per cent) accounted for the high increase in revenue expenditure.

10.10

Table 10.1 below shows the salary, interest and pension components of the State for the period 1991-1999. An average of 60-65 per cent of the Revenue Expenditure of the State is devoted to meeting interest payments and paying the employees both serving and retired. Here, we would like to sound a note of caution. The State's bill on salary, interest and pension has assumed a level, which does not bode well for the future spending plans of Government. We have in detailing our approach observed that the State, as demanded by prudent fiscal

208

considerations, should, as far as possible, refrain from creating in LSGIs for which it would have to meet the salary commitments. We have recommended in our award, that future additions to st the LSGIs should be subjected to a careful scrutiny by the Ombudsman whose role should be expanded to perform the function of a financial steward and appraiser. However, it will not be inappropriate for us to remark that Government might have to seriously curtail the share of its expenditure on employees, if it is to free resources for development. As far as salaries and pensions go, this can be done only if the State Government temporarily suspends its role as a provider of additional employment till it can nurse the public finances back to health, On interest payment, the only remedy is to be selective in taking recourse to debt, and progressively limit the use of debt for capital expenditure alone.

209

REVENUE DEFICIT

10.11

The excess of revenue expenditure over revenue receipts, which is the revenue deficit, is a good first measure of how well a Government is able to manage its finances. It is instructive to appreciate the behaviour of the revenue deficit of a State from year to year. For any given year, let the revenue expenditure, revenue receipts and revenue deficit be denoted by Et, Rt and Dt respectively. Let the growth in revenue receipts and revenue expenditure for the next year be denoted by grt+1 and get+1 respectively. The Revenue Deficit in the next year Dt+1 will be given by Revenue Deficit

= Revenue Expenditure - Revenue Receipts D t+1 = Et+1 –R t+1

Hence

D+1

= (Et) (1 + get+1) - Rt (1 + grt+1) =(Rt+Dt)(1+get+1)-Rt(1+grt+1) = Rt(get+1-grt+1) + Dt (1+get+1)

10.12

The first component Rt(gTt+1 - grt+i) shows the effect of the revenue mobilisation relative to growth in expenditure. If the growth in revenue grt+1 equals the growth in expenditure get+1 then this component would become zero and hence there is no contribution to the revenue deficit. If the growth in revenue grt+1, exceeds the growth in expenditure get+1, this would contribute towards decreasing the revenue deficit. Thus an improvement in this component can result from either a reduction in expenditure or a growth in revenue. Hence this may be referred to as the relative efficiency component.

10.13

Given the deficit Dt in any year, the second component Dt(l + get+1) solely depends on the growth hi expenditure. If the growth rate gf can be controlled then this component of revenue deficit can be managed. Hence this component may be referred to as the expenditure component of revenue deficit. Reductions in expenditure growth get+1’ directly result in reductions of this component. Table 10.2 shows these components for the ten years 1990-2000.

210

TABLE 10.2 (in Rs. Lakhs) Year

Deficit

Revenue

Expendit

Relative

Relative

Receipts

ure

Efficiency

Efficiency

Compon

Componen

ent

t/

get

grt

get-grt

Revenue Deficit 1

2

3

4

5

6

7

8

9

1989-90

25045

204764

-

-

-

-

-

-

1990-91

42204

240294

30787.14

11416.86

27.05%

22.3%

17.35%

5.58%

1991-92

36435

285212

48052.69

-11617.69

-31.89 %

13.86 %

18.69%

-4.83 %

1992-93

33744

331870

41415.42

-7671.42

-22.75%

13.67%

16.36%

-2.69%

1993-94

37160

392176

39625.16

-2465.16

-6.63%

17.42%

18.17%

-0.74%

1994-95

39988

455542

43849.97

-3861.97

-9.66%

18.00%

18.99%

-0.98%

1995-96

40282

542356

45987.27

-5705.27

-14.14%

15.00%

16.23%

-1.22%

1996-97

64303

614507

46931.07

17371.93

27.05%

16.51%

13.30%

3.20%

1997-98

112290

711819

78067.03

34222.97

30.48%

21.40%

15.84%

5.57%

1998-99

202996

719812

125738.36

77257.64

38.06%

11.98%

1.12%

10.85%

1999-00

351561

792668

251703.40

99857.60

28.40%

23.99%

10.12%

13.87%

10.14

The analysis of the revenue deficit figures shows that the relative

efficiency component helped stabilise the revenue deficit in as many as five out the first six years in the nineties (as indicated by negative signs in columns 5 and 9). However, thereafter, in the last four years, the excess of expenditure growth over revenue growth has adversely affected the revenue deficit. 10.15

We had observed earlier, the very significant dip in OTR, (on

both tax and non tax revenues) of the State in the year 1998-99. It would be pertinent to remark here, that this is the only year in the decade in which own tax revenue has declined in real terms, allowing for inflation 211

during the corresponding period. But, what is surprising at the same time is that there has been no noticeable decline in the growth of SDP

212

during this period. There seems to be an incongruity in this and we fail to understand how revenue mobilisation and economic growth could exhibit this kind of a divergence in their growth trends. But, suffice it for us to say, that if there has been any let up in the efficiency of tax and revenue administration in the State during the period, then unless such trends are guarded against in future, these would have very debilitating effects on the State finances. 10.16

It is pertinent to remark here that the data reveal that high revenue deficit in Kerala in the recent years, is primarily a result of fall in efficiency of resource mobilisation, and only secondarily because of the growth in expenditure. It is not the growth rate of expenditure that has shown a marked increase; it is the growth rate of revenue that has fallen noticeably. This interpretation of the State's deficit affords fair ground for optimism about the future of the State finances. Growth in revenue has historically been 18-20 per cent in the past. Many reasons are ascribed for the general fall in revenue collection in the second half of the nineties. Several analysts hold the view that revenue mobilisation has fallen partly on account of the general economic recession in the country and the slump in prices of agricultural commodities. The general prices of agricultural commodities grown in the State remain far from satisfactory and do not yield a reasonable margin to the farmer for sustaining production. Both Governments, at the State and the Centre, are seized of this crisis in the agricultural sector. If there is a recovery in the agricultural sector, then this fact, coupled with some improvements in the tax and non-tax administration, will push up revenue collections. There already are positive indications, which suggest a recovery in revenue collections. From figures available in the Finance Department, the half yearly tax collections show a growth rate near the 18 per cent mark in 2000-01. Of course, the absolute figures this year will not be impressive since there has been considerable erosion in revenue receipts in the years 1997-1999; but signs of a recovery are there. Even so, the task ahead for the Government in the next few years is quite formidable.

213

CAPITAL EXPENDITURE 10.17

The outlay on capital expenditure is presented in Table 10.3. The percentage of capital expenditure as a ratio of total expenditure has been less than 9 per cent. The figures show a marked decline in the capital expenditure from 1998-99. However while the capital outlay on the State Budget has declined, as mentioned elsewhere in this chapter, this could be, to a great extent, because the capital expenditure from devolved plan funds by the LSGS get accounted as revenue expenditure. Therefore we would not like to postulate any inference on the basis of the data. When a clearer accounting mechanism to classify expenditure by the LSGIs is evolved, more informed analysis of these figures would be possible. TABLE 10.3 CAPITAL EXPENDITURE (in Rs. cr.)

Year

Capital

Growth

Expenditure

Revenue Expenditure

CE (RE+CE)

(RE) 1990-91

255.97

1991-92

286.12

1992-93

2824.98

8.31%

11.78%

3216.47

8.17%

277.90

-2,87%

3656.14

7.06%

1993-94

363.33

30.74%

4293.36

7.80%

1994-95

446.01

22,76%

5066.30

8.09%

1995-96

563.47

26.34%

5826.38

8.82%

1996-97

622.52

10.48%

6788.10

8.40%

1997-98

738.87

18.69%

8241.09

8.23%

1998-99

651.63

-11.81%

9228.08

6.60%

1999-00

661.20

1.47%

11442.29

5.46%

214

DEPT AND INTEREST BURDEN OF THE STATE 10.18

In this section we have attempted to present a summary of the debt situation of the State and the annual interest payments incurred by the State. Given the high gross fiscal deficit of the State, the entire extra devolution to the local bodies too would have to be financed by borrowing. It is in this connection that the picture of the State's debt and its growing interest payment has to be borne in mind.

10.19

Tables 10.4 to 10.10 show the growth of various components in the overall debt of the State in the years 1990-1999. Debt of the State arises from borrowings on account of Internal Debt, Savings and Loans from Government of India. Internal debt of the state consists of Market Loans borrowed by Government and Ways and Means Advances received from the Reserve Bank of India. Debt liabilities on Savings arise from the deposits received in the Savings Accounts in the Treasuries, the remittances retained in the State Provident Fund, Money in Insurance and Pension Funds and in trusts and endowments. Loans received from Government of India include those received under Central Plan, Non Plan Loans, State Plan Loans and Centrally Sponsored Schemes. Each of these three streams of the State's debt (viz. Internal debt, Savings and Loans from Government of India) was subjected to a detailed analysis. The interest payment on accumulated liabilities in each of these streams was also examined. We looked at gross retention (defined as the excess of receipts over disbursements) and net retention (defined as gross retention less interest payments for that stream of borrowing). This approach has its limitations: interest payments in a particular year used for reckoning net retention, would relate wholly or largely to accumulated balances on that stream of borrowing in the past. Likewise the disbursements in any year would correspond to the repayment on the principal borrowed in the past. A rigorous analysis would therefore include an analysis of the lag in the receipts, disbursements and interest payments over a longer time horizon.

215

10.20

As the detailed accounts on debt for the year 1999-2000 have not yet been published by the Comptroller and Auditor General, the analysis has been restricted to the period 1990-1999. Receipts on account of Loans from Government of India, do not seem to conform to affi definite pattern of growth (Table 10.4). The fluctuation is explained by the variability of schemes included in the Government of Indii budget as well as the utilisation and drawal of funds by the State. Itis significant that in two years towards the latter half of the period considered, net retention has been negative from this stream even though the gross retention has been positive. TABLE 10.4

10.21

Year

Loans and Advances from Government of India (in Rs. Cr.) Recipts Disburse Interest Gross Growth Net Growth ments Retention Rate Retention Rate

1990-91

408.42

138.58

138.33

269.84

1991-92

575.03

305.91

231.15

269.12

-0.27%

37.97

-71.13%

1992-93

529.55

243.29

237.62

286.26

6.37%

48.64

28.10%

1993-94

595.85

202.67

278.16

393.18

37.35%

115.05

136.47%

1994-95

749.42

137.59

330.70

611.83

55.61%

281.13

144.42%

1995-96

655.45

143.25

418.07

512.20

-16.28%

94-13

-66.52%

1996-97

539.94

165.65

494.16

374.29

-26.93%

-119.87

-227.35%

1997-98

567.15

189.18

550.71

377.97

0.98%

-172.74

44.11%

1998-99

869.59

211.96

606.54

657.63

73.99%

51.09

-129.58%

131.51

Deposits into the savings accounts in the treasury have been a pillar of support for the finances of the State. The stream has yielded a positive gross contribution to financing the State. The State is becoming more dependent on this source to finance its deficit. This stream has in one year 1995-96 shown a negative net figure during this period. But borrowing from the savings accounts in the Treasury has been particularly large in the year 1998-99 and 1994-95, withal unprecedented jump of 468% in 1998-99. (Table 10.5)

216

TABLE 10.5 Small Savings and Deposits (in Rs. Cr.)

10.22

Year

Recipts

Disburse Interest ments

Growth Rate

23.14

Gross Rente ntion 77.69

Net Growth Retemtio Rate n 54.55

1990-91

786.85

709.16

1991-92

995.95

905.35

27.37

91.60

17.90%

64.23

17.75%

1992-93

1268.78

1142.05

40.19

126.73 35.34%-

86.54

34.73%

1993-94

1629.29

1504.39

45.79

124.90 1.44%

79.11

-8.59%

1994-95

1880.90

1581.54

103.26

299.36 139.68% 196.10

147.88%

1995-96

1887.17

1824.76

64.62

62.41

-101.13%

1996-97

1988.28

1809.58

62.46

178.70 186.33% 116.24

-5359.73%

1997-98

1396.71

2168.57

76.70

228.14 27.67%

30.28%

1998-99

3875.61

2935.66

78.92

939.95 312.01% 861.03

-79.15%

-2.21 151.44

468.56%

Net accretions from the State Provident Fund have steadily tapered off, and in some years show negative balances (Table 10.6). Insurance and Pension funds account only for a very small amount of the total borrowing and hence separate data for this stream of borrowings are not presented here.

217

TABLE 10.6 Year

State Provident Funds (in Rs. Cr.) Recipts Disburse Interest Gross ment Retention

1990-91

382.04

180.41

77.73

201.63

1991-92

369.22

226.38

89.97

1992-93

405.27

337.98

1993-94

692.15

1994-95

Growth Rate

Net Retenti on 123.90

Growth Rate

142.84

-29.16%

52.87

-57.33%

101.92

67.09

-53.03%

-34.83

-165.88%

368.82

174.13

323.32

381.92%

149.19

-258.34%

773.16

428.20

159.33

344.96

6.69%

185.63

24.43%

1995-96

800.90

513.36

176.04

287.54

-16.65%

111.50

-39.93%

1996-97

880.10

363.32

214.66

243.78

-15.22%

29.12

-73.88%

1997-98

972.17

779.95

253.69

192.22

-21.15%

-61.47

-311.09%

1998-99

1128.11 770.01

276.32

358.10

86.30%

81.78

-233.04%

10.23

Internal debt of the State has been rising markedly to finance the State budget (Table 10.7). This is largely on account of the steady growth in the annual market borrowing of the State Government, approved b Government of India as part of its overall credit policy.

218

TABLE 10.7

1355.50

Disbur sement 1143.87

Internal Debt (in RS. Cr.) Interest Gross Growth Retention Rate 97.56 211.63

Net Growth Retention Rate 114.07

1991-92

1859.13

1635.48

124.61

223.65

5.68%

99.04

-13.18%

1992-93

2162.62

1831.94

154.98

330.68

47.86%

175.70

77.40%

1993-94

1143.35

1102.81

180.90

40.54

-87.74%

-140.36

-179.89%

1994-95

509.32

164.68

216.41

344.64

750.15% 128.23

-191.36%

1995-96

427.64

20.68

253.63

406.96

18.08%

153.33

19.57%

1996-97

623.01

138.44

318.08

484.57

19.07%

166.49

8.58%

1997-98

947.81

333.54

388.50

614.27

26.77%

225.77

35.61%

1998-99

3101.91

2265.67

465.38

839.24

36.62%

373.86

65.59%

Year

Reciept

1990-91

10.24

For the limited purpose of this analysis, a discussion on each line of debt financing in detail may not be called for. But, the stark reality that confronts us is that with respect to many of the sources of debt financing, outflows exceed the inflows. The overall picture that emerges is given in Table 10.8.

219

TABLE 10.8 Total debt (L&A from GOI, Small savings and deposits, State Provident Funds and Internal debt) (inRs.Cr) Year

Receipts

Interest

2952.93

Disburse ment 2178.00

Growth Rate

Net Retention 434.34

Growth Rate

340.59

Gross Retention 774.93

1990-91 1991-92

3830.24

3080.46

483.36

749.78

-3.25%

266.42

-38.66%

1992-93

4393.24

3562.68

542.45

830.56

10.77%

288.11

8.14%

1993-94

4089.67

3188.13

687.08

901.54

8.55%

214.47

-25.56%

1994-95

3944.30

2322.09

819.59

1622.21

79.94%

802.62

274.23%

1995-96

3805.79

2513.13

924.05

1292.66

-20.31%

368.61

-54.07%

1996-97

4070.17

2762.81

1103.30

1307.36

1.14%

204.06

-44.64%

1997-98

4930.51

3483.29

1285.97

1447.22

10.70%

161.25

-20.98%

1998-99

9027.21

6195.06

1446.12

2832.15

95.70%

1386.03

759.55%

10.25

Table 10.9 also shows the relative shares of the major streams of borrowing viz. Internal Debt, L&A from GOI and Small Savings in the total gross retention, net retention and interest payments. As seen in the table, the shares accounted for by Internal debt (which comprises mainly market borrowings) and deposits received in the Treasuries through savings schemes account for an increasing percentage of the total. It is pertinent to note that in two years viz. 1994-95 and 1998- 99, the State has leaned more pronouncedly on amounts mobilised into the treasuries through the savings scheme. It is understood during this period that the State did face considerable difficulty in its liquidity management. The share of the State Provident Fund shows a decreasing trend.

220

TABLE 10.9 GR = Gross Retention, NR = Total Retention, INT = Interest. All figures in %. Year

Internal Debt GR/

10.26

NR/

L&A from GOI INT/

GR/

NR/

INT/

Small Savings etc.

State Provident Fund

GR/

GR/

NR/

INT

NR/

INT

Total Total

Total Total Total

Total Total Total Total Total Total

Total

GR

NR

INT

GR

NR

INT

GR

NR

INT

GR

NR

INT

9-91

27.36

26.26

28.64

34.82

3028

40.61

10.03

12.56

6.79

26.06

28.53

22.82

91-92

29.83

37.17

25.78

35.89

14.25

47.82

12.22

24.11

5.66

19.05

19.84

18.60

92-93

39.81

60.98

28.57

34.47

16.88

43.80

15.26

30.04

7.41

8.08

-12.09

18.79

93-94

4.50

-65.45

26.33

43.61

53.63

40.48

13.85

36.89

6.66

35.86

69.56

25.34

94-95

21.25

15.98

26.40

37.72

35.03

40.35

18.45

24.43

12.60

21.26

23.13

19.44

95-96

31.48

41.60

27.45

39.62

25.54

45.24

4.83

-0.60

6.99

22.24

30.25

19.05

96-97

37.06

81.50

28.83

28.63

-58.74

44.79

13.67

56.96

5.66

18.65

14.27

19.46

97-98

42.44

140.01

30.21

26.12

-107.13

42.82

15.76

93.92

5.69

13.28

-38.02

19.73

98-99

29.63

26.97

32.18

23.22

3.69

41.94

33.19

62.12

5.46

12.64

5.90

19.11

Table 10.10 shows the growth of the Debt of the State along with the interest payments over the period 31.3.1990 to 31.3.2000.

221

TABLE 10.10 DEBT AND INTEREST PAYMENTS FOR THE PERIOD 31.3.1990 TO 31.3.2000 Debt

Interest

Growth Rate (90-99)

17.74%

20.88%

Growth Rate (90-95)

17.48%

22.84%

Growth Rate (95-00)

18.00%

18.95% Annual

Period

Annual

Growth

Growth

Rate in % As on 31st March 1990

3941.87

As on 31st March 1991

4716.79

As on 31 March 1992

Rate in % 1989-90

293.00

19.66

1990-91

340.64

16.26

5466.56

15.90

1991-92

483.42

41.92

As on 31st March 1993

6297.14

15.19

1992-93

542.51

12.22

As on 31st March 1994

7198.67

14.32

1993-94

687.16

16.66

As on 31st March 1995

8820.87

22.53

1994-95

819.67

19.28

As on 31st March 1996

st

10113.54

14.65

1995-96

924.15

12.75

st

11420.91

12.93

1996-97

1103.41

19.40

st

As on 31 March 1998

12868.13

12.67

1997-98

1286.09

16.56

As on 31st March 1999

15700.28

22.011

1998-99

1446.26

12.45

As on 31st March 2000

20176.06

28.51

1999-00

1952.27

34.99

As on 31 March 1997

222

10.27

The picture of the year-to-year borrowing of the State that emerges is not encouraging. The data in Tables 10.4 to 10.10 above warrant a critical look at the advisability of the State's taking increasing recourse to debt. We feel that drawing up a comprehensive debt strategy for a reasonably long period ahead, with the assistance of experts would be eminently desirable for the State at this juncture. We leave this suggestion for the consideration of Government.

10.28

In the preceding chapters, it was argued that the maintenance of assets created should be a focal point for action for LSGIs. Given the scale of transfer of resources to the LSGIs, through Plan devolution from 199596, the State is witnessing an unprecedented surge of activity, which has led to creation of wealth at the community level, in the form of buildings, roads and irrigation structures. Besides, institutions that were hitherto managed by Departments of the State have been transferred on a large scale to LSGIs. These aspects have been discussed elsewhere in this report.

10.29

It has been a general experience that the first casualty of a shortage of funds is the outlay earmarked for maintenance expenditure. This is not confined to LSGIs or State Governments alone, but seems to be a universal phenomenon. Successive Finance Commissions have been seized of this problem and have in their assessment made provisions for maintenance requirements of the States. The Eleventh Central Finance Commission in its report (Chapter V Para 5.38) observed as follows: "It is a matter of concern that our capital assets are languishing because of poor maintenance". Despite affirmations about the importance of earmarking adequate provisions for maintenance, expenditure for this has not been commensurate with the requirements. The Report of the Eleventh Central Finance Commission further notes: " This has happened in spite of the fact that successive Finance Commission in the past have made liberal provisions for maintanance of capital assets in their assessment of revenue expenditure”.

223

10.30

Table 10.11 gives approximate expenditure on maintenance requirements in the selected sectors of Health, Education and PubEc Works for the period 1990-2000. These figures are only approximations. There would be always some expenditure under various heads of account, which, at least partly, would fall under the categon of maintenance expenditure. Thus maintenance outlays are not explicitl] identifiable in the budget or the Government accounts. As the Table reveals, the total maintenance expenditure as a percentage of Revenue Expenditure of the State has been just over 3 per cent. During the three years 1997-2000, which correspond to a difficult financial peritx for the State Government, maintenance expenditure, as a percentage o total revenue expenditure, has shown a decrease. This again confirms the general assertion made in the last paragraph. Thi finding has been a prime consideration behind ou recommendation that funds should be adequately earmarks for maintenance. TABLE 10.11 MAINTENANCE EXPENDITURE

Year

Medical Education Buildings Roads and Bridges

Total

Revenue Total/ ExpenRevenue diture Expenditure

1990-91

39.16

11.57

6.10

40.76

97.60

2824.95

3.45%

1991-92

11.02

12.28

6.94

40.94

71.19

3216.46

2.21%

1992-93 38.89

29.35

7.79

45.22

121.25 3656. 13

3.32%

1993-94 48.30

32.43

9.01

61,07

150.80 4293.36

3.51%

1994-95 60.01

34.27

9.46

60.37

164.11 5066.30

3.24%

1995-96

67.09

37.72

12.71

104.17

221.68 5826.38

3.80%

1996-97

85.57

54.02

12.17

116.02

267.78

6788.11

3.94%

1997-98

73.21

28.87

1J.29

136.26

249.64 8241.12

3.03%

1998-99

79.68

36.16

13.41

156.74

285.99

3.10%

1999-00 89.66

34.78

25.46

197.18

347.08 11565.96 3.00%

224

9228.08

GROSS FISCAL DEFICIT OVER THE DECADE 1990-2000

10.31

Data on the growth of the gross fiscal deficit (GFD) of the State and its components are shown in the Table below. The growth in revenue deficit accounts for a growing share of the gross fiscal deficit. There has been a decline in net capital expenditure on the State account, particularly from 1997-98. This watershed line coincides with the 3540 per cent devolution of the total plan to the local bodies in the wake of decentralised planning. The revenue deficit has grown inordinately in the second half of the decade, particularly since 1997-98, the first year in which decentralised planning was introduced. Revenue deficit accounted for 74 per cent, 82 per cent and 73 per cent of the gross fiscal deficit in the years 1997-98, 1998-99 and 1999-2000. A partial explanation for this disproportionate growth in revenue deficit, is that the entire devolution under Plan to local bodies, is, for accounting reasons prescribed by the Comptroller and Auditor General, classified as revenue expenditure. However, the stiff rise in revenue expenditure on account of the pay revision has also contributed significantly to the problem.

10.32

There are two ways of assessing the high revenue expenditure. Government has held the view that as much as 60-70 per cent of the transfer to local bodies is on capital works, and that there is not much cause for alarm in the figures of revenue deficit. While it is not possible to confirm the actual percentage of capital expenditure out of the plan devolution to local bodies, in the absence of data, it should be conceded there is a great deal of merit in this argument. Even when final figures are available, classifying micro-level infrastructure works into two neat categories of 'revenue' and 'capital' expenditure would pose problems. By Government's argument thus, the percentage of revenue deficit in the gross fiscal deficit for the three years would reduce to 25 per cent, 45 per cent and 65 per cent respectively.

225

10.33

On the other hand, if one were to extrapolate the growth rate in capital expenditure of the first half of the decade i.e. 14.89 per cent over the three years in question, and apply this to the funds transferred to LSGIs, then the percentage of revenue deficit in the gross fiscal deficit for the three years would reduce to only 47 per cent, 62 per cent and 73 per cent respectively. Gross fiscal deficit has risen at 21 per cent per annum over the decade, and

10.34

at a higher rate of 36 per cent in the second half of the decade, But what is worrisome is that this gross fiscal deficit has been increasingly used for financing revenue deficit of the State. In such a situation, these alternative views on revenue deficit of the State Government would afford little comfort to any State Government, These figures would point to the inherent weakness of the financial position of the State, and give an idea of the level of borrowing that the State Government has to do each year to sustain spending levels, particularly on account of the revenue expenditure envisaged in the budget. Table 10.12 gives the picture of the gross fiscal deficit of the State over the decade 1990-2000. TABLE 10.12 ROSS FISCAL DEFICIT OVER THE DECADE 1990-2000

(inRs.Cr)

REVENUE DEFICIT

GR(90-95) GR(95-00) GR(90-00)

-1.34 71.88 26.56 % of GFD

1990-91

422.02

52.85

1991-92

364.34

45.35

1992-93

337.41

1993-94

CAPITAL EXPENDITURE 14.89 4.08 11.12 % of Growth GFD Rate

Growth Rate

LOANS AND ADVANCES OF STATE GOVERNMENT(NET) 21.50 -5.89 9.11 % of Growth GFD Rate(%) 120.56 15.10

GROSS FISCAL DEFICIT 8.55 35.88 21.00 Growth Rate

255.97

32.05

-13.67

286.12

35.61

11.78

125.98

19.04

26.89

803.44

0.61

46.09

-7.39

277.9

37.96

-2.87

116.68

15.94

-23.73

731.99

-8.89

371.31

39.71

10.05

363.33

38.85

30.74

200.52

21.44

71.85

935.16

27.76

1994-95

399.88

36.07

7.69

446.01

40.23

22.76

262.76

23.70

31.04

1108.65

18.55

1995-96

402.81

30.92

0.73

563.47

43.26

26.34

336.37

25.82

28.01

1302.65

17.50

1996-97

643.03

41.69

59.64

622.52

40.36

10.48

276.93

17.95

-17.67

1542.48

18.41

1997-98

1122.90

46.52

74.63

738.87

30.61

18.69

552.08

22.87

99.36

2413.85

56.49

1998-99

2029.96

67.39

80.78

651.63

21.63

-11.81

330.61

10.98

-40.12

3012.20

24.79

226

798.55

1999-00

3515.61

79.16

73.19

661.20

14.89

227

1.47

264.21

5.95

-20.08

4441.02

47.43

FORECAST OF STATE FINANCES 2001-2005

10.35

In this section, we attempt a fairly simple forecast of State Finances over the period covered by the award of our Finance Commission. This forecast is aimed at presenting a picture of how the finances are affected by the aggregate transfer of nine per cent of the Own Tax Revenue that we have recommended as general and maintenance grants. We have, while keeping the number of assumptions as few as possible, looked at the major components of revenue receipts. But we do not propose to analyse individual components of revenue expenditure. We have adopted this ground rule, which stems from the observation that revenue expenditure, as stated earlier, has been far more stable than revenue receipts in the State. Of course this approach also uses a major premise, that Government may find it difficult in the medium term, in the absence of an explicit strategy, to make reductions in expenditure, beyond the range of 1-2 per cent. At the same time we note that it can ill-afford to step up expenditure beyond what is being incurred now. Hence we believe that fine-tuning our efforts to forecast individual components of the revenue expenditure will not yield commensurate improvements in the quality of our forecast. The only disaggregation we use is to look at the interest burden and the rest of the revenue expenditure separately. For the year 2000-01 we have used the revised estimates used by Finance Department for its annual projections. This is justified as these projections are generally fairly close to those presented in the budget. For the year 2001-02, we employ the estimates of revenue receipts used for the assessment of the resources for the annual plan 2001-02. For revenue expenditure, we use the revised estimate for the year 2000-01 and the forecast for the year 2001-02; we do the same for interest payments.

10.36

The allocations to local bodies are a part of the revenue expenditure of the State. As stated earlier, since it is not our intention to prescribe remedies or measures to improve the State's finances, we have not attempted to project the capital side of the state finances or the gross fiscal deficit.

228

10.37

With this background, we attempt a forecast of the revenue account of the State Government. For this we use the year 2000-01 as the base year. The accounts are yet to be published by the Accountant General At this point in time, Finance Department has completed a review of the half yearly status of revenue collection. We use the buoyancy figures for the various streams of tax revenue available at the close of the half year 2000-01.

10.38

The basic assumptions are discussed below: (1)

TAX REVENUE For any revenue stream, we use the half yearly growth rate for our forecast, provided there has been a positive growth in the previous year.

(2)

For Sales Tax, we assume that buoyancy will pick up to the leve in the first half of the nineties. We assume that it will touch the level of 22 per cent, which was roughly the figure for the early nineties, before its growth loses momentum to reach 20 percent in 2008-09.

(3)

Taxes on vehicles are expected to touch the average historical growth rate for the period 1993-99 i.e. 16 per cent by 2003-04 and then stabilise at 14 per cent from 2005-06 to 2008-09.

(4)

A proposal to adopt minimum fair value fixation as the basis for levying stamp duty is under implementation. We expect that it will take the next financial year for the system to be fully implemented. Hence we expect the buoyancy to record a substantial increase in 2002-03 and touch 23 per cent and subsequently to attain a stable rate of 18 per cent viz. the projected SDP growth rate by 2008-09

229

(5)

However where there has been a decrease or negative growth in either of the two previous years (i.e. 1998-2000), we take the minimum of the half yearly buoyancy for 2000-01 and the positive growth rates registered in 1993-1999. NON-TAX REVENUE

(1) The major components of this non-tax revenue in the State are Forests, Miscellaneous Departments and Interest receipts. Collection from Forests is largely dependent on the revenues that come out of felling of trees and disposal of timber. With felling of trees having been brought under more rigorous guidelines in the recent years, the growth of this line of revenue has not been as significant as it used to be in the past. For Forests, we use the half yearly growth rate. (2) Non Tax Revenues from other departments come largely through collection of fees and user charges. The Non Tax Revenue Wing of the Finance Department has submitted proposals for approval of Government. Decisions are yet to be taken in many of these. Hence for the years 2001-02 and 2002-03, we assume that there will be a quicker growth in such revenue and assume this to be 17 per cent per annum. Subsequently we have assumed this to stabilise at the same rate as the non-interest component of revenue expenditure viz., at 13 per cent. (3) Interest receipts are assumed to grow at the average historical rate observed for the period 1993-1999. GRANTS IN AID Grants in aid received from Government of India are for Non Plan, State Plan, Central Plan, Centrally Sponsored Schemes and Special Plan schemes. The major share is accounted for by Grants in aid for

230

State Plan and for Centrally Sponsored Schemes. The average historial growth rate for the period 1993-1999 is used for making the projections. FISCAL COMMISSION TRANSFERS On Fiscal Commission Transfers, the projections made by the Eleventh Central Finance Commission are used. 10.39

The growth rate assumed for each tax is presented in the table below We have shown the rates for the years 2002-2009 for the reason that it will be instructive to look at a slightly longer-term period than that covered by our award. We have not included the year 2001-02 in the table below as we have based our projections of revenue receipts for 2001-02 on what has been adopted in the Finance Department for id assessment as in November 2000. The maximum annual growth ratt in the decade 1990-2000 for selected taxes are also shown in the last column of Table 10.13 TABLE 10.13

GROWTH RATES OF VARIOUS ITEMS STATE TAX REVENUES Maximum Growth Rate for selsected Items in 1990-2000

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

Agricultutal Income

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

Land Revenue

10.52%

10.52%

10.52%

10.52%

10.52%

10.52%

10.52%

37.81%

Stamps and Registration

23.00%

22.00%

20.00%

18.00%

18.00%

18.00%

18.00%

28.52%

State Excise

15.00%

1600%

16.00%

16.00%

16.00%

16.00%

16.00%

29.84%

Sales Tax

19.00%

20.00%

21.00%

22.00%

21.00%

21.00%

20.00%

22.58%

Taxes on Vehicles

15.00%

16.00%

15.00%

15.00%

14.00%

14.00%

14.00%

21.83%

Taxes on duties on electricity

1.00%

1.00%

1.00%

1.00%

1.00%

1.00%

1.00%

Building Tax

12.00%

12.00%

12.00%

12.00%

12.00%

12.00%

12.00%

Other taxes and duties

1.00%

1.00%

1.00%

1.00%

1.00%

1.00%

1.00%

231

44.31%

10.40

The figures for own revenue, revenue receipts, revenue expenditure and revenue deficit for the years 2001-02 to 2005-06 arrived in the forecast exercise are shown in Table 10.14. We have analysed the figures for three years beyond the period 2005-06. However the general results for the award period hold also for this extra period. We see a decline in the percentage of revenue deficit as a share of State Domestic Product from the current level of 3.5 per cent to under 2 per cent, even assuming a comparatively low nominal growth rate of SDP at 15.94 per cent (the average historical value).

10.41

The State has seen a comparatively steep decline in tax collection over the last few years. However, if the cycles of economic growth, as reflected in the eighties and nineties repeat over the next five years, the State is poised for a faster financial recovery than what we have given in Table 10.14. We have taken care to recommend a scale of transfers, which therefore would not impose an unduly difficult target for the financial managers of the State. 232

TABLE 10.14 Projected fiscal scenario with the Commission's recommended transfers for the Award Period 2001 -02 to 2005-06

10.42

What is important here is the fact that the transfers lie in a narrow band between 0.18 and 0.22 per cent of estimated State Domestic Product. The average value for the award period being 0.20 per cent, Given our assumptions, we feel that there is considerable scope for the finances to improve over the years, albeit slowly. We do not endeavour to guess the State Government's response to the Fiscal Responsibility Act under enactment by Government of India or the ingredients of the financial reforms under discussion with the Asian Development Bank, We have not taken into account any deep cuts in expenditure as a part of the financial reforms of public expenditure that the State Government may undertake.

233

10.43

10.44

In our exercise, we have also looked at the behaviour of this difference under various growth rates of the State Domestic Product for the forecast period. With our recommended scale of transfers, the average value of transfers as a percentage of State Domestic Product stabilises with improved economic growth at around a peak value of 0.2184, as is shown in Chart 10.1. As mentioned elsewhere earlier, we have assumed that the State Domestic Product will grow at the average historical value. For alternative growth rates, Own Tax Revenue has to be correspondingly adjusted for the forecast period. This has been done by using a simple proportionality factor. It is clear that with faster growth the transfers that have been recommended by this Commission will be accommodated better in the fiscal balance of the State: this is so because revenue deficit as a percentage of SDP declines for increasing growth rates of SDP (Table 10.15)

Table 10.15 shows the behaviour of Revenue Deficit, post transfers, over the forecast period for a few alternative rates of economic growth. The transfers that have been recommended will not upset fiscal management, since they do not, by themselves, introduce any spurts in Revenue Deficit as a percentage of the State Domestic Product. 234

TABLE 10.15 BEHAVIOUR OF REVENUE DEFICIT AS % OF SDP AFTER TRANSFERS FOR DIFFERENT GROWTH RATES

PROJECTIONS OF THE ELEVENTH CENTRAL FINANCE COMMISSION

10.45

Here, we look at the relevant projections arrived at by the Eleventh Central Finance Commission and compare these with our own. We also show the projections of the State Government presented in its Memorandum submitted to the Eleventh Central Finance Commission, The CFC has in Annexure V3 assumed a prescriptive growth rate of 16.8 per cent for tax revenue and a growth rate of 14 per cent for the State Domestic Product. As mentioned earlier, for our projections of the SDP, we have assumed the average historical growth for the period 1993-94 to 1998-99. We have looked at the buoyancy of the various components of the Tax and Non Tax Revenue income of the State separately.

235

10.46

We have taken the non plan revenue surplus projected by the Eleventh Central Finance Commission in Table 10.2. We have also assumed that the Annual Plan will grow at a rate of 13 per cent per annum over the award period (at the rate of growth of non-interest component of revenue expenditure). Given that the revenue component in the Plan continues to be 70 per cent of the total plan outlay then the revenue deficit computed is shown in Table 10.16.

10.47

The figures arrived at in our forecast lie between those given in the report of the CFC and those presented in the State's Memorandum to the CFC. Generally, memoranda presented by State Governments tend to overestimate the Expenditure figures. This is largely to prevent the possibility of the State losing out on non plan assistance in the Award. The Memorandum's estimate of revenue deficit for the year 1999-2000 for example is Rs.5680 cr. while the audited figures show a revenue deficit of Rs.3625 cr. Likewise, the Finance Commissions use normative measures of 'prescriptive' rates for various items particularly on the expenditure side. As a result the final audited figures at the end of the award period of the various Finance Commission and the projections that these commissions have made in their awards differ by a very large margin. This detracts considerably from the reliability of the projections, particularly of revenue expenditure by the Finance Commission.

10.48

In our own forecast, we have adopted figures, which are suggested by the trends in the past, specifically the period 1993-94 to 1999-2000. At the same time we neither anticipate any runaway expenditure nor any unusual momentum in the growth of any revenue stream. At the end, it is relevant to mention that we have avoided taking into account the implications of a further pay revision for the employees of the State Government through the next Pay Commission. We have done this for two reasons. Firstly there is a recommendation of the last Pay Commission that pay revisions should be made once in ten years as against the existing practice of once in five years. As of now, the State

236

Government does not seem to be in favour of adopting this recommendation of the Pay Commission. But the scales of pay, barring a few instances, are at present fairly identical with Central Pay scale With DA announcements reflecting the entire increase in prices, pay revisions after every five years may cease to be a prevalent practice. Secondly, even if a pay revision were to be implemented in the award period covered by our report, the effect will be reflected in the last year of the award period, which would not alter the forecasts much. In any case, the impact of transfers suggested by us would remain at an approximately constant level through the award period.

237

CHAPTER 11

SOME ISSUES RAISED BY THE ELEVENTH CENTRAL FINANCE COMMISSION 1.1

Our report is being prepared at a time when the Eleventh Central Finance Commission has just submitted its report to the President. The Eleventh Central Finance Commission's report has given rise to a lively controversy on the appropriate criteria for the inter sc distribution of resources between the different states. These issues are outside the sphere of our concern; but the CEC has made a number of important suggestions regarding the setting up and functioning of State Finance Commissions, and has expressed its views on a number of questions relating to decentralisation, on which we feel we must give our opinion. The CFC has pointed to an anomaly which has been exercising us as well. This consists in the following. Article 280(3)(bb) and (c) of the Constitution states that the CFC must make recommendations as to the measures needed to augment the Consolidated Fund of a State to supplement the resources of Panchayats and Municipalities in the State "on the basis of the recommendations made by the Finance Commission of the Stattf* (emphasis added). But the timing of the setting up of the crop of First State Finance Commissions happened to be such that their reports could not be made available to the Tenth Central Finance Commission and appeared almost immediately afterwards. The only SFC reports available to the Eleventh CFC therefore are almost five years old and hence at the end of their time-frame of reference, they cannot conceivably be of any use

238

to the CFC in formulating its recommendations. Besides, since both CFCs and SFCs are constituted once every five years, this problem will recur with every CFC. In the case of Kerala for instance the first SFC's report was submitted in February 1996 and was supposed to cover the period 1996-7 to 2000-1. This can hardly form the basis of the recommendation of the Eleventh CFC whose report is supposed to cover the period 2000-1 to 2004-5. Thus the only SFC report available to the CFC is one whose timeframe of reference has nearly ended; it can not possibly form the basis of the CFC's recommendations. 11.3

The first SFC of Kerala had drawn attention to this problem.lt had suggested that the SFCs should be constituted on a date early enough, such that their reports could be made available six to nine months before the CFC submits its report. It had also drawn attention to the discrepancy that while Article 280 of the Constitution empowered the President to appoint a CFC after five years or "at such earlier times as the President considers necessary" there was no such leeway provided in Article 243 (I) dealing with the appointment of the SFCs; clearly a removal of this discrepancy allowing for the appointment of SFCs earlier than at the "expiration of the fifth year" can resolve the problem,

11.4

The Eleventh CFC has suggested precisely this, namely Constitutional Amendment which merely adds "or earlier" to "the expiration of the fifth year" in Article 243(1), making it exactly analogous to the provision regarding the appointment of CFCs. While we agree with the spirit of this suggestion, there is a practical problem here, namely that such an amendment would open up the possibility of a state government appointing a Finance Commission whenever it fancies. This danger already exists in the wording of the provision governing the appointment of tht CFC; it would now get generalised to the case of the SFCs as well. A more suitable amendment therefore would be to say that SFCs have to be appointed "two years before the expiry of the

239

total picture regarding state finances, including what the states themselves are being called upon to devolve to LSGIs. (Since the latter is governed by the recommendations of the SFCs, the Constitution talks of the CFC’s making its own recommendations "on the basis of the recommendations made by the Finance Commission of the State"). This is an eminently reasonable provision. What is more, it constitutes an anti-thesis of the "topdown" approach and an expression of commitment to the primacy of LSGIs: instead of SFCs taking the devolution from the Centre as a datum in their decision-making it is the CFC that is supposed to take the devolution to LSGIs as the datum in its decision-making. The needs of LSGIs, as reflected in the SEC recommendations, have a primacy and constitute a constrain within which the CFC must operate, rather than having to adjust to what the CFC decides to devolve. An amendment deletinj this provision therefore is not just unwarranted; it amounts to an overturning of a basic principle. 11.6

Indeed it seems to us that the two Constitutional amendment suggested by the CFC would undermine each other's rationale i.e. the second Constitutional amendment suggested by the CF would undermine the rationale of its first Constitutions amendment, and vice versa. If CFC recommendations are a longer to be linked constitutionally to those of the SFCs the the need for synchronising the two, so that the latter comes befor the former, disappears. On the other hand if the Constitution to be amended to ensure synchronisation, then the exercise t doing so would be futile if at the end of it the CFC is no long required to take SFC recommendations as the basis on which it makes its own awards. To be sure, it may be argued that SK recommendations, if available to the CFC, would be useful for it, even though the latter may not recommend on the basis of them. But the case for synchronisation would lose much of its compelling power if convenience alone is invoked in support of it. And in any case the argument that the second proposed

240

amendment would remove some of the Constitutional shackles on the CFC would still remain. There may be a case for adding "and other relevant factors" to "on the basis of the recommendations made by the Finance Commission of the State", but none in our view for deleting the latter. 11.7

There is however an implication of Article 280(3)(bb) and (c) which has gone generally unnoticed. In stating that the CFC should make recommendations regarding augmenting the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities on the basis of the SFC recommendations, the Constitution implicitly suggests that the recommendations of the SFC would be more or less binding on the state government. There would be no point in the CFC taking the SFC recommendations as the basis of its own award, if the latter recommendations amounted to no more than mere pious wishes which the state government could accept or reject at will, or, in the case of those it accepts, could give effect to at a time of its own choice. In short, in enjoining on the CFC the need to heed the SFC recommendations, the Constitution accords the latter a degree of sanctity. Unfortunately, state governments have been quite cavalier in their treatment of SFC recommendations. The CFC itself quotes instances of Action Taken Reports on SFC recommendations not being presented to state legislatures even two to three years after the submission of the SFC report. In Kerala too some of the recommendations of the First SFC were rejected by the government (e.g. the provision regarding 1 percent of State revenue, appropriately defined, going towards the Rural and Urban Pools); and, even with regard to the others, the necessary legislation has taken an inordinately long time. Of course the total devolution from the state government to the LSGIs in Kerala has been impressive and unprecedented, and has in fact gone beyond the prevailing conception at the time of the first Finance Commission report. This fact however was never advanced as the reason for the partial acceptance of the SFC

241

report. We welcome the CFC's suggestion that the Action Taken Report on the SFC's recommendations should be placed before the state legislatures within six months of the submission of the SFC report, and urge greater regard on the part of the state government for the spirit of the Constitutional provision in I dealing with the recommendations of the SFC. 11.8

The CFC's suggestions for augmenting the Consolidated Funds of the States are welcome, and in particular the suggestion that Parliament should be empowered to raise the ceiling on the Profession tax without going in for a Constitutional Amendment each time. This is a matter that has also exercised us, especially since in Kerala LSGIs have been empowered to levy Profession tax, and it constitutes an important source of their revenue. The scope for raising revenue from Profession tax is very large, given the weight of the service sector in Kerala's economy, provided its rate as well as coverage could be increased. Specific suggestions regarding ways of extending its coverage (as well as garnering revenue through other means) have been made in Chapter 9, which also highlight the constraint placed by the Constitutional ceiling. We welcome the addition of the CFC's voice to ours for overcoming this constraint.

11.9

Of the annual amounts of Rs.1600 crores for Panchayats and Rs.400 crores for Municipalities which the CFC would be transferring for an improvement in civic services, Kerala's share would be Rs.65.92 crores for distribution among Panchayats, and Rs.15.05 crores for distribution among Municipalities. The criteria for inter se distribution within each of these categories have been left to the SFCs. We recommend that these sums be distributed entirely on the basis of the population criterion among the Panchayats and among the Municipalities. Since this sum according to the CFC "should be over and above the normal flow of funds to the local bodies from the States, and the amounts that would flow from the implementation of SK

242

recommendations", its availability makes no difference to the rest of our report. These funds, it must be emphasised too, should not be included in the Plan funds which have a completely distinct existence. It is suggested that these grants should be devolved in one instalment. 11.10

A perusal of the CFC report however makes it clear that the process of decentralisation in Kerala has gone way beyond what the CFC, looking perhaps at the average picture among states, visualises. The CFC had commissioned a study by the NIRD on rural local bodies and by NIPFP on urban local bodies. According to the CFC, "The Study done by the NIRD reveals that the 73rd amendment has not significantly altered the functional domain of the panchayats at various tiers. Few states have been serious in vesting the panchayats with the necessary powers, funds and staff to enable them to perform the functions assigned to them under the statutes. The Centre as well as the States have sponsored schemes for rural people without associating panchayats in planning and implementation." The picture in Kerala is vastly different: not only were a whole array of assets transferred to the LSGIs in 1995 together with staff and funds to meet operating costs, but, under the stimulus of the Peoples' Plan Campaign, over 35 percent of plan outlay has been given to LSGIs to spend on projects of their choice. Precisely because of this unique status of Kerala, the index of decentralisation prepared by the CFC (which has to do with criteria such as when the SFCs were set up and the extent of action on their report, matters that have become secondary in a context where over Rs.1000 crores are handed over every year as plan grants to LSGIs) does not do justice to Kerala.

11.11

The use of such criteria in the preparation of an index of decentralisation is in any case questionable, since it elevates form over substance. Any such index has to be based on substantive criteria such as the proportion of actual devolution from the state

243

government to LSGIs, or the magnitude of assets actually transferred to LSGIs, since this is the essence of the process of decentralisation, as envisaged in the Constitutional Amendments, Looking only at the SFC recommended devolution, which has in most states, for no convincing reason (and certainly not for any Constitutionally-specified reason), excluded plan funds from its purview, is inadequate to start with. But not taking into account the actual devolution even with regard to the non-plan part, but concentrating only on the state government's formal' response to the SFC recommendations, increases further the inadequacy of the index. It is in fact a symptom of the inadequacy of the index that a state like Kerala, with its unique record of decentralisation, performs so poorly according to it. 11.12

There is however a more basic sense in which Kerala's remarkable essay in democratic decentralisation which is qualitatively different, conceptually, from the average picture among the States in India, has not elicited the response it deserved from the CFC. The CFC does "not find adequate justification in the demand that a certain percentage of the funds transferred by the States to the panchayats and municipalities be provided by the Finance Commission". The reason is the following. On the one hand, the mere transfer of plan schemes to LSGIs should not lead to any additional expenditure liability on the States; on the other hand the additional financial burden falling on the State for implementing the SFC recommendations has to be built into the expenditure stream of the State which the CFC is already cognisant of. (And any transfer to LSGIs over and above SFC recommendations is outside its purview anyway). It follows then that the CFC has to take no special note of the devolution to LSGIs by the State government. This argument might have some cogency in the "normal" situation, but not in the context of the democratic decentralisation experiment in Kerala. The reasons are obvious, and are as follows.

244

11.13

With the devolution of plan funds to LSGIs, there has been a significant change in the composition of plan investment. In particular there has been a massive increase in road length. This change in composition is nothing to frown upon; on the contrary, if decentralised planning is really meaningful, then it must be reflected in some change in the composition of plan investment, for otherwise the need to shift away from paternalistic planning would appear correspondingly weaker. Roads in particular, and similar investments in local infrastructure in general, require, as discussed in an earlier chapter, high levels of maintenance expenditure. If plan funds are not to be frittered away on maintenance expenditure (and the whole effort in Kerala at the present juncture must be to educate the people not to fritter away plan outlays for current uses, for which the temptation would be almost irresistibly high), then adequate provision must be made for maintenance. The argument can be advanced, and our Commission in fact has advanced it and accepted it in an earlier chapter, that the State government which has transferred the plan outlay should also meet the maintenance expenditure, since if the same outlay had been spent through departments, it would have provided for the maintenance of the assets anyway. Now, the CFC's argument amounts to saying that if the state government transfers plan schemes to LSGIs and meets their maintenance requirements, then its overall expenditure obligations do not increase. But this presumption is incorrect since the change in the composition of plan investment also raises the maintenance expenditure, and hence the overall expenditure obligation of the state government. It is certainly true that in so far as this additional obligation gets reflected in the SFC report, it would be taken cognisance of by the CFC. But that would be almost five years from now. Meanwhile, maintenance expenditure needs have to be met immediately, since the roads constructed in 1997-8, the first year of enhanced plan devolution, would be already due for re-topping (a very expensive operation) in the coming fiscal year itself; and subsequent fiscal years would only

245

see an escalation in such expenditure. By the time the Twelfth CFC makes some arrangement to help the state, it would already have carried a big fiscal burden. The Eleventh CFC regrettably, in concentrating on the average picture, has provided little succour to a state like Kerala (the amount coming to the state from the CFC's provision for civic services is too meagre relative to the state's requirement, which, to repeat, is highly specific). Our Commission nonetheless has enjoined upon the state government the task of meeting the maintenance expenditure in full. This is an obligation which cannot be shirked merely because the Eleventh Central Finance Commission chose not to recognise its existence.

246

CHAPTER 12

PROCEDURAL SAFEGUARDS 12.1

In the context of the considerable devolution of funds both Plan and non-Plan suggested by this Commission, it is felt that strong procedural safeguards are necessary both ways to ensure that the Government and the LSGIs perform their fiscal responsibilities fair and straight. The Government has to accept the financial entitlements of LSGIs and honour their due claim promptly. The LSGIs have to show utmost diligence and care in utilizing public money. The Commission would be dwelling at length on issues related to fiscal responsibility and financial management of LSGIs in the second part of the Report. However the Commission feels that certain procedural safeguards be adopted immediately and would recommend the following.

12.2

12.2.1

LEGISLATIVE PROVISIONS

There should be new sections introduced in the Kerala Panchayat Raj Act, 1994 and the Kerala Municipality Act, 1994, to the effect that LSGIs are entitled to nine percent of State's own tax revenue defined as the sum of the amounts received by way of Sales Tax, Excise, Motor Vehicles Tax, Stamp Duty, Basic Tax, Building Tax and other taxes and surcharge imposed by the State and reckoned on the basis of the latest accounts certified by the Accountant General.

12.2.2

Once this principle of general sharing of taxes is accepted and implemented, simultaneously the existing assigned Basic Tax, and Surcharge on Stamp Duty and the shared Motor

247

taxes

of

Vehicles Tax would move out of the financial domain of LSGIs and become state taxes. For this, appropriate amendments to the Kerala Panchayat Raj Act, Kerala Municipality Act and Kerala j Motor Vehicles Taxation Act and the relevant rules are needed. 12.2.3

12.3 12.3.1

This nine percent has to be split up into two groups viz., the General Purpose Grant and Maintenance Grant, getting 3.5 percent and 5.5 percent shares respectively. LSGIs should be free to spend the General Purpose Grant for establishment expenses as well as for performing the obligatory and other functions; the Maintenance Grant should be used exclusively for maintenance and well-defined related requirements only. It should be made non-divertible. Similarly the Plan funds should be used exclusively for development purposes and again should be totally non-divertible. While General Purpose Grant would be released fully as per entitlement and would be allowed to be transferred to PD Accounts permitting unlimited carry over; for the other two grants, unspent funds would lapse. SAFEGUARD AT GOVERNMENT LEVEL

(1) Flow of Funds. Now Plan Funds flow to LSGIs in four quarterly instalments. For claiming each instalment the concerned LSGI has to make an application, to the Deputy Director in the case of Village Panchayats, to the Heads of Department in the case of Block Panchayats and Municipalities and to the Government in the case of District Panchayats and Corporations, Every time an instalment is to be released prior general approval of the Finance Department is required. This system has been found to be cumbersome and slow since there is considerable time lag between the preferring of a claim and the actual crediting of funds to the LSGI account. It often happens that funds cannot be accessed when most needed.

248

12.3.1.1

In

respect

of

sponsored

schemes,

both

Plan

and

Non-plan,

the

funds flow to LSGI from the Heads of Department either directly or through district level officers. Normally it is given in one instalment; but sometimes the release is made rather late in the financial year. Also, there is some communication gap between the department and the LSGI on how exactly some of the funds can be spent, with the result that there are substantial unspent funds lying with LSGIs from sponsored schemes. 12.3.1.2

As per the existing system, LSGIs are permitted to carry over 25 percent of their allotted Plan funds to the next financial year. This is justified on two counts:- Firstly due to delayed releases the last quarter get credited only towards the end of the financial year with the result that it is not possible to spend it and carryover becomes inevitable; secondly, the first instalment of the succeeding year also gets delayed as various procedures are to be followed and this necessitates LSGIs to have carry over funds so that their expenses during the early months of the financial year could be met. This system of carryover has not been very efficient.

12.3.1.3

The Finance Department has a letter of credit system in vogue for regulating expenditure by cheque drawing departments like the Public Works, Irrigation and Forest Departments. Also there is a practice of issuing monthly and quarterly ceilings for regulating the expenditure of major departments. These were put in place for regulating outflows from the treasury. Drawing elements from these systems, in order to get over the problems outlined above, the Commission recommends an entitlement approach in the case of Plan Grants, Maintenance Grants and General Purpose Grants by the LSGIs. This would mean that the instalments would be automatically credited to the LSGIs. For the release of Plan Grants and Maintenance Grants, giving due consideration to the need of the Government to manage the ways and means position and to the right of LSGIs to get a free flow of funds, the following procedure is recommended.

249

(1) The

Director

of

Panchayats

(in

the

case

of

Village

Panchayats), the Commissioner of Rural Development (in the case of Block Panchayats and District Panchayats) and the Director of Municipalities in the case of Municipalities and Corporations) would be declared as the Controlling Officers of these grants for the LSGIs serviced by them. (2) These Controlling Officers would, as soon as the Budget is passed, issue annual allotment letters giving LSGI-wise allocation to the District Collectors. (Normally in the state only the Vote on Account is passed. However, since the withdrawals would be allowed only on a quarterly basis, the question of exceeding the Vote on Account does not arise.) (3) At

the

district

level,

the

District

Collector

would

issue

allotment letters to individual LS&Is. This is to be done in four quarterly instalments. This would mean that on the first day of April, July, October and January, the LSGIs would get as their entitlement in the treasuries one-fourth of the annual allotment. This system would negate the need for claims, allotments and transfer crediting. Based on the allotment order of the District Collector funds would automatically move into the account of the LSGIs. For discharging this function, District Collector would be supported by the Deputy Director of Panchayats, Assistant Development Commissioner (General) and the Joint Director of Municipal Administration. (4) In the interest of free flow of funds, even while facilitating liquidity management and avoiding the possibility of excessive lumping of expenditure, LSGIs would be authorized to carry over a fixed percentage of funds from the quarterly allotment as follows:

250

From the first quarter From the second quarter From the third quarter From the fourth quarter

50 percent 40 percent of the quarterly allotment plus the carried over amount 30 percent of the quarterly allotment and the carried over amount Nil

Even if the LSGIs were to use this flexibility to the maximum the quarterly percentage of expenditure would not exceed the following: First quarter

25 percent

Second quarter

37.5 percent

Third quarter

40.0 percent

Fourth quarter

37.0 percent

This arrangement would restrict runaway expenditure towards the end of the financial year. (5)

In this system since the Plan Grants and Maintenance Grants would be drawn against bills presented in the treasuries the question of carrying over any amount at the end of the financial year does not arise. In other words, unspent funds would lapse on the 31st of March.

(6)

The District Collector would issue two sets of allotments to each LSGI. The first set can be called "regular allotment" to be issued just before the beginning of the year immediately after the Budget is approved. Against

251

this 'regular allotment' expenditure can be permitted subject only to the condition that the maximum permissible amount should not exceed one-third of the quarterly allotment in the first month and two-third of the quarterly allotment in the first two months together. This is to regulate too much of outflow from the treasury in any given month. (7)

The second allotment can be called "authorization to use carryover funds". This is also to be done quarterly, However this would not be automatic and a system of certification by the LSGI Secretary and elected head with counter signature from the Treasury Officer would be insisted on. This authorization could be given within a fortnight of LSGI submitting their utilization certificates. In order to curb the possibility of false claims, invariably, false certification should be treated as a crime resulting in prosecution and loss of job for the persons certifying.

(8)

12.3.1.4

For the Treasury to monitor drawal of funds against allotments a kind of appropriation account needs to be maintained.

For devolution of the General Purpose Grant, a monthly allotment is suggested; i.e. 12 equal monthly instalments would be automatically credited on the first of each month. The above procedure may be followed mutatis mutandis, with the only difference being that there will be no requirement to spend a prescribed minimum of funds and there would be no lapsing of funds. Also the LSGI would be able to transfer credit its allotment to its Personal Deposit account in the treasuries as soon as it is received.

252

The Eleventh Finance Commission grant could be given in one instalment in the first quarter of the year in the same manner as above. LSGIs can transfer-credit the amount. Releases in subsequent years could be linked to expenditure. The elaborate procedures explained above would ensure that the objective of liquidity management of government is fully met even while simplifying the mechanism of flow of funds. 12.3.2

12.3.3

(2) Calculation of entitlements: For the purpose of calculating the share of taxes due to the local governments, the accounts of the year previous to the last one should be taken so that the accounts certified by the Accountant General can be used. (3)

Assessment

of

maintenance

requirement:Government should

carry out a proper survey of assets transferred to LSGIs as well as assets owned by them. And using this data it should calculate Standard Spending Assessment for maintenance purposes for each LSGI as per existing norms. Thereafter allotments of maintenance grants can be made in proportion to the assessed amount, according to the availability of funds. 12.3.4

(4) Separate Budget Document. Through an appropriate entry in the Kerala Panchayat Raj Act and the Kerala Municipality Act, it should be ensured that Grants-in-Aid to LSGIs are shown in a separate budget document. It should show LSGI-wise distribution of funds in respect of three streams of Grants-in-Aid - Plan, Maintenance and General Purposes. In the case of other kinds of Grants-in-Aid, for pensions, as well as noon feeding in schools, the allocations may be shown indicating the entitlements of different types of LSGIs and formulae for devolving funds to individual LSGIs.

253

12.4 12.4.1

REISTRATION ON CREATION OF NEW STAFF

In

the

context

of

transfer

of

responsibilities

it

is

only

natural

that LSGIs would be demanding creation of more posts both for institutions/offices transferred to them as well as for expanding their traditional staff strength. The Government may also want to create new staff for the institutions/offices transferred to LSGIs either on normative considerations or in response to pressures from employees or LSGIs. The Commission would like to reiterate the principle enunciated by the Committee on Decentralisation of Powers that there should not be any net addition to the staff due to decentralisation of functions and powers. 12.4.2

An analysis of the State finances shows that there is need for utmost care and caution in expanding the staff strength in view of the severe financial crunch. For practical reasons, salaries and pensions end up as the first charge on government revenues and when the revenues are not enough, borrowing is resorted to meet these commitments. This has dangerous implications; for, it fully eats away the allocations for maintenance, which is so essential for the optimum use of the good social infrastructure, which Kerala has built up over the years. Therefore there is every reason to economize on creation of staff and allot more resources for the upgradation and upkeep of the assets created.

12.4.3

Of course the transferred staff are paid for by the Government; but if the staff costs increase the first squeeze will be on funds recommended to be earmarked to LSGIs for maintenance and probably even for Plan purposes. Also, in the not too distant future, LSGIs would have to take on the full responsibility of meeting the establishment costs. So too much of staff can later prove to be a burden for the LSGIs themselves. In this context the Commission would put forward certain basic suggestions to contain the salary and related commitments. 254

12.4.4

Firstly any proposal by Government to create staff in institutions/ offices transferred to LSGIs should be formulated in consultation with the concerned LSGIs. Secondly it would be advisable to let the LSGI bear the additional cost due to the staff creation. Thirdly it is necessary to have an independent institutional mechanism to thoroughly analyse proposals for staff creation either from LSGIs or Government, relating to both own staff as well as transferred staff. What is required is a kind of Expenditure Ombudsman. Since Kerala already has an excellent organisation in the form of a multi-member Ombudsman created with the primary responsibility of controlling maladministration in LSGIs, it is felt that this body could take on the responsibility of vetting all proposals for staff creation. Since unnecessary expenditure on staff is a kind of maladministration there is logical justification for the Ombudsman to handle this task. Therefore the Commission would recommend that Ombudsman for LSGIs be authorised to approve every proposal for creation of staff either from LSGIs or from Government, in institutions/offices transferred to LSGIs or in the original offices/institutions of LSGIs. The approval could be based on the reasonableness of the request with reference to need and existing norms, sustained affordability of the proposal on the part of the State Government as well as LSGIs, implications for future, possibility for redeployment from other local governments or from Government, possibility of out-sourcing, potential for streamlining existing work etc. The Council of Ministers could then take an informed decision based on the recommendations of the Ombudsman. This institutional mechanism would ensure that while absolutely unavoidable posts get created, there would be an effective check on uncontrolled, ad-hoc expansion of bureaucracy. It could bring reliability in staff creation and over a period of time give push to efficiency and economy in the administration of LSGI responsibilities.

255

12.4.5

12.5

Alongside, Government may set up a one-time Local Government Staff Commission, which could go into the question of scientific reallocation of staff among LSGIs and redeployment from government to LSGIs subject to the condition that no creation of staff would be recommended. In the latter report it could take off from where the Committee on Decentralisation of Powers has stopped and fully operationalise the principle of "work and worker going together". It could also suggest measures for improving office management through the use of modern techniques and technologies as well as through retraining the existing staff. It could explore the possibility of outsourcing certain kinds of work as also pooling of human resources for access by a group of LSGIs. This Staff Commission could give its recommendations in about a year. SAFEGUARDS AT LEVEL

1. All LSGIs should have a maintenance plan, which will spell out both the maintenance needs and the intended expenditure for each item. 2. In

order

to

prevent

inflating

of

expenditure

by

writing

out

cheques which are cashed after the end of the financial year it is suggested that all cheques issued by local government after 31st December should carry a stamped statement to the effect that the cheques would be valid only up to 31st of March of that financial year. 3. Unpermitted diversion of funds should invite automatic penalty by way of interest at 2 percent per month for the fund diverted and should be recovered from the persons responsible. 4. All LSGIs should have a single account for crediting all their

256

entire collected income other than grants-in-aid from State or Central Government or other agencies. 5. In respect of Maintenance Grants and Plan Grants, the existing PD Account system where funds are drawn by cheques may be replaced by a system where Bills are prepared and presented with appropriate certification regarding the bonafides and admissibility of the Bill. For the sake of convenience, to help easy distinguishing of Bills presented by various LSGIs it is suggested that separate colours could be used for Village Panchayats, Block Panchayats, District Panchayats, Municipalities and Corporations. 12.6

COMMITTEE TO FOLLOW-UP ACCEPTED RECOMMENDATIONS

12.6.1

Once the recommendation of the Commission are accepted by Government, there has to be a system of quickly operationalising them, at any rate within three months. There would be need for amending Acts and Rules and issue of orders by Local Self Government Department, Finance Department and other Departments. This process takes a lot of time. As has been pointed out, many of the accepted recommendations of the First State Finance Commission are yet to be operationalised.

12.6.2

Therefore the Commission would an Empowered Committee under of the following members:

1.

Secretary (Finance)

2.

Secretary (Law)

3.

Director of Panchayats

257

recommend the Chief

the setting up of Secretary consisting

4.

Director of Municipal Administration

5.

Secretaries of Departments which have to carry out the recommendations

6. 12.6.3

Secretary (LSGD)_ - Convener.

This Committee would have the task of preparing amendments to Acts and Rules and monitoring the issue of notifications and general orders. It should prepare the Action Taken Report to be submitted to the Legislature. This Committee could be serviced by the SFC Cell of the Finance Department.

12.7

SFC CELL

12.7.1

The first SFC had recommended setting up of a Special Cell and accordingly as per G.O.(MS)564/97/Fin dated 4-6-1997 a Cell has been set up in the Finance Department. Unfortunately this Cell has not been able to discharge its functions very effectively with the result that there have been delays in operationalising the recommendations of the first SFC. The fact that the second SFC had really to struggle and spend a lot of time to get the data and details, which could have been gathered and analysed regularly by the SFC Cell without much difficulty, further reinforces the need to have a small but efficient regular set up.

12.7.2

Accordingly the Commission recommends the setting up of a cell under the joint control of Secretary (Finance) and Secretary (LSGD) consisting essentially of an officer from the Finance Department and an officer from the Panchayat and Municipal Wings of LSG Department, an officer from the Statistical Department competent in use of Computers and analysis of data. This could be supported by a small team consisting of two ministerial staff, two Data Entry Operators, one Stenographer

258

and the required class IV staff, driver etc. The Commission would like to underline the fact that it is not suggesting any level for the posts. It is felt that the accent should be on the quality of the person rather than his rank in the official hierarchy. 12.7.3

The mandate of this Cell would be (i) Follow up the accepted recommendations of the First Finance Commission and co-ordinate them to their logical conclusions. (ii) Process the recommendations of the Second Finance Commission for decision at appropriate levels and operationalise them fully. (iii) Design formats for monitoring resource mobilization at the local level and resource flow from Government to the LSGIs, obtain periodical reports in the formats, collate them, analyse them and prepare monthly statements and annual reports. This monitoring system could be used by LSGD for taking necessary remedial action wherever required. (iv) Play the nodal role in organizing training programmes for LSGIs in respect of recommendations of this Commission relating to new systems of Budgeting, Accounting, Auditing etc. (v)

Serve as a resource center on local government finances.

(vi) Search, collect and store information on local government finances from both within the State and outside the State. (vii) Create a data bank for the use of future State and Central Finance Commissions.

259

SUMMARY OF RECOMMENDATIOS 1. The important recommendations of the Second SFC are summarised below: 2.

DEVOLUTION OF FUNDS

(1) Government

may

devolve

to

the

LSGIs,

Plan

funds

not

less

than one-third the annual size of the State Plan as fixed by the Planning Commission. This Fund is to be used by LSGIs for planning and implementing locally relevant projects. The secotral ceilings if any within this grant may be fixed by Government from time to time. (2) Five

and

a

half

percent

of

the

annual

own

tax

revenue

of

the State Government may be devolved to the LSGIs as Grant-in-aid for maintenance of assets under the control of the LSGIs including the transferred assets. This percentage may be determined on the figures certified by the Accountant General, which normally relates to the financial year two years before the Budget year. All expenses related to running of institutions except wages, supply of medicines to health institutions, educational concessions / scholarships to students, supply of books and consumables to schools, equipments, conducting noonfeeding in schools, shall be borne by the LSGIs. This should include payment of rents, repair of equipment including vehicles, and meeting of telephone charges and vehicle operating expenses.

260

(3) Three and a half percent of the own tax revenue of the State Government based on the figures certified by the Accountant General could be devolved to LSGIs as Genera Purpose Grant in lieu of assigned taxes, shared taxes and various statutory and non-statutory grants-in-aid, both specific purpose and general purpose. This grant-in-aid would subsume under it Basic Tax Grant, Surcharge on Stamp Duty, Vehicle Tax Compensation, Rural Pool Grants, the specific purpose and general purpose grants to Urban Local Bodies and all other non-plan grants-in-aid devolved to LSGIs from the Local Self Government Department. 3. It has to be noted that Kerala has become highly vulnerable in the context of liberalization and globalisation. How the poor get affected by this process needs to be specially studied. 4.

The Eleventh Finance Commission grants to LSGIs should be passed down as such over and above the grants suggested above.

5

For the above three streams of grants-in-aid the devolution formula and the distribution formula are as suggested below: (a)

Plan Grant-in-Aid. The existing devolution formula as well as the distribution formula may continue. However up to ten percent of the non-SCP/TSP Funds may be distributed as an incentive for increased own revenue mobilization by the Village Panchayats and the Urban Local Bodies. The actual percentage to be distributed as incentive grant-in-aid should be the same as the percentage of Village Panchayats and Urban Local Bodies showing an increase in own revenue. And this amount could be shared as per the formula given below:

261

qi = ri Pi / a ri Pi qi - share for LSG1 i ri - percentage increase in its revenue Pi - Population of the LSGI i The date of effect of the incentive system may be indicated to LSGIs well in advance. (b) Maintenance Grant. The maintenance grants should be based on the current cost of replacement and the initial norms (which has to be updated periodically) may be as follows:

i. Maintenance of buildings constructed before 1-4-

3% of capital cost

1967 ii. Maintenance of buildings constructed after 1-4-1967

2% of capital cost

iii. Current construction cost.

Rs.400/-per Sq.ft.

iv. Frequency of resurfacing ofblack-top/WBM Roads

Once in five years

v. Annual repair expenditure of Blacktop roads.

Rs.25,000/-per K.M

vi. Annual repair expenditure ofWBM roads

Rs.23,000/-per K.M.

vii. Annual repair expenditure ofunsurfaced roads

Rs.2,000/-per KM.

viii.Cost of re-surfacing black-top roads(3.8 Metre

Rs. 1.65 lakhs per K.M.

width) ix. Cost of resurfacing WBM roads (3.8 Metre width)

262

Rs. 1.84 lakhs per K.M

6

The distribution of the maintenance grant could be as follows: (1)

On the basis of a price index work out what Rs.140 crores at 2000-2001 prices would amount to for the year for which the provision is being made. The deflator for the construc tion sector can be utilized for this purpose.

(2)

One-seventh of this amount may be kept aside for the Dis trict and Block Panchayats and divided between them in the ratio 19 : 1. The share of the Block Panchayat should be divided equally half the share distribution of trict roads and non-road assets after 1995)..

among them. As regards District Panchayats, should be divided according to the ratio of the transferred village roads and other dis the other half based on norms for repair of in their control (other than those created

(3)

Seven-eighth of the share of the Village Panchayats and Municipalities is to be distributed among the Village Panchayats, Municipalities and Corporations in the same ra tio as VTC is currently divided; one-eighth of the share of the Village Panchayats and Municipalities should be distributed according to the maintenance needs of non-road as sets, own and transferred, (other than those created after 1995) - as determined by norms.

(4)

The division formula mentioned above needs to be corrected by a series of iterations.

(5)

The remaining portion of the maintenance grant i.e. the excess over Rs.140 crores at 2000-01 prices may be distributed exactly in the same manner as Plan 6rant-in-aid.

263

c) General Purpose Grant. The Government may determine as a one-time exercise, the share of District Panchayats and Block Panchayats in the General Purpose Grant, based on normative assessment of their establishment cost and office expense requirements. The remaining amount may be distributed as follows:

Village Panchayats

78.5 percentage

Municipalities

8.5 percentage

Corporations

13.0 percentage

7. The inter se distribution among the Municipalities and Corporations should be entirely on the basis of population. As regards Village Panchayats, a corpus of Rs.10 crore may be set apart and be used as per a gap filling formula - to fill the gap between obligatory expenditure (reckoned as establishment expenses, street light and water supply charges) and the revenue usable for these purposes (calculated as the sum of own collected revenue and the share of the Village Panchayat from the General Purpose Grant). The entire gap could be filled up in the case of Second and Third Grade Village Panchayats, 50 percentage of the gap in the case of First Grade Village Panchayats and 25 percentage of the gap in the case of Special Grade Panchayats. The remaining portion may be distributed according to the population criterion. 8

In order to avoid hardships during transition period, it is recommended that no Village Panchayat or ULB should experience a real shortfall in its receipts on account of these transfers compared to the previous year.

264

d)

9

Eleventh Finance Commission grants may be devolved on the basis of the population criterion in one instalment. OWN RESOURCES MOBILISATION BY LSGIs

(1) For Property Tax the recommendations of the First SFC may be operationalised and the following scheme is suggested for classifying buildings and fixing the tax. (i)

Location Zone - Four Zones.

(ii)

Type of building - (a) Ordinary Building. (b) Medium type building.

( c) Luxury building. (iii)

Type of use: -

(a) Commercial use. (b) Non-commercial use.

(iv)

The relative weights for the Zone could b - 1 : 1.5 : 2 : 2.5

(v)

The relative weights for the type of building could be - 1 : 1.5 : 2

(vi)

The relative weights between non-commercial and commercial use could be - 1 : 3

(vii) Deduction for age and owner occupation may be as provided for in the Kerala Municipality Act.

265

(2)

On no account should there be a cap on increase or a limit to decrease when the new system is introduced.

(3)

A dual system of numbering is suggested so that incomplete buildings can get a provisional number and their completion tracked properly.

(4)

Presumptive Profession Tax may be introduced to bring certain self employed occupational groups into the tax net.

(5)

Entertainment Tax may be introduced for Cable and Internet.

(6)

In the case of Advertisement Tax the Government may fix the minimum rates for taxation for different kinds of advertisement for different types of locations by issuing Advertisement Tax Rules, which could set out the guide lines for LS6Is to assess the tax.

(7)

There should be a system of authenticating advertisements to avoid unauthorized advertisements. Penal provisions for unauthorized advertisement should be at least five times the normal tax.

(8)

Conversion Tax may be realized at the rate of five per cent of the capital value in the case of conversion of paddy lands. Half this rate may be made applicable for other kinds of conversions. In the case of conversions without prior permission a severe penalty of ten times the Conversion Tax should be realized in the case of conversion of paddy land and an amount equivalent to the Conversion Tax could be realized in other cases.

266

(9)

The Service Tax should be made compulsory and be linked to the cost of performing obligatory functions and calculated as a percentage of Property Tax.

(10)

The ceiling on Surcharges may be removed.

(11)

In the case of Non-tax Revenue the Government should fix the minimum fees for various kinds of licences in the case of Municipalities and Corporations through notification. In the case of Village Panchayats only the minimum amount may be fixed in the rules.

(12)

In the case of licences and permits, which are renewed periodically, 25% of the licence fee may be collected as fine for delay beyond a grace period of ten days; this pen alty may be increased by 25% for every additional fort night of delay.

(13)

There must be compulsory display by LSGIs on the spot for various items of revenue and in the case of auctions a district level public notice should be given in December about to all the forthcoming auctions.

(14)

For trade licences the present practice in Village Panchayats of calculation based on turnover may be done away with and for both Village Panchayats and Urban Local Bodies, Government could notify the minimum rates for each trade with separate rates in each category for small, medium and large establishments.

(15)

A separate numbering system should be adopted for trade establishments.

(16) The following fees may be enhanced. (i) Building fee for Theatres. 267

(ii) Licence fee under the Kerala Places of Public Resort Act. (iii)Licence fee for Private Markets. (iv) Licence fee for Private Slaughter Houses. (v) Licence fee for Brokers, Commission Agents, Weigh men and Measurers. (vi) Licence fee for Butchers, Fishmongers, Poulterers. (vii)Licence fee for premises where animals are kept for commercial purposes. (viii)Market fee. (ix) Cate fee for public halting and parking places, (x) Cate fee for slaughterhouses. (xi) User charges for burial grounds, burning ghats and electric crematoria. (17) The meat stalls and the right to fish in water bodies may be auctioned every year by the concerned LSGIs after giving due publicity. (18) Village Panchayats may auction the right to set up temporary shops in public land just as Urban Local Governments are doing so under Section 376 of the Kerala Municipality Act.

268

FOLLOW UP OF FIRST SFC RECOMMENDATIONS

10

(1) Rules for levy of Advertisement Tax in Village Panchayats and ULBs may be issued immediately. (2) Steps to finalise minimum land value for use in registering sales may be completed at the earliest, (3) Tax mapping may be done immediately and unique premises numbering system introduced. (4) A single financing agency for LSGIs may be set up by merging KUDFC and the Rural Development Board.. (5) 50% of building exemption fees and regularization fees may be given to the concerned Village Panchayats and ULBs. (6) The question of Village Panchayats and ULBs levying daily fee for use of poramboke may be examined and decided by Gov ernment without further delay. (7) Rationalisation of revenue village and Village Panchayat/ULB boundaries may be done in such a way that no revenue village would lie within more than one Village Panchayat or ULB. (8) Shortfall in devolution of assigned and shared taxes vis-a-vis the accepted level may be made good by Government. 11

PROCEDURAL SAFEGUARDS

(1) Necessary amendments to the Kerala Panchayat Raj Act and the Kerala 269

Municipality Act may be made to specify the minimum shares of LSGIs, of the Plan Grant, Maintenance Grant and General Purpose Grant.

270

(2) LSGIs should get automatic allocations at the beginning of every month. (3) A

survey

of

assets

transferred

to

LSGIs

as

well

as

assets

owned by them may be carried out to calculate the standard spending assessment for maintenance purposes and the re sult of the study should be utilized for devolution of mainte nance funds. (4) A separate Budget document indicating LSGI-wise distribu tion of the three streams of grants-in-aid, grants-in-aid for pensions and for noon feeding. For other grants-in-aid, dis trict-wise figures may be indicated along with formula for de volving them to individual LSGIs. (5) A legislative provision may be introduced for indexing non tax revenue items, and taxes like Property Tax, Advertise ment Tax and Service Tax. Two-yearly revisions are recom mended for non-tax licence items and Advertisement Tax based on Consumer Price Index for non-manual workers for Thiruvananthapuram in the case of Urban Local Bodies and Consumer Price Index for agricultural labourers for the state in the case of Village Panchayats; four-yearly revision may be done for Professional Tax and Service Tax. (6) All proposals for staff creation should be cleared by the Ombudsman. (7) A Local Government Staff Commission may be set up to sug gest redistribution of staff among LSGIs as well as from Gov ernment to LSGIs.

271

(8) All LSGIs should prepare annual maintenance Plans. (9) Unpermitted diversion of funds should be penalized by charg ing a penalty of two percent per month from the persons re sponsible. (10) Village Panchayats, Municipalities and Corporations should have a single account for crediting all their own collected revenues (11) In the case of Plan 6rant-in-aid and Maintenance 6rant-inaid, bill system of drawing from treasuries should be intro duced in the place of PD Accounts. (12) An Empowered Committee under the Chief Secretary may be set up to follow-up the accepted recommendations and imple ment them fully. 12 A Cell under the joint control of Finance and Local Self Government Departments may be created for concurrent monitoring of all financial matters of LSGIs

PRABHAT PATNAIK Chairman

K.M. ABRAHAM Member

S.M. VIJAYANAND Member

Thiruvananthapuram 8th January, 2001

272

Annexure I.I GOVERNMENT OF KERALA Finance (State Finance Commission Cell) Department NOTIFICATION Dated, Thiruvananthapuram, 23rd June 1999

No.33384/SFC.Al/99/Fin.

S.R.O.No.543/99.— Under clause (1) of Article 243-1 of the Constitution of India and section 186 of the Kerala Panchayt Raj Act, 1994 (13 of 94), read with clause (1) of Article 243-—Y of the Constitution of India, and section 205 of the Kerala Municipalities Act, 1994 (20 of 1994), the Governor of Kerala is pleased to constitute a Finance Commission consisting of Sri.Prabhat Patnaik, Professor, Jawaharlal Nehru University, New Delhi as the Chairman and the following two other persons as members, namely.—(1) Dr.K.M.Abraham, Secretary to Government, Finance (Resources) Department (2) Sri.S.M.Vijayanand, Secretary to Government, Local Administration Department. 2. The Chairman and other members of the Commission shall hold office for a period of one year from the date of this notification. 3. The Finance Commission shall review the financial position of the Panchayat and the Municipalities and make recommendations as to (a) the principles which should govern, (i)

the distribution between the State, Panchayats and the Municipalities of the net proceeds of the taxes, duties, tolls and fees leviable by the State, which may be divided between them, under Part IX and part IX - A of the Constitution and the allocation

between

the

Panchayat

at

all

levels

and

Municipalities of their respective shares of such proceeds; (ii)

the determination of the taxes, duties, tolls and fees which may be assigned to or appropriated by, the Panchayats and the Municipalities;

273

(iii)

the grants-in-aid to the Panchayats and the Municipalities from the Consolidated fund of the State.

(b) the measures needed to improve the financial position of the Panchayats and the Municipalities with reference to, (i)

the scope for local bodies to raise institutional finance, and suggest a framework for local self governments to take recourse to such sources along with procedures to be followed and limits, if necessary, to raising such resources;

(ii)

need for sharing the cost of maintenance of assets and institutions transferred to local self governments, and evolving criteria for it, with due regard to the fiscal position of the State Government and the local self- governments;

(iii)

steps necessary for efficient financial management with particular reference to efficiency in resource mobilization and economy in expenditure;

(iv)

settlement of claims and dues of Panchayats and Municipalities vis-a-vis Government and Governmental agencies;

(v)

procedures to be followed for smooth flow of funds to local self Governments and ensuring proper financial accountability,

Orders regarding the terms and conditions of appointment of the Chairman and other members of the Commission will be issued separately. By Order of the Governor VINOD RAI, PRINCIPAL SECRETARY(Financc)

274

Annexure 1.2 GOVERNMENT OF KERALA Finance (Administration - A) Department NOTIFICATION No.48596/Admn.Al/2000/Fin.

Dated, Thiruvananthapuram, 26'" July 2000

S.R.O.No.766/2000.— Under clause (1) of Article 243-1 of the Constitution of India and section 186 of the Kerala Panchayt Raj Act, 1994 (13 of 1994), read with clause (1) of Article 243—Y of the Constitution of India, and section 205 of the Kerala Municipalities Act, 1994 (20 of 1994), the Governor of Kerala is pleased to extend the term

of

the

Finance

Commission

constituted

as

per

Notification

No.33384/SFC.Al/99/Fin , dated 23"' June, 1999, published as S.R.O.No.543/99 in the Kerala Ga/ette Extraordinary No.1239 dated 23rd June, 1999, up to 22nd June 2001 and consequently the following amendment to the said Notification, namely:AMENDMENT In the said Notification, for the 2nd paragraph, the following paragraph shall be substituted, namely:"2. The Chairman and other members of the Commission shall hold office up to the 22nd day of June 2001."

By Order of the Governor VINOD RAI, PRINCIPAL SECRETARY (Finance)

275

Annexure 1.3 VISIT OF THE COMMISSION TO LOCAL SELF GOVERNMENT INSTITUTIONS OF EACH TYPE As part of the study the Commission visited the following LSGIs and had detailed discussions with the elected representatives and officials. Grama Panehayat, Karakulam Block Panchayat, Anchalummood District Panchayat, Kollam Punalur Municipality Corporation of Thiruvananthapuram Annexure 1.4 COMMISSION'S DISCUSSION WITH ASSOCIATIONS 22nd November,A.N, 1999

Discussion with the office bearers of Association representing Village Panchayats.

24th November, AN 1999

Meeting with Block Panchayats Presidents. Hon'ble Minister for Local Self Government Institutions was present

25th November, AN, 1999

Meeting with Chairmen.

the

Chamber

of Municipal

Annexure 1.5 COMMISSION'S DISCUSSIONS WITH SECRETARIES AND HEADS OF DEPARTMENTS 24th November, AN, 1999

Discussion of the Commission with the Chief Engineer (Building &Local Works) and Deputy Chief Engineer (Roads).

25th November, AN, 1999

Discussion of the Commission with Secretaries, LSGD Rural and Urban, Director of Municipalities and Director of Panchayats.

276

Annexure 3.1

Municipalities having Entertainment Tax and Additional Entertainment Tax Exceeding Property Tax Collection - 1998-99

SI. No.

Rupees in Thousands Property Tax Entertainment Tax 12580 16087

Name of Municipality

1

Kollam

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Perinthalmanna Thodupuzha Palakkad Alappuzha Kunnamkulam Kodungallur Guruvayoor Kottayam Chalakudy Shornur Pala Changanassery Thalassery Mavelikara Aluva Pathanamthitta Vadakara Cherthala Tirur Thrissur

2504 3822 10934 7016 3510 2098 3988 12206 2304 1952 3334 5762 7688 2386 4484 3034 7924 2315 3054 9588

Source SFC Survey 2000

277

3275 4503 19597 10405 5113 7065 4488 14297 5637 3839 6644 7621 10471 2596 6712 3388 8052 2399 8794 20144

Annexure 3.2 USE OF PENAL PROVISIONS BY ULBS - A STATUS REPORT The Kerala Municipality Act gives ample powers to the various authorities in the administrative hierarchy to regulate private behaviour in public places for common good. The Commission made a study to find out whether the Municipalities are making full use of their authority. It was found that of the 55 Municipalities and three Corporations only a very few have utilised the provisions sampled out. The details are presented below:l). Section 335: Improper disposal of carcasses, rubbish and filth. According to the existing provisions, the Municipality can charge a fine of Rs.500/- for this. The details of enforcement are given below: Name of the Municipality

Amount Collected 1998-1999 1999-2000

1. Thiruvalla

Rs. 70007-

Rs.80007-

2. Mavelikara

Rs. 46007-

Rs. 170007-

For 42 Municipalities the collection was 'Nil'. Fourteen of them did not give any reply. 2). Section 336: Allowing rubbish or filth to accumulate on premises for more than 24 hours. The Municipality can charge up to Rs.10007-.

The details of

penalties collection arc given below: Name of the Municipality 1. Thiruvalla

Amount Collected 1998-1999 1999-2000 Rs. 100007-

278

Rs.80007-

2. Mavelikara

Rs. 124007-

279

Rs. 170007-

For 42 Municipalities the collection was 'Nil'. Fourteen of them including Thiruvanathapuram and Cochin Corporations did not give any reply 3) Section 337: Allowing filth to flow in streets. The Municipality can charge up to Rs.2500/-. The details of collections are shown below: -

Name of the Municipality

1998-1999

Amount Collected 1999-2000

1. Kollum

Rs.1750/-

Rs.1000/-

2. Thiruvalla

Rs.2000/-

Rs.2000/-

3. Palai

Rs.135/-

—

4. Vadakara

Rs.500/-

—

5. Kozhikode Corporation

—

Rs.500/-

For 39 Municipalities the collection was 'Nil'. Fourteen of them did not give any reply. 4).Section 340: Throwing rubbish or filth into public places. The Municipality can charge up to Rs.2000/-. The details are given below: Name of the Municipality Amount Collected 1998-1999 999-2000 1. Kollam

Rs.10250/-

Rs.l 5250/-

2. Thiruvalla

Rs.1000/-

Rs.2000/-

3. Palai

Rs.500/-

—

4. Changanassery

Rs.250/-

—

5. Tirur

RS.1500A

Rs.750/-

6. Quilandy

Rs.500/-

--

7. Mattannur

Rs.250/-

280

8. Kannur

Rs. 1750/-

Rs. 1250/-

9. Kozhikode Corporation

Rs.500/-

Rs.3250/-

10.Palakkad

—

Rs. 1850/-

1 l.Manjeri

—

Rs.250/-

12.Vadakara

—

Rs.5750/-

The collection is 'Nil' for 32 Municipalities. Fourteen Municipalities did not give any reply. 5). Section 357: Protection of appurtenances and materials of street. The Municipality can charge up to Rs.5000/-. The collection details are as follows: Name of the Municipality

Amount Collected 1999-2000 Rs.7500/-

1 Kollam

1998-1999 Rs.5250/-

2. Thiruvalla

Rs.1000/-

Rs.1000/-

3. Pathanamthitta

Rs.610/-

Rs. 1350/-

The collection is 'Nil' for 41 Municipalities. Fourteen Municipalities did not give any reply,

6).Section 369: Erecting of structures or fixtures causing obstruction in public streets. The Municipality can charge up to Rs. 10, 0007-. The fines collected are as given below: Name of the Municipality. 1998-1999

Amoun Collected 1999-2000

1. Thiruvalla

Rs. 10007-

Rs. 1000/-

2. North Parur

Rs.185/-

Rs.170/-

281

3. Vadakara

Rs.40250/-

Rs.48275/-

4. Mattannur

Rs.250/-

5. Changanaserry

—

Rs.100/-

6 Guruvayoor

—

Rs.510/-

7. Kannur

—

Rs.3380/-

--

In respect of 37 Municipalities the collection is 'Nil'. Fourteen Municipalities did not give any reply. 7). Section 370: Deposits etc. of things on Public Street. The Municipality can charge up to Rs. 1000/-. The details of penalties collection are noted below: Name of the Municipality

1998-1999

Amount Collected 1999-2000

1 . Varkala

Rs. 1375/-

Rs.2250/-

2. Mavelikara

Rs.78000/-

Rs.90000/-

3. Kayamkulam

Rs.3250/-

Rs.7450/-

4. Changanaserry

Rs.750/-

—

5. Guruvayoor

Rs.3755/-

Rs.22225/-

6. Chalakudy

Rs.5270/-

Rs.7350/-

7. Manjeri

Rs.5495/-

Rs.8756/-

8. Tirur

Rs.6500/-

Rs.7250/-

9. Kanhangad

Rs.500/-

—

10.Kozhikode Corporation

Rs.7320/-

Rs.5735/-

1 l.Paravoor

--

Rs.380/-

12.Kalamassery

—

Rs.100/-

13. Kannur

—

Rs. 1670/-

14.Kasargod

—

Rs.4800/-

15. Palai

Rs.1065/282

—

1 6.Thiruvalla

Rs.1000/-

283

Rs.1000/-

The collection is 'Nil' in respect 28 Municipalities. Fourteen did not respond.

8). Section 41 1(1) Structures in ruinous State dangerous to passers-by or to the occupiers of neighbouring structures. The Municipality can charge up to Rs.5000/-The details are noted below: Name of the Municipality

1998-1999

Amount Collected 1999-2000

1 . Thiruvalla

Rs.12000/-

Rs.21000/-

2. Mavelikara

Rs.22000/-

Rs.34000/-

3. Guruvayoor

Rs.3987/-

—

4. Palakkad

Rs.10000/-

Rs.15000/-

5. Kottayam

—

Rs.815/-

6. Changanssery

Rs.765/-

—

The Municipalities in which the collection is 'Nil' are 38 in number. No reply was received from fourteen municipalities. 9).Section 412 (1) Tree or branch of a tree likely to fall and cause danger to persons or any structure. The Municipality can charge up to Rs.2()()0/-. The details arc noted below: Name of the Municipality

1998-1999

Amount Collected 1999-2000

1. Kollam

Rs.1500/-

Rs.2000/-

2. Thiruvalla

Rs.7000/-

Rs.7000/-

3. Irinjalakuda

Rs.300/-

—

The collection is 'Nil' in respect of 40 Municipalities. Fourteen of them did not give 284

any reply.

285

10).Section 414: Dangerous quarrying.

The Municipality can charge up to

Rs.5000/-. Out of the 58 Municipalities, Thriuvalla Municipality alone has collected an amount of Rs.4000/- during 1998-99 and Rs.5000/- during 1999-2000.

11). Seel ion 426: Untenanted building or land, which becomes a resort of idle and disorderly persons. The details are noted below: Name of the Municipality

1998-1999

Amount Collected 1999-2000

1 . Thiruvalla

Rs.1000/-

Rs.7000/-

2. Mavclikara

Rs.4500/-

Rs.l0300/-

For 42 Municipalities the collection was 'Nil'. Fourteen of them did not give any reply. 12).Section 427: Non-removal of filth or noxious or wild vegetation. The Municipality can charge up to Rs.500/-. The details of amounts collected are noted below:Name of the Municipality

1998-1999

Amount Collected 1999-2000

1, Thiruvalla

Rs.2000/-

Rs.3000/-

2. Mavclikara

Rs.31000/-

Rs.38000/-

For 42 Municipalities the collection was 'Nil'. Fourteen of them did not give any reply. 13).Section 428:

Non-securing of trees adjacent to house or well.

The Municipality can charge up to Rs.1000/-. The details are noted below: 286

Name of the Municipality

1998-1999

Amount Collected 1 999-2000

1 . Thiruvalla

Rs.1000/-

Rs.18000/-

2. Mavelikara

Rs.1500/-

Rs.4000/-

For 42 Municipalities the collection was 'Nil'. Fourteen of them did not give any reply. 14.Section 436:

Keeping of animals causing nuisance or danger.

The

Municipality can charge up to Rs.500/-. The details are given below: Name of the Municipality

1998-1999

Amoun t Collected 1999-2000

1 . Thiruvalla

Rs. 170007-

Rs.2000/-

2. Changanssery

Rs.250/-

3. Kottayam

Rs.l9300/-

Rs.8500/-

4. Kothamangalam

Rs.3630/-

Rs.5580/-

—

In respect of 40 Municipalities the collection is 'Nil' The following are Municipalities / Corporations which did not furnish the details. (!) Neyyattinkara, (2)Punalur, (3)Adoor, (4) Chegannur, (5) Cherlhala, (6)Thodupuzha, (7)AIuva, (8)Kodungallur, (9)Kunnamkulam, (10)Ponnani. (11) Piiyyannur, (12)Thalassery, (13)Thiruvananthapuram Corporation and (l4)Kochi Corporation.

287

Annexure 3.3 Details of Plan Provisions to Panchayat_Raj /Nagarapalika Institutions STATE SPONSORED SCHEMES - 2000-01 (Rs.in lakhs)

1 2 3 4 5 6

7 8 9 10 11 12 13 14

15

16 17 18 19

implementing LSGIs

Aariculture & Other Services Strengthening of Veterinary Services

490.00 10.00 Total 500.00 Expansion of cross-breeding facilities 2.00 D oultry farms & expansion of poultry production 2.00 ntensive Pig Development Schemes 1.00 Strengthening of goat farms 1.00 Special Livestock Breeding Programme 95.00 310.00 Total 405.00 Fisheries Setting up of Matsyabhavans 80.00 Social Fishery 40.00 Janakeeya Matsyaknshi 50.00 Assistance for Fish Marketing and Fish selling booths 130.00 Education and Training 50.00 Sanitation in Fishermen houses 80.00 Theerajyothi in Fishermen houses 80.00 Supply & service scheme, Alternate Ornamental Fish Culture 20.00 Total 530.00 Forestry & Wild Life Enhanced Contribution of Forest to Community Welfare Community Development and Panchavat Rai Strengthening of Block Administration Solid Waste Disposal problem in Panchayats Kudumbasree Total Irriqation and Flood Manaqement Minor Irrigation Class - II Total

288

VP Munici VP DP DP DP VP DP VP DP VP VP DP VP VP VP

50.00 100.00 215.00 350.00 665.00

VP BP VP VP

300.00 200.00 500.00

VP DP

(Rupees in Lakhs) implementing LSGIs Drainaae & Flood Manaqement 20

Contingency Plan for flood Management

500.00

DP

Welfare of 50,51 & OBC Development of Scheduled Castes 21

Boarding Grants Total

22 Tuition system in pre-metric hostels Total 23 Development Programme for the Vulnerable Groups Total

24

Better Education facilities to SC Students Total

25

Pre-prirnary Education to SC children Development of Scheduled Tribes 26 27

Total

Better Education facilities to ST Students Assistance for marriage of ST Girls Note: Provisions for Special Component Plan and Tribal Sub Plan are shown under Rural Development Sector

28 29

Urban Environmental Improvements Solid waste

289

21.01 8.00 1.00 30.01

BP Munici. Corpn.

31.63 7.62 0.75 40.00 1 1 1 .00 13.80

BP Munici. Corpn.

124.80 32.00 7.00 1.00 40.00 26.10 3.20 0.70 30.00 12.00

BP Munici.

DP Munici. Corpn. VP Munici. Corpn.

Annexure 3.4 DETAILS OF NON-PLAN SPECIFIC PROGRAMMES 2000-2001 implementing LSGIs 1159.00 DP

1 2

Renewal of Transport Ordinary Repairs of Roads and Bridges

347.70

DP

3

Special repairs to roadside bridges

579.50

DP

4

Flood damage repairs

231.79

DP

5

Mid-day meals

2500.00

VP

150.00

DP

150.00

MP

Total 6

Free supply of writing aids and text books to Primary Students

150 00 2950.00 20.00 7.00 2.50

Corpn VP MP Corpn.

Total

7

Unemployment allowance Total

8 Pension Scheme for Physically handicapped, disabled and mentally retarded personsTotal

9

Orphanage grant-in-aid Total

10

Financial help to widows towards marriage expenses of daughters

Total 11

29.50 6277.00

VP

506.00

MP

217.00

Coprn.

7000.00 1193.59 137.50 66.00

Total

Agricultural Workers' Pension Total 13

DP

17.00

MP

21.00

Corpn.

193.59 77.00

VP

22.00

MP

11.00

Corpn.

110.00

Total

3720.00 268.70 28.00 10.28

1014.20 47.60

290

VP MP Corpn. VP MP Corpn.

306.98

Production incentive to Paddy Growers

Total

VP MP Corpn.

1977.69

National old age pension scheme 14

Corpn.

155.59

3437.13 260.40 22.47

12

MP

1397.09

1675.47 208.15 94.07

Destitute pension

VP

1061.80

VP MP Corpn.

15 16

Maintenance of Village roads by Community Development Department Grant -in- aid to TVPM Corporation Towards Addl. Expenditure on lighting the Highways in the City

291

202.00

VP

12.00

Corpn.

Annexure 3.5 -2 ABSTRACT OF TOTAL RECEIPTS OF VILLAGE PANCHAVATS UNDER OWN REVENUE ITEM

1993-94 Amount PTR

1994-95 Amount PTR

Amount

1995-96 PTR

1996-97 1997-98 Amount PTR Amount PTR

1998-99 Amount PTR

1. Direct Tax

424833

36.01

508497

41.00

514801

37.15

598555

28.51 640555

26.54

725875

27.94

2. Assigned Tax

312397

26.48

290215

23.40

273655

19.75

524871

25.00 443871

1839

445450

17.15

3.Shared tax

90790

7.70

25040

2.02

216874

15.65

329101

15.68 382328

15.84

364809

14.04

4. Non Tax Revenue

206235

17.48

235087

22.99

310105

22.38

464567

22.13 605721

25.10

749003

20.83

5.General purpose grant 26785

2.27

29438

2.37

23475

206

28714

1.37

0

0.00

0

0.00

6.Specific Purpose grant 118370

10.03

101567

8.19

41436

2-99

153001

7.29

175162

7.26

15200

0-59

99.98

1239845

99.98

1385347

93.12

2300337 88.55

Total

1179411

Amount - In Rupees

9998

2098810 99.97 2247636

PTR Percentage to Total Revenue Annexure 3.5 - 3

PERCENTAGE SHARE OF TAXES TO DIRECT TAXES ( VILLAGE PANCHAYATS) ITEM i. Property Tax ii. Prolession tax iii. Ent & Add. Ent. Tax iv. Advertisement Tax v. Service tax vi. Show tax & surcharge on vii. Land conversion viii. Surcharges ix Land cess Total

Amount - In Rupees

1993-94 Amount PDT

1994-95 Amount PDT

Amount PDT

1996-97 Amount PDT

1997-98 Amount PDT

1998-99 Amount PDT

222671

265503 148522 73027 810 14368 3376 418 622 1850 508497

256590 159679 79458 395 12647 3142 262 543 2085 514801

293864 190383 89976 876 14428 4653 80 555 3741 598555

296160 220324 99585 1960 16546 3409 155 559 1857 640555

344370 259089 97114 939 18192 3832 64 530 1746 725875

65186 1134 10987 2661 695 541 2089 424833

52.41 27.98 15.34 0.27 259 0.63 0.16 0.13 0.49 100

52.21 29.21 14.36 0.16 2.83 0.66 0.08 0.12 0.36 100

49.84 31.02 15.43 0.03 2.46 0-61 0-05 0.11 0.41 100

49.10 31.81 15.03 0.15 2.41 0.78 0.01 009 0.63 100

46.23 34.40 15.55 0.31 2.58 0.53 0.02 0.09 0.29 100

47.44 35.69 13-38 0.13 2.51 0.53 0.01 0.07 0.24 100

PDT -Percentage of direct tax

PERCENTAGE INCREASE OF TAXES OVER PREVIOUS YEAR (VILLAGE PANCHAYATS)

Annexure 3.5 -4 ITEM 1993-94 i.Property Tax ii.Profession tax iii.Ent: & Add' Ent. iv.Advertisement Tax v.Service tax vi.Show tax & surcharge on ST vii. Land conversion viii.Surcharges ix.Land cess Total

1994-95

1995-96 97

Amount 222671 118869 65186 1134 10987 2661

Amount 265503 148522 73027 810 14368 3376

% 19.24 24.95 12.03

695 541 2089 424833

418 622 1850 509497

-39.85 262 15.02 543 2085 1969 514801

30.77 26.87

Amount 256590 159679 79458 395 12647 3142

% Over 93-94

19961997-96

1998-99

% -3.36 7.51 8.81 -51.29 -11.98 -6-95

Amount 293864 190383 89976 876 14428 4653

% 14.53 19.23 13.24 122.05 14.09 48.10

Amount 296160 220324 99585 1960 16546 3409

% 0.78 15.73 10.68 12370 14.68 -26.74

Amount 344370 259089 97114 939 18192 3832

% 16.28 1759 -2.48 -52.11 9.94 12.42

-37.31 -12.68 12.71 1 .24

80 555 3741 598555

-69.65 2.17 79.39 16.27

155 559 1857 640555

94.68 0.78 -50.36 7.02

64 530 1746 725875

-58.39 -90.73 -2,02 -5.98 -16,44 13.32 70.86

294

54.65 11.96 48.98 -17.20 65.58 44.01

Annexure 3.5-5 PERCENTAGE INCREASE OF OWN REVENUE OVER PREVIOUS YEARS (VILLAGE PANCHAYATS) ITEM

1993-94 1994-95 Amount Amount %

1 Direct Tax 2. Assigned Tax 3. Shared tax

42483 508497 312397 290215 90790 25040

19.69 514801 -7.10 273655 -72.42 216874

1.24 -5.71 766.10

598555 524871 329101

16.27 640555 91.80 443871 51.75 382328

7.02 725875 -15.43 445450 16.17 364809

1998-99 % % Over 93-94 13.32 70.80 0.36 42.59 4.58 301.82

4. Non Tax Revenue

20623

285087

38.23

310105

8.78

46456

49.81 605721

30.38 749003

23.65

29438

9.91

28475

-3.27

28714

0.84

-14.20 41436

-5920

153001

269.25 175162

14.48 15200

2098810

51.50 2247636

7.09

5. General Purpose grant 26785

6. SpecificPurpose grant 118370 101567 Total

1179411 1239845 5.12

1995-96 Amount %

1385347 11.74

1996-97 Amount %

1997-98 Amount %

0

Amount

263.18

0 -91.32 -87.16

2300337 234

95.04

SHARE OF DIRECT TAXES IN TOTAL OWN REVENUE (VILLAGE PANCHAYATS) ITEM

1993-94 Amount (1) Properly Tax 222671 (ii) Profession tax 118869 (iii) Ent: & Add Enl: Tax 65186 (iv| Advertisement Tax 1134 (v) Service tax 10987 (vi ) Show tax 8 surcharge 2661 (vii) Land conversion 695 (viii) Surcharges 541 (ix) Land cess 1089 Total (Direct taxes) 425 Total 1179411

Amount - In Rupees

193-1-95 Amount PTO 265503 21.41 148522 11.98 73027 5.89 810 0.07 14368 1.16 3376 0.27 418 0.03 622 0.05 1850 0.15 508 0.04 100.00 1239845 100.00

PTOR 18.88 10.08 5.53 0.10 0.93 0.23 0.06 0.05 0.18 0.04

1995-96 Amount PTOR 256590 18.52 159679 11.53 79458 5.74 395 0.03 12647 0.91 0.23 262 0.02 543 0.04 2085 0.15 515 0.04 1385347 100.00

1996-97 1997-98 Amount PTOR Amount 293864 14.00 296160 190383 9.07 220324 89976 4.29 99585 876 0.04 1960 14428 0.69 16546 4653 0.22 3409 80 0.00 155 555 0.03 559 3741 0.18 1857 599 0.03 641 20988110 100.00 2247636

PTOR 13.18 9.80 4.43 0.09 0.74 0.15 0.01 0.02 0.08 0.03 100.00

1998-99 Amount 344370 259089 97114 939 18192 3832 64 530 1746 726 2300337

PTOR 14.97 11.26 4.22 0.04 0.79 0.17 0.00 0.02 0.08 0.03 100.00

PTOR - Percentage of Total Own Revenue

SHARE OF ITEMS UNDER OWN REVENUE (VILLAGE PANCHAYATS) ITEM 1. Direct Tax

1993-94 Amount POR 424833 36.02

2. Assigned Tax 3. Shared tax 4. Non Tax Revenue 5. General Purpose grant 6. Specitic Purpose grant Total

312397 90790 206235 26785 118370 1179411

2649 7.70 17.49 2.27 10.04 100.00

1994-95 1995-96 1996-97 Amount POR Amount POR Amount POR 508497 41.01 514801 37 .16 598555 28.52 290215 23.41 25040 2.02 285087 22.99 29438 2.37 101567 8.19 1239845 100.00

273655 216874 310105 28475 41436 1385347

19.75 15.65 22.38 2.06 299 100.00

Amount - In Rupees POR - Percentage on Own Revenue

295

524871 329101 464567 28714 153001 2098810

25.01 15.68 22.13 1.37 7.29 100.00

1997-98 Amount POR 640555 28.50

1998-99 Amount POR 725875 31.56

443871 382328 605721 0 175162 2247636

445450 364809 749003 0 15200 2300337

19.75 17.01 26.95 0.00 7.79 100.00

19.36 15.86 32.56 0.00 0.66 100.00

Annexure 3.5 -8 TOTAL EXPENDITURE OF VILLAGE PANCHAYATS - YEAR WISE (Excluding expenditure under People's Plan Campaign) ITEM 1.GENERAL ACCOUNT 1.Management & Collection i.Salary / Honararium etc. of Office bearers ii.Establishment of cost of secretaries & staff iii. Other Office expense 2. Education & Culture i. Salary and other expenses ii.Other charges 3. Public Works i. Establishment Cost ii. Maintanance 4. Irrigation i.Maintanance 5.Core Function (a).Sanitation & drainage i.Establishment Charge ii.Maintanance (b) Water Supply i.Maintanance ii.Other petty works (c) Street Lighting i.Current Charge ii.Other Charge 6.Medical Service i.Establishment Charge ii. Operational Cost iii. Maintanance Charge iii. Other Charges 7. Ferry Service i. Establishment ii. Other Charges 8. Remunarative Enterprises i. Establishment Charge ii.Maintanance` iii.Other Charges 9. Social welfare i.Family welfare etc ii. Housing iii. Other Charges 10. Town Planning i. Establishment Charges ii. Maintanance iii.Other Charges 11.Land Development i. Land Development ii. Other Charges II CAPITAL ACCOUNT 1.Management 2. Public Works 3.Remurative Asset

1993-94 AM 870709

PTE

1994-95 AM 983411

PTE

1995-96 AM 1070639

PTE

1996-97 AM 1461619

PTE

1997-98 AM 1837705

PTE

1998-99 AM 1880212

PTE

32442

2.52

31216

2.11

57160

3.55

108938

5.16

109589

3.78

163645

6.01

329140

25.59

365379

24.73

408694

25.40

462937

21.91

513570

17.72

604873

22.21

46793

3.64

73448

4.97

63586

3.95

84656

4.01

112838

3.89

132814

4.88

6539

0.51

7113

0.48

8302

0.52

10773

0.51

12004

0.41

14307

0.53

21924

1.70

23151

1.57

24254

1.51

26252

1.24

36591

1.26

36540

1.34

6914 217762

0.54 16.93

7617 248689

0.52 16.83

8648 262953

0.54 16.34

9843 388736

0.47 18.40

13471 496238

0.46 17.12

17493 381123

0.64 13.99

8904

0.69

10518

0.71

8404

0.52

12800

0.61

14477

0.50

10306

0.38

20364 7260

1.58 0.56

21061 7095

1.43 0.48

27266 7905

1.69 0.49

35521 16617

1.68 0.79

37541 17515

1.30 0.60

35775 16737

1.31 0.61

13451 4201

1.05 0.33

19627 4413

1.33 0.30

25695 5216

1.60 0.32

64588 9346

3.06 0.44

68397 10962

2.36 0.38

55819 8953

2.05 0.33

77290 2769

6.01 0.22

79930 2591

5.41 0.18

80874 3326

5.03 0.21

92422 6558

4.37 0.31

109083 10657

3.76 0.37

106777 8708

3.92 0.32

766 316 733 1865

0.06 0.02 0.06 0.14

798 207 1187 1649

0.05 0.01 0.08 0.11

798 504 1041 2320

0.05 0.03 0.06 0.14

815 502 1155 3711

0.04 0.02 0.05 0.18

889 802 1063 4802

0.03 0.03 0.04 0.17

1039 1192 1084 8319

0.04 0.04 0.04 0.31

2079 1140

0.16 0.09

2150 1007

0.15 0.07

2627 1115

0.16 0.07

3357 1650

0.16 0.08

3820 2768

0.13 0.10

3940 11562

0.14 0.42

159

0.01

163

0.01

415

0.03

2062

0.10

1572

0.05

1973

0.07

502 1422

0.04 0.11

584 835

0.04 0.06

50 958

0.00 0.06

366 939

0.02 0.04

1137 2562

0.04 0.09

1782 13840

0.07 0.51

4918 22240 5168

0.38 1.73 0.40

4644 28941 5989

0.31 1.96 0.41

4340 28912 6685

0.27 1.80 0.42

11641 40969 12884

0.55 1.94 0.61

12488 76356 29660

0.43 2.63 0.93

13377 39168 26375

0.49 1.44 0.97

184

0.01

289

0.02

41

0.03

2062

0.10

3820

0.13

3940

0.14

1406 1658

0.11 0.13

1155 1509

0.08 0.10

1851 1319

0.12 0.08

213 1466

0.01 0.07

2349 3518

0.08 0.12

609 2762

0.02 0.10

1324 29069 345501

0.10 2.26 26.86

847 29611 396272

0.16 2.00 26.82

1877 23499 431665

0.12 1.46 26.83

2103 47618 558158

0.10 2.25 26.41

6686 26718 854837

0.23 4.37 29.50

997 158027 522240

0.04 5.80 19.17

36913 262142 7042

2.87 20.8 0.55

43267 296495 8463

2.93 20.05 0.5

40343 327224 11486

2.51 20..34 0.71

42441 437309 13694

2.01 20.70 0.65

63918 703454 14924

2.21 24.57 0.51

71183 366445 12468

2.61 13.45 0.46

296

4. Creation of asssets to govt dept 5. Others 6. Loan refund III. DEBT HEADS 1. Refund of Deposit i Shop Rooms ii. Buildings iii. Others 2. Library Cess 3. Surcharge to block/district 4. Sales tac etc 5. Others Total

1834

0.14

1315

0.09

2456

0.15

5940

0.28

7834

.027

9079

0.33

4079` 33491 70172

0.32 2.60 5045

8446 38586 97624

0.57 2.61 6.61

6551 43605 106673

0.41 2.71 6.63

9575 49198 93299

0.45 2.33 4.42

11448 53260 205624

0.40 1.84 7.09

13475 49593 321382

0.49 1.82 11.80

39951 1979 6742 2428 69

3.07 0.15 0.52 0.19 0.01

40129 1391 8191 2868 113

2.72 0.09 0.55 0.19 0.1

2176 1639 9111 2260 33

2.62 0.10 0.57 0.14 0.00

51814 1972 9526 8975 123

2.45 0.09 0.45 0.42 0.01

61987 1572 18807 11348 172

2.14 0.05 0.65 0.39 0.01

65084 4128 33794 8258 1185

2.39 0.15 1.24 0.30 0.04

6985 12417 1286376

0.54 0.97 100.00

6634 38299 1477307

0.45 2.5* 100.00

6001 75452 1608975

.0.37 2.82 100.00

7805 13085 2113076

0.37 0.62 100.00

9951 101788 2898166

0.34 3.51 100.00

11681 197253 2723834

0.43 7.24 100.00

NB:- date of 976 Village Panchayats AM:- Rupees in Thousand PTE:- Percentage to Total Expenditure PERCAPITA EXPENDITURE OF VILLAGE PANCHAYATS-YEAR WISE (Excluding expenditure under People’s Plan Campaign) Annexure 3.5-9 ITEM

1993-94

I.GENERAL ACCOUNT

AM

1. Management & Collection (i) Salary /Honararium etc of Office beares (ii) Establishment of cost of secretaries & staff (iii) Other office expenses

1994-95 PC

AM

1995-96 PC

AM

870703 33.97

983411

32442 1.27

31216

1.20

329140 12.84

365379

14.03

46793 1.83

73448

2.82

6539 0.26

7113

21924 0.86

23151

1996-97 PC

AM

37.77 1070638 40.47 1461619 57160

1997-98 PC

AM

1998-99 PC

54.36 1837705 67.22

2.15

108938

4.05 109589

408694 15.45

4.01

AM

PC

1880212 67.63 163645

5.89

462937

17.22 513570

18.79

604873

21.76

63586

2.4

84656

3.15 112838

4.13

132814

4.78

0.27

8302

0.31

10773

0.4 12004

0.44

14307

0.51

0.89

24254

0.92

26252

0.98 36591

1.34

36540

1.31

2. Education & Culture (i) Salary and other expenses (ii) Other Charges 3. Public Works (i) Establishment Cost

7617

0.29

8648

0.66

9843

0.37 13471

0.49

17493

0.63

8.5

248389

9.55

262953

9.94

388736

14.46 496238

18.15

381123

13.71

8904 0.35

10518

0.4

8408

0.32

12800

0.48 14477

0.53

10306

0.37

20364 0.79

21061

0.81

27266

1.03

35521

1.32 37541

1.37

35775

1.29

7260 0.28

7095

0.27

7905

0.3

16617

0.62 17515

0.64

16737

0.6

13451 0.52

19627

0.75

25695

0.97

64588

2.4 68397

2.5

55819

2.01

4201 0.16

4413

0.17

52156

0.2

9346

0.35 10962

0.4

8953

0.32

(i) Current Charge

77290 3.02

79930

3.04

8074

3.06

92422

3.44 109083

3.99

106777

3.84

(ii) Other Charges

2769 0.11

2591

0.1

3326

0.13

6558

0.24 10657

0.39

8708

0.31

(i) Establishment Charges

766 0.03

798

0.03

798

0.03

815

0.03 889

0.03

1039

0.04

(ii) Operational Cost

316 0.01

207

0.01

504

0.02

502

0.02 802

0.03

1192

0.04

(iii) Maintanace Charge

733 0.03

1187

0.05

1041

0.04

1155

0.04 1063

0.04

1084

0.04

1865 0.07

1649

0.06

2320

0.09

3711

0.14 4802

0.18

8319

0.3

(i) Establishment Charges

2079 0.08

2150

0.08

2627

0.1

3357

0.12 3820

0.14

3940

0.14

(ii) Other Charges

1140 0.04

1007

0.04

1115

0.04

1650

0.13 2768

0.1

11562

0.42

(ii) Maintanance

6914 0.27 217762

4. Irrigation (i) Maintanance 5. Core Function (a) Sanitation & drainage (i) Establishment Charges (ii) Maintanance (b) Water Supply (i) Maintanance (ii) Other petty works (c) Street lighthing

6. Medical Service

(iv) Other Charges 7. Ferry Service

8. Remunarative Enterprises

297

(i) Establishment Charges

159 0.01

163

0.01

415

0.02

2062

0.08 1572

0.06

1973

0.07

(ii) Maintanance

502 0.02

584

0.02

50

0.00

366

0.01 1137

0.04

1782

0.06

1422 0.06

835

0.03

958

0.04

939

0.03 2562

0.09

13840

0.5

(iii) Other Charges 9. Social Welfare (i) Family Welfare etc (ii) Housing (iii) Other Charges

4918 0.19

4644

0.18

4340

0.16

11641

0.43 12488

0.46

13377

0.48

22240 0.87

28941

1.11

28915

1.09

40969

1.52 76356

2.79

39168

1.41

5989

0.23

6685

0.25

12885

0.48 26990

0.99

26375

0.95

5168

0.2

10. Town Planning (i) Establishment Charges

184 0.01

289

0.01

41

0.11

183

0.04 254

0.01

296

0.01

(ii) Maintanance

1406 0.05

1155

0.04

1851

0.07

213

0.04 2349

0.09

609

0.02

(iii) Other Charges

1658 0.06

1509

0.06

1319

0.05

1466

0.05 3518

0.13

2762

0.1

11. Land Development (i) Land development (ii) Other cahrges II. CAPITAL ACCOUNT

1324 0.05

847

0.03

1877

0.07

2103

0.08 6686

0.24

997

0.04

29069 1.13

29611

1.14

23499

0.89

47618

1.77 126718

4.64

158027

5.68

431665 16.32

18.78

345501 13.48

396272

15.22

1. Management

36913 1.44

43267

1.66

2. Public Works

262142 10.23

296195

11.38

3. Remunarative Assets 4. Creation of assets to govt dept

7042 0.27

8463

0.33

11486

1834 0.07

1315

0.05

5. Others

4079 0.16

8446

0.32

70172 2.74

97624

39551 1.54 1979 0.28

6. Loan Refund

558158

20.76 854837

31.27

522240

1.52

42441

1.58 36918

2.34

71183

2.56

327224 12.37

437309

16.26 703454

25.73

366442

13.18

0.43

13694

0.51 14925

0.55

12468

0.45

2546

0.09

5940

0.22 7834

0.29

90790

0.33

6551

0.25

9575

0.36 11448

0.472

13475

0.48

3.75

106673

4.03

93299

3.47 205624

7.52

321382

11.56

40129

1.54

42176

159

51814

1.93 61987

2.27

65084

2.34

1391

0.05

1639

0.06

1972

0.07 1475

0.06

4128

0.15

40343

III. DEBT AHEADS 1 Refund of Deposits (i) Shop rooms (ii) Buildings (iii) Others

6742 0.26

8191

0.31

9111 0.347

9526

0.35 18807

0.69

33794

1.22

2. Librarary cess

2428 0.29

2868

0.11

2260

0.09

8975

0.33 11348

0.42

8258

0.3

3. Surcharge to block /district

69 0.00

4.Sales Tax etc 5. Others TOTAL

113

0.00

33

0.00

123

0 172

0.01

1185

0.04

6985 0.00

6634

0.00

6001

0.00

7805

0 9951

0.00

11681

0.00

12417 0.00

38299

0.00

45450

0.00

13085

0 101788

0.00

197253

0.01

1286376 50.19 1477307

56.74 1608975 60.82 2113076

78.58 2898166 106.02 2723834 97.98

NB :- data 976 Village Panchayat Am:- Rupees in Thousand PC :- Percapita

Annexure 3.6-1

TOTAL RECEIPTS OF MUNICIPALITIES 1993-94 TO 1998-99 1993-94 Item

AM

1994-95 PTR

AM

1995-96 PTR

AM

1996-97 PTR

1997-98

AM

PTR

AM

1998-99 PTR

AM

PTR

I. TAX REVENUE

385328

43.45

432978

44.97

539012

48.1

599103

33.72

624836

40.42

680383

41.62

A. DIRECT TAX

308939

34.84

335818

34.88

381514

34.04

433350

24.39

479749

31.03

503622

30.97

(i) Propety & serivce Tax

134679

15.19

144739

15.03

158677

14.16

182536

10.27

202952

13.13

223292

13.66

22663

2.56

27326

2.84

29704

2.65

36828

2.07

39588

2.56

47704

2.92

1854

0.21

2002

0.21

2499

0.22

2922

0.16

3034

0.2

3641

0.22 14.09

(ii) Profession tax (iii) Advertisement Tax (iv) Ent& Add Ent.Tax

148690

16.77

160865

16.71

189353

16.9

209251

11.78

233000

15.07

230395

(v) Show Tax & SC on ST

822

0.09

837

0.09

961

0.09

962

0.05

975

0.06

915

0.06

(vi) Land Conversion

215

0.02

49

0.01

293

0.03

850

0.05

200

0.01

373

0.02

0

0

0

1

0

0

2

0

6.25

101774

5.73

6.24

100452

6.15

(vii)Timber Tax (viii) Tax on animals & vehicles

0.00

0

16

0

0

27

0

47789

5.39

9.3

69998

B.ASSIGNED TAX (i) Duty on transfer of property

0

. 89498

96439

C. SHARED TAX Vahicle Tax Compensation II. NON-TAX REVENUE

28600

3.23

7662

0.8

87500

7.81

63979

3.6

48648

3.15

73609

4.5

186008

20.98

190354

19.77

223789

19.97

270592

15.23

341315

22.08

376156

23.01

298

A.LICENCE FEES (i) D&O Licence

16486

1.86

20884

2.17

25049

2.24

29167

1.64

30401

1.97

37579

2.3

5517

0.62

5805

0.6

6224

0.56

6610

0.37

9183

0.59

12222

0.75

(ii) P F A

309

0.03

363

0.04

355

0.03

347

0.02

386

0.02

374

0.02

(iii) Cinematograph

102

0.01

113

0.01

955

0.01

98

0.01

100

0.01

136

0.01

(iv) Place of public resort

71

0.01

100

0.01

93

0.01

126

0.01

134

0.01

110

0.01

(v) Private slaughter house

20

0

200

0.02

79

0.01

745

0.04

189

0.01

590

0.04

(vi)Private market

28

0

29

0

25

0

25

0

434

0.03

779

0.05

(vii) Ocupation of purampoke

248

0.03

695

0.07

472

0.04

475

0.03

833

0.05

470

0.03

(viii) Cart stand/halting places

508

0.06

811

0.08

979

0.09

470

0.03

783

0.05

799

0.05 0.04

(ix) Dogs & Pigs (x) Building permits B. RAGISTRATION FEES (i) Private hospital

7

0

39

0

1

0

3

0

10

0

724

9676

1.09

12729

1.32

16725

1.49

20268

1.14

18349

1.19

21375

1.31

286

0.03

262

0.03

417

0.04

390

0.02

620

0.04

612

0.04

2

0

0

4

0

5

0

5

0

29

0

54

(ii) Private paramedical Intn

0

4

0

4

0

6

0

29

0

46

0

(iii) Tutorial & parallel colleges

0

0

3

0

(iv) Contractors regn (v) Births & death regn (vi) Arch:/ engineers regn

0

0

0

149

0.02

90

0.01

145

0.01

101

0.01

112

0.01

184

0.01

84

0.01

86

0.01

97

0.01

112

0.01

120

0.01

200

0.01 0.01

51

0.01

78

0.01

166

0.01

166

0.01

330

0.02

125

C.GATE FEES

24160

2.72

28505

2.96

32316

2.88

47554

2.68

42008

2.72

46517

2.85

(i) Private market

10361

1.17

11180

1.16

13638

1.22

14856

0.84

16448

1.06

16544

1.01

(ii) Public slaughter houses

1298

0.15

1672

0.17

1645

0.15

1865

0.1

1787

0.12

2092

0.13

(iii) Cart stand bus stand

8267

0.93

9712

0.01

10035

0.9

12357

0.7

13320

0.86

15362

0.94

(iv) Comfort station

1307

0.15

2212

0.23

2635

0.24

3333

0.19

3645

0.24

3960

0.24

(v) Cloak room

165

0.93

4

0

0

63

0

93

0.01

163

0.01

(vi) River sand

2762

0.15

3725

0.39

4363

0.39

15080

0.85

6717

0.43

8396

0.51

82610

0.02

82756

8.6

94165

8.4

107035

6.02

126105

8.16

140513

8.6

118

0.31

204

0.02

135

0.01

230

0.01

163

0.01

211

0.01

D.USER CHARGES (i) Search fee (ii) Extract fee

282

8.19

280

0.03

291

0.03

333

0.02

361

0.02

416

0.03

4522

0.01

4998

0.52

5540

0.49

6718

0.38

8249

0.53

9294

0.57

67587

0.03

76172

7.91

87073

7.77

97466

5.49

113828

7.36

125519

7.68

91

0.51

1053

0.11

1126

0.1

2288

0.13

3504

0.23

5073

0.31

(vi) Connetion Charge

10

7.62

49

0.01

E.OTHER SOURCES

72466

0.01

57947

6.02

71842

6.41

86446

4.86

142181

9.2

150735

9.23

(iii) Service cahrges (iv) Municipal property (v) Water charge

(i) Conrtib & donation (ii) Endowment & Interest on End. (iii) Fine & Penalitite (iv) Cattle Pound

(vii) Lease of land

0

0

0

74

0

0.46

953

0.09

6102

0.34

31843

2.06

46136

2.82

13068

8.17

4406

0.8

5611

0.5

7936

0.45

7159

0.46

4691

0.29

3466

0.01

7726

0.02

7557

0.67

5163

0.29

7724

0.5

9099

0.56

83

1.47

145

0

184

0.03

129

0.01

100

0.01

129

0.01

0

159

0.01

74

0

3

0

0.04

201

0.01

178

0.01

80

0

(v) Fishing (vi) Usufructs

0

0.39 434

0.04

0.01

425

0.25

424

2243

0

2426

0.03

3378

0.3

4539

0.26

4338

0.28

5933

0.36

(viii) Library

229

0.05

244

0.01

377

0.03

339

0.02

341

0.02

338

0.02

(ix) Ferry service

126

0.25

91

4.41

77

0.01

100

0.01

133

0.01

119 .0.01

(x) Others III. GRANT IN AID*

52743

0.03

42484

9.38

53281

4.75

61778

3.48

90291

5.84

84407

5.61

105014

0.01

90322

0.74

121428

10.83

676410

38.07

274702

17.77

206479

12.63 0.39

(i) General purpose grant

7138

5.95

7131

0.75

7131

0.64

6449

0.36

6442

0.42

6451

(ii) Specific purpose grant

6585

11.84

7175

1.14

6453

0.58

7827

0.44

10985

0.71

9880

0.6

(iii) Other grants

16243

0.8

10971

2.15

7483

0.67

20757

1.17

19440

1.26

17702

1.08

(iv) State sponsered schemes

26006

0.74

20661

4.61

30386

2.71

547804

30.83

58650

3.79

21041

1.29

(v) Centrally sponsered schemes

49042

1.83

44384

9.79

69975

6.24

93573

5.27

179185

11.59

151405

9.26

IV. LOANS

88955

2.93

94301

2.17

65144

5.81

49877

2.81

72845

4.71

94255

5.77

(i) Government

27825

5.53

20865

7.62

36722

3.28

29015

1.63

33182

2.15

7494

0.46

(ii) Others

61130

10.03

73406

16.08

28422

2.54

20865

1.17

39663

2.57

86761

5.31

V. DEBT

120940

3.14

154832

9.15

171788

15.33

181804

10.22

233413

15.1

278121

17.01

(i) Deposit

66177

7.46

88122

1.99

94556

8.44

89276

5.02

119039

7.7

161974

9.91

(ii) Advance

17017

1.92

19121

0.15

17573

1.57

17102

0.96

21825

1.41

24266

1.48

1264

0.14

1453

3.14

5929

0.53

7485

0.42

8651

0.56

9830

0.6

(i) LIbrary Cess

299

(ii) Provident fund/ pension fund

25774

2.91

30248

1.65

38431

3.43

45809

2.58

52583

3.4

61336

375

(iii) Sales tax/Income tax etc

10708

1.21

15888

100

15299

1.37

21932

123

31315

2.03

20715

1.27

100 1635394

100

TOTAL AM:-Amount

886245 PTR:- Percentage to total revenue

100 962787 1121161 100 1777586 * Excluding gratn in aid for people’s campaign

300

100 1547111

Annexure3.6- 2 ABSTRACT OF TOTAL RECEIPTS OF MUNICIPALITIES UNDER OWN REVENUE 1393-94

Itern

1994-95

1995-96

1996-97

1997-98

1998-99

AM PTR AM PTR AM PTR AM PTR AM PTR AM 308939 34.84 335818 34.88 381514 34.04 433350 24.39 479749 31.03 506322

1. DirectTax

PTR 30.97

2. Assigned Tax

47789

5.39

89498

9.30

59998

6.25 101744

5.73

96439

6.24 100452

6.15

3. Shared Tax

29600

3.23

7662

0.80

87500

7.81

63979

3.60

48648

3.15 73609

4.50

4. Licence Fees 5. Registration Fees

16486 286

1.86 0.03

20884 262

2.17 0.03

25043 417

2.24 0.04

29167 390

1.64 0.02

30401 620

1.97 37579 0.04 612

2.30 0.04

6. Gate Fees

24160

2.72

28505

2.96

32316

2.88

47554

2.68

42008

2.72 46517

2.85

7. User Charges

72610

8.19

82756

8.60

94165

8.40 107035

6.02 126105

8.16 140513

8.60

8. Other Sources 9. General Purpose Grant

72466 7133

8.17 0.80

57946.5 7131

602 0.74

71842 7131

6.41 0.64

86446 6449

4.86 142181 0.36 6442

9.20 10935 0.42 6451

9.23 0.39

6585

0.74

7175

0.75

5453

0.58

7827

044

0.71 9880

0.60

585059

66.02

637638

66.23

776385

10. Specific Purpose Grant Total

AM:- Amount in Rs. Thousand

G9.25 883971

10985

45.73 983578

63.58 1072870

1997-98

1998-99

65.60

PTR - Percentaae to total revenue

Annexure3.6-3 PERCENTAGE SHARE OF TAXES TO DIRECT TAX (MUNICIPALITIES) 1993-94

Item

1994-95

Amount PDT

1995-96

Amount PDT

1996-97

Amount PDT

Amount PDT

Amount P DT

Amount

A. DIRECT TAX (I) Property & service Tax

134679

(M) Prolesslon tax

182536 42.12

202952

42.30

223292 44 .10

7.34

27326

8.14 29704

7.79

36828 8.50

39588

8.25

47704 9.42

1854

0.60

2002

0.60 2499

0.66

2922 0 67

3034

0.63

3641 0.72

233000

48.57

230395 45.50

975 200

0.20 0.04

915 0.18 373 0.07

148690

(v) Show tax & S C on ST (vi) Land conversion

48.13 160865

822 215

0.27 0.07

(vii) Timbertax (viii) Tax on animals & vehicles

16

Total

43,10 158677 41 59

22663

(IN) Advertisement Tax (iv) Ent: 8 Add: Ent: Tax

43.59 144739

837 49

47.90 189353 49 63

209251 46.29

0.25 961 0,01 293

0.25 0.08

962 0 22 850 0.20

0.00

0.00

0.00

0.00

0 00

0.00

0.01

0,00 27

0.01

1 0.00

0.00

2 0.00

308939 100.00 335818 100.00 381514 100.00

433350

100.00 479749 100.00

506322 100.00

AM -Amount In Rs.Thousand Anncxure 3.6-4 PERCENTAGE INCREASE OF TAXES OVER PREVIOUS YEAR (MUNICIPLITIES) Items (I) Property & service Tax (II) Profession tax (III) Advertisement Tax

199394

199495

%

%

134679

144739

7.47

158677

22663

27326

20.58

29704

7.98

2499

1854

2002

148690

160865

(vi)l Show tax & surcharge on ST

822

837

(vi) Land conversion

215

49

(iv) Ent: & Add: Ent: Tax

199596

199697

%

199798

%

199899

%

% Over 93-94

9.63 182536

15.04 202952 11.18

223292

C.70 36828

23.98

39588 7.49

47704

20.50 110.49

3034 3.83

3641

20.01

230395

-1.12 54.95

915

-6.15 11.31 96.50 73.49

24.83 2922

16.93

8.19 189353

17.71 209251

10.51 233000 11.35

1.82

961

14.81 962

0.10

293

497.96 850

190.10

200 -76.47 373

-96.30

-100.00

975 1.35

10.022 65.80 96.39

(vii)Timbertax (viii)Tax on animals & vehlcles Total

16 308939

-100.00 335818

27

8. 70 381514

1 13.61

301

433350

13.59 479749

2

10.71 506322

-87.50 5.54

63.89

Annexure 3.6-5 PERCENTAGE INCREASE OF OWN REVENUE OVER PREVIOUS YEAR (MUNICIPALITIES) Item 1.Direct Tax

1993- 199494 95 308939 335818

%

1995% 96 8.70 38154 13.61

2. Assigned Tax

47789

89498

87.28

3. Shared Tax

28600

7662

-73.21

4. Licence Fee

16486

20884

286

262

6. Gate Fees

24160

28505

7. User Charges

72610

8. Other Sources

Total

199798 13.59 479749

%

119899 10.71 506322

%

°° over 9394 5.54 63.89

101774

45.40

96439

63979

-26.88

48648

26.68

25049 19.94

29167

16.44

-8 39

417 59.16

390

-6.47

17.98

32316 13.37

47554

47.15

82756

13.97

94165 13.79

107035

72466 57946. 7138 71315

-20.04

71842 23.98

86446

-0.10

7131 0.00

6449

-9.56

6442

-0.11

6451

0.14

-9.62

6453 -10.06

7827

21.29

10985

40.35

9880

- 0.06

50.04

11.27 1072870

9.08

83.38

1997-96

1998-99

11. Specific Purpose Grant

6585

7175

69998 -21.79

%

87500 1042.00

5. Registration Fee

9. General Purpose Grant

199697 433350

8.96

585059 637638

89S 776385 21.76

883971

4.16

10.20

-23.96

73609

51 31

157.37

30401

4.23

37579

23,61

127.94

620

58.97

612

-1.29

113.99

42008

-11.66

46517

10.73

92.54

13.67 126105

17. 82 140513

1 43

93.52

20.33 142181

64.47 150935

6. 6

108.28

13.86 983S78

-5.24 100452

Annexure 3.6- 6 SHARE OF DIRECT TAXES IN TOTAL OWN REVENUE (MUNICIPALITIES) Items

1993-94 AM

PTOR

1994-95 AM

1995-96

PTOR AM

1996-97

AM

PTOR

1.Property & Service

134679 2302

144739 22.70

158677 20.44

PTOR AM

182536 20.65

PTOR AM

202952 20.63

PTOR

223292

20.81

2.Professional Tax

22663

3.87

27326

4.29

29704

3.63

36828

4.17

39588

4.02

47704

4.45

3.Advertisement Tax

1854

032

2002

0.31

2499

0.32

2922

0.33

3034

0.31

3641

0.34

4. Ent & Add.Ent tax

148690 25.41

160865 25.23

189353 24.39

209251 23.67

233000 23.69

230395

21.47

5. Show Tac & SC on ST 822

0.14

837

0.13

961

0.12

962

0.11

975

0 10

915

0.09

6. Land Conservation

004

49

001

293

0.04

850

0.10

200

0,02

373

0.03

215

7. Timber Tax

000

000

0.00

000

0.00 27

0.00

0 00

0.00

0.00

0.00

16

9.(Direct Taxes)

308939 5280

335818 52.67

Own Revenue

535053 10000

63763? 100.0C 776385 100.0C 883971 100.0C 983570 100.00 1072870 100.00

381514 49.14

1

0.00

8. Tax on Animals & Vehicles

4333SC 4902

479749 48.78

2

0,00

506322

47.19

AM:- Amount in Rs Thousand PTOR:- Percantege of Total Own Revenue Annexure 3.6-7 SHARE OF ITEMS UNDER OWN REVENUE (MUNICIPALITIES) Item

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

AM

POR

AM

POR

AM

POR

AM

POR

AM

POR

AM

POR

1. Direct Tax

308939

52.8

335818

52.67

381514

49.14

43350

49.02

479749

48.78

506322

47.19

2. Assigned Tax

47789

8.17

89498

14.04

69998

9.02

101774

11.51

96439

9.8

100452

9.36

3. Shared Tax

28600

4.89

7662

1.2

87500

11.27

63979

7.24

48648

4.95

73609

6.86

4. Licence Fees

16486

2.82

20884

3.28

25049

3.23

29167

3.3

30401

3..09

37579

3.5

5. Registration Fees

286

0.05

262

0.04

417

0.05

390

0.04

620

0.06

612

0.06

6.Gate Fees

24160

4.13

28505

4.47

32316

4.16

47554

5.38

42008

4.27

46517

4.34

7. User Charges

72610

12.41

82756

12.98

94165

12.13

107035

12.11

126105

12.82

140513

13.1

8. Other Sources

72466

12.39

57947

9.09

71842

9.25

86446

9.78

142181

14.46

150935

14.07

9. General Purpose Grant

7138

1.22

7131

1.12

7131

0.92

6449

0.73

6442

0.65

6451

0.6

10. Specific Purpose Grant

6585

1.13

7175

1.13

6453

0.83

7827

0.89

10985

1.12

9880

0.92

Total

585059

100

637638

100

776385

100

883971

100

983578

100

1072870

100

AM:- Amount in Rs Thousand POR:- Percantege on Own Revenue 302

Annexure 3.6-8 TOTAL EXPENDITURE OF MUNICIPALITIES 1993-94 TO 1998-99 (Excluding expenditure under People’s Plan Campaign) Item I. GENERAL ACCOUNT

1993-94

1994-95

1995-96

1996-97

Amount PTE

Amount PTE

Amount PTE

Amount

PTE

1997-98 Amount

PTE

1998-99 Amount

PTE

387917 51.17

446416 51.16

508447 52.85

606807

48.26

671257

45.52

729958

48.68

1. Management & Collection

100838 13.3

114656 13.14

128047 13.31

160074

12.73

186863

13.67

196871

13.13

(1) Salary /Honararium etc Office (2) Establilshment Cost of Secretaries & Staff

6608

0.87

6491

0.74

9675

1001

15574

1.24

16229

1.1

23157

1.54

75241

9.92

86791

9.95

92776

9.64

111423

8.86

128501

.8.71

137448

9.17

(3) Other expenses

18989

2.5

21374

2.45

25596

2.66

33077

2.63

42133

2.86

36266

2.42

2. Public Work

81951

10.81

96520

11.06

112849 11.73

127719

10.16

135121

9.16

142749

9.52

(1) Establishment charge (2) Maintanance of Roads.Bridges,Park& Gardens

31960

4.11

34572

3.96

39077

4.06

45200

3.59

51721

3.51

53934

3.6

37255

4.91

49280

5.65

58773

6.11

66094

5.26

67379

4.57

75097

5.01

(3) Contigenies

12736

1.68

12668

1.45

14999

1.56

16425

1.31

16021

0.09

13720

0.91

3.(a) Town Planning

5878

0.78

7200

0.83

16800

1.75

8347

0.66

10273

0.7

12580

0.84

(1) Establishment charge

5818

0.77

6866

0.79

9041

0.94

8043

0.64

9688

0.66

11692

0.78

(2) Other Charges

60

0.01

334

0.04

7759

0.81

304

0.02

585

0.04

888

0.06

3.(b) Land Development

1236

0.16

2411

0.28

1062

0.11

6872

0.55

3723

0.25

18634

1.24

0.04

1495

0.17

743

0.08

1069

0.09

784

0.05

449

0.03 1.21

(1)Town survey establishment cost 302 (2) Other Charges

934

0.12

916

0.1

319

0.03

5803

0.46

2939

0.2

18185

4. Education & Culture

4355

0.57

5255

0.6

5857

0.61

6864

0.55

7739

0.52

8393

0.56

(1) Establishment charge

2446

0.32

2975

0.34

3594

0.34

4021

0.32

4240

0.29

4906

0.33

(2) Other Charges

1909

0.25

2298

0.26

2563

0.27

2843

0.23

3399

0.23

3487

0.23

5. Water Supply

4923

0.65

24955

2.86

27958

2.91

38863

3.09

30966

2.1

36738

2.45

(1) Establishment cost

1254

0.17

1210

0.14

1379

0.14

1555

0.12

2134

0.14

1131

0.08

(2) Maintanace

2738

0.36

22210

2.55

23258

2.42

33667

2.68

23583

1.6

31998

2.13

(3) Other Petty Works

931

0.12

1535

0.18

3321

0.35

3641

0.29

5249

0.36

3609

0.24

6. Public Health

139900 18.45

140857 16.14

159736 16.6

192105

15.28

216960

14.71

226853

15.13

(1) Establishment charge

123167 16.25

128181 14.69

143611 14.93

165653

13.17

197407

13.39

205074

13.68

(2) Operational Cost

12556

1.66

9673

1.11

12975

1.35

22508

1.79

15774

1.07

16580

1.11

(3) Maintanance Charge

34

0

215

0.02

323

0.03

366

0.03

124

0.01

271

0.02

(4) Other Charges

4143

0.55

2877

0.32

2827

0.29

3578

0.28

3655

0.25

4928

0.33

7. Street Lighthing

27930

3.68

31270

3.58

31911

3.32

37085

2.95

42409

2.94

45721

3.05

(1) Establishment charge

156

0.02

122

0.01

292

0.03

1134

0.09

1470

0.1

1080

0.07

(2) Current Charge

25415

3.35

28421

3.26

29862

3.1

31316

2.49

34742

2.36

35883

2.39

(3) Other Charges

2359

0.31

2727

0.31

1757

0.18

4635

0.37

7197

0.49

8758

0.58

8. Municipal Properties

4023

0.53

4416

0.51

3894

0.4

3889

0.55

8151

0.55

9408

0.63

(1) Establishment charge

1743

0.23

1602

.0.18

1684

0.18

1950

0.16

3365

0.23

3368

0.22

(2) Maintanance

2280

0.3

2814

0.32

2210

0.23

4939

0.39

4786

0.32

6040

0.4

9. Other Expenditure

9347

1.23

11986

1.37

11900

1.24

10037

0.8

17110

1.16

15168

1.01

(1) Audit Fee

619

0.08

409

0.05

1726

0.18

461

0.04

1316

0.09

2354

0.16

(2) Interest on borrowings'

8728

1.15

11577

1.33

10174

1.06

9576

0.76

15794

1.07

12814

0.85

10 . Extra Ordinray Items

7536

0.99

6890

0.79

8433

0.88

11952

0.95

10942

0.74

16843

1.12

(1) Reception to important

622

0.08

1556

0.18

1145

0.12

2687

0.21

2245

0.15

2949

0.2

(2) Grants, Awards etc

6914

0.91

5334

0.61

7288

0.76

9254

0.74

8697

0.59

13894

0.93

II CAPITAL ACCOUNT

268270 35.38

291591 33.41

317510 33.01

470273

37.4

565250

38.33

493510

32.91

1. Management

24299

3.21

19772

2.27

22392

2.33

25510

2.03

37730

2.56

30519

2.04

2. Loan Repayment

37057

4.89

41106

4.71

44864

4.66

55774

4.44

52692

3.57

51437

3.43

3. Plan Schemes

185452 24.46

201361 23.07

228505 23.75

355479

28.27

429708

29.14

369832

24.66

(a) Communication

81486

10.75

87739

10.05

108802 11.31

178455

14.19

221366

15.01

177216

11.82

(b) Town Improvement

65510

8.64

63901

7.32

58672

6.1

85398

6.79

88243

5.98

73303

4.89

19027

2.51

22582

2.59

41219

4.28

51323

4.08

68126

4.19

63368

4.23

Govt.Sponsered Programmes (a) Town Improvement Scheme

0

0

0

303

0

0

0

(b) Poverty Allevation

19429

2.56

27139

3.11

19812

2.06

40303

3.21

58273

3.95

55945

4. Education

1230

0.16.

2149

0.25

1505

0.16

1407

0.11

4521

0.31

1189

0.08

5. Water Supply &drainage

12054

1.59

13422

1.24

8079

0.84

14271

1.13

23856

1.62

20638

1.38

(a) New water supply schemes

1559

0.21

863

0.1

2028

0.21

4491

0.36

8052

0.55

4137

0.28

(b) Deposits to water authority

456

0.06

3440

0.39

1648

0.17

1433

0.11

3182

0.22

2114

0.14

(c) Surface Darinage

10039

1.32

9119

1.04

4403

0.46

8347

0.66

12622

0.86

14387

0.96

6. Public Health

1760

0.23

4895

0.56

3600

0.37

6509

0.52

7553

0.51

5727

0.38

(a) Building &Vehicles, equipment 1302

0.17

4081

0.47

3111

0.32

6440

0.51

7440

0.5

5107

0.34

(b) Solid Waste Management

458

0.06

811

0.09

489

0.05

69

0.01

113

0.1

620

0.04

7. Street Lighthing

4865

0.64

4053

0.46

6946

0.72

8513

0.68

7328

0.5

12001

0.8

0.2

4833

0.55

1619

0.17

2810

0.22

1862

0.13

2167

0.14

8. Endowment and Investments 1553

3.73

III. DEBT HEADS

101962 13.45

134656 15.43

136033 14.14

180290

14.34

238199

16.15

276128

18.41

(1) Refund of Deposit

33848

4.46

47102

5.4

42408

4.41

47539

3.78

65832

4.46

104204

6.95

(2) Advance Recoverd

16605

2.19

18742

2.15

20809

2.16

23001

1.83

25406

1.72

20052

1.34

(3) PF/Pension fund

34591

4.56

41457

4.75

44812

4.66

72242

5.75

73475

4.98

90184

6.01

(4) Sinking Fund

3103

0.41

3829

0.44

3608

0.38

5310

0.42

10689

0.72

5953

0.4

(5) Library Cess

1497

0.2

12794

1.47

8248

0.86

5582

0.44

6858

0.47

6967

0.46

(6) Sales Tax

6569

0.87

6135

0.7

8300

0.86

15402

1.22

30649

2.08

32240

2.15

(7) Others

5749

0.76

4597

0.53

7848

0.82

11214

0.89

25300

1.72

16528

1.1

TOTAL

758149 100

872663 100

961990 100

1257370 100

1474706 100

1499596 100

Annexure 3.6-9 PERCAPITA EXPENDITURE OF MUNICIPALITIES

Item

1993-94

1994-95

1995-96

1996-97

Amount PC

Amount PC

Amount PC

Amount

1997-98

I. GENERAL ACCOUNT

387917 141.1

446416 160..59 508447 180..85 606807

1. Management & Collection

100838 36.68

114656 41.25

128047 45.55

(1) Salary /Honararium etc Office (2) Establilshment Cost of Secretaries & Staff

6608

2.4

6491

2.34

9675

3.44

75241

27.37

86791

31.22. 92776

(3) Other expenses

18989

6.91

21374

7.69

25596

2. Public Work

81951

29.81

96520

34.72

(1) Establishment charge (2) Maintanance of Roads.Bridges,Park& Gardens

31960

11.63

34572

12.44

37255

13.55

49280

17.73

58773

2.91

66094

23.24

67379

23.42

75097

25.8

(3) Contigenies

12736

4.63

12668

4.56

14999

5.34

16425

5.78

16021

5.57

13720

4.71

Amount

1998-99 PC

Amount

PC

213.39 671257

233.34

729958

250.8

160074

56.29

186863

64.96

196871

67.64

15574

5.48

16229

5.64

23157

7.96

33

111423

39.18

128501

44.67

137448

47.22

9.1

33077

11.63

42133

14.65

36266

12.46

112849 40.14

127719

44.91

135121

46.97

142749

49.05

39077

45200

15.89

51721

17.98

53934

18.53

13.9

PC

3.(a) Town Planning

5878

2.14

7200

2.59

16800

5.98

8347

2.94

10273

3.57

12580

4.32

(1) Establishment charge

5818

2.12

6866

2.47

9041

3.22

8043

2.83

9688

3.37

11692

4.02

(2) Other Charges

60

0.02

334

0.12

7759

2.76

304

0.11

585

0.2

888

0.31

3.(b) Land Development

1236

0.45

2411

0.87

1062

0.38

6872

2.42

3723

1.29

18634

6.4

(1)Town survey establishment cost 302

0.11

1495

0.54

743

0.26

1069

0.38

784

0.27

449

0.15

(2) Other Charges

934

0.34

916

0.33

319

0.11

5803

2.04

2939

1.02

18185

6.25

4. Education & Culture

4355

1.58

5255

1.89

5857

2.08

6864

2.41

7739

2.69

8393

2.88

(1) Establishment charge

2446

0.89

2975

0.06.

3594

1.17

4021

1.41

4240

1.51

4906

1.69

(2) Other Charges

1909

0.69

2298

0.83

2563

0.91

2843

1..00

3399

1.18

3487

1.2

5. Water Supply

4923

1.79

24955

8.98

27958

9.94

38863

13.67

30966

10.76

36738

12.62

(1) Establishment cost

1254

0.46

1210

0.44

1379

0.49

1555

0.55

2134

0.74

1131

0.39

(2) Maintanace

2738

1..00

22210

7.99

23258

8.27

33667

11.84

23583

8.2

31998

10.99

(3) Other Petty Works

931

0.34

1535

0.55

3321

1.18

3641

1.28

5249

1.82

3609

1.24

6. Public Health

139900 50.89

192105

67.55

216960

75.42

226853

77.94

140857 50.67

159736 56.82

304

(1) Establishment charge

123167 44.81

128181 46.11

143611 51.08

165653

58.25

197407

68.62

205074

(2) Operational Cost

12556

4.57

9673

3.48

12975

4.62

22508

7.92

15774

5.48

16580

70.46 5.7

(3) Maintanance Charge

34

0.01

215

0.08

323

0.11

366

0.13

124

0.04

271

0.09

(4) Other Charges

4143

1.51

2877

1..00

2827

1.01

3578

1.26

3655

1.27

4928

1.69

7. Street Lighthing

27930

10.16

31270

11.25

31911

11.35

37085

13.04

42409

15.09

45721

15.71

(1) Establishment charge

156

0.06

122

0.04

292

0.1

1134

0.4

1470

0.51

1080

0.37

(2) Current Charge

25415

9.25

28421

10.22

29862

10.62

31316

11.01

34742

12.08

35883

12.33

(3) Other Charges

2359

0.86

2727

0.98

1757

0.62

4635

1.63

7197

2.5

8758

3.01

8. Municipal Properties

4023

1.46

4416

1.59

3894

1.39

3889

2.42

8151

2.83

9408

3.23

(1) Establishment charge

1743

0.63

1602

0.58

1684

0.6

1950

0.69

3365

1.73

3368

1.16

(2) Maintanance

2280

0.83

2814

1.01

2210

0.79

4939

1.74

4786

1.66

6040

2.08 5.21

9. Other Expenditure

9347

3.4

11986

4.31

11900

4.23

10037

3.53

17110

5.95

15168

(1) Audit Fee

619

0.23

409

0.15

1726

0.61

461

0.16

1316

0.46

2354

0.81

(2) Interest on borrowings'

8728

3.18

11577

4.16

10174

3.62

9576

3.37

15794

5.49

12814

4.4

10 . Extra Ordinray Items

7536

2.74

6890

2.48

8433

3..00

11952

4.2

10942

3.8

16843

5.79

(1) Reception to important

622

0.23

1556

0.56

1145

0.41

2687

0.94

2245

0.78

2949

1.01

(2) Grants, Awards etc

6914

2.52

5334

1.92

7288

2.59

9254

3.26

8697

II CAPITAL ACCOUNT

268270 97.59

470273

165.37 565250

1. Management

24299

8.84

19772

7.11

22392

7.96

25510

8.97

37730

13.12

30519

10.49

2. Loan Repayment

37057

13.48

41106

14.79

44864

15.96

55774

19.61

52692

18.32

51437

17.67

3. Plan Schemes

185452 67.47

201361 72.44

228505 81.28

355479

125.01 429708

149.37

369832

127.1

(a) Communication

81486

29.64

87739

31.56

108802 38.7

178455

62.75

76.95

177216

60.89

(b) Town Improvement

65510

23.83

63901

22.99

58672

20.87

85398

.30.03 88243

30.67

73303

25.19

(a) Town Improvement Scheme

19027

6.92

22582

8.12

41219

14.66

51323

18.05

68126

21.49

63368

21.77

(b) Poverty Allevation

19429

7.07

27139

9.76

19812

7.05

40303

14.17

58273

20.26

55945

19.22

4. Education

1230

0.45

2149

0.77

1505

0.54

1407

0.49

4521

1.57

1189

0.41

5. Water Supply &drainage

12054

4.39

13422

4.83

8079

2.87

14271

5.02

23856

8.29

20638

7.09

(a) New water supply schemes

1559

0.57

863

0.31

2028

0.72

4491

1.58

8052

2.8

4137

1.42

Govt.Sponsered Programmes

291591 104.9

0..00

317510 112.9

0..00

0..00

221366

0..00

3.02

13894

4.77

196.49

493510

169.6

0..00

0..00

(b) Deposits to water authority

456

0.17

3440

1.24

1648

0.59

1433

0.5

3182

1.11

2114

0.73

(c) Surface Darinage

10039

3.65

9119

3.28

4403

1.57

8347

2.94

12622

4.39

14387

4.94

6. Public Health

1760

0.64

4895

1.76

3600

1.28

6509

2.29

7553

2.63

5727

1.97

(a) Building &Vehicles,equipment

1302

0.47

4081

1.47

3111

1.11

6440

2.26

7440

2.59

5107

1.75

(b) Solid Waste Management

458

0.17

811

0.29

489

0.17

69

0.02

113

0.04

620

0.21

7. Street Lighthing

4865

1.77

4053

1.46

6946

2.47

8513

2.99

7328

2.55

12001

4.12

8. Endowment and Investments

1553

0.56

4833

1.74

1619

0.58

2810

0.99

1862

0.65

2167

0.74

III. DEBT HEADS

101962 37.09

134656 48.44

136033 48.39. 180290

63.4

238199

82.8

276128

94.87

(1) Refund of Deposit

33848

12.31

47102

16.94

42408

15.08

16.72

65832

22.83

104204

35.8

(2) Advance Recoverd

16605

6.04

18742

6.74

20809

7.4

23001

8.09

25406

8.83

20052

6.89

(3) PF/Pension fund

34591

12.58

41457

14.91

44812

15.94

72242

25.4

73475

25.54

90184

30.99

(4) Sinking Fund

3103

1.13

3829

1.38

3608

1.28

5310

1.87

10689

3.71

5953

2.05

(5) Library Cess

1497

0.54

12794

4.6

8248

2.93

5582

1.96

6858

2.38

6967

2.39

(6) Sales Tax

6569

2.39

6135

2.21

8300

2.95

15402

5.42

30649

16.65

32240

11.08

(7) Others

5749

2.09

4597

1.65

7848

2.79

11214

3.94

25300

8.79

16528

5.68

TOTAL

758149 275.8

872663 313.9

961990 342.2

305

47539

1257370 442.16 1474706 512.63

1499596 515.2

Annexure 3.6-10 Total receipts and expenditure of Municipalities at a glance (Rs in lakhs) Receipt 1993-94: 1994-95 1995-96 A. General Account 6013.26 6488.42 7840.69

1996-97 9043.58

1997-98 1.998-99 10028.89 10897.9

B. Capital Account

1640.03 1593.46 1655.05

6912.54

3106.80 2667.01

Total (A+B )

7653.29 8081.88 9495.74

15956.12 13135.69 13564.91

C. Debt Head

1209.40 1548.32 1717.88

1816.04

Total (A + B + C)

8862.69 9630.20 11213.62 17772.16 15469.82 16346.12

2334.13 2781.21

Expenditure A. General Account 3879.17 4464.16

5084.47

6068.07 6712.57 7299.58

B. Capital Account

2682.70 2915.91

3175.10

4702.73 5652.50 4935.10

Total ( A+B )

6561.87 7380.07

8259.57 10770.80 12365.07 12234.68

C. Debt Head

1019.62 1346.56

1360.33

Total (A + B + C)

7581.49 8726.63

9619.90 12573.70 14747.06 14995.96

Closing balance

1281.20 903.58

1593.72

1802.90 2381.99 2761.28 5198.47

722.76 1350.16

Annexure 3.7-1 TOTAL RECEIPTS OF MUNICIPAL CORPORATIONS 1993-94 to 1998-99 (Rupees in Tthousands) 1993-94

1994-95

1995-96

1996-97

Item

AM

PTR

AM

PTR

AM

PTR

AM

I. TAX REVENUE

312021

67.55

357217

62.04

460147

66..30 413807

1997-98

1998-99

PTR

AM

PTR

AM

PTR

48.82

461215

55.16

555297

61.41

A. DIRECT TAX

232958

50.44

249079

43.26

294470

42.43

310926

36.68

340361

40.71

397340

43.94

(i) Propety & serivce Tax

137017

29.66

147600

25.63

182092

26.24

189803

22.39

197693

23.64

241597

26.72

(ii) Profession tax

11756

2.55

18017

3.13

19471

2.81

20413

2.41

23483

2.81

32947

3.64

(iii) Advertisement Tax

1527

0.33

1885

0.33

2216

0.32

2889

0.34

4265

0.52

4242

0.47

(iv) Ent& Add Ent.Tax

81746

17.1

81059

14.08

90033

12.97

97357

11.49

114014

13.64

117888

13.04

(v) Show Tax & SC on ST

521

0.11

341

0.06

377

0.05

337

0.04

509

0.06

389

0.04

202

0.02

180

0.02

391

0.08

177

0.03

281

0.04

126

0.01

93

0.01

97

0.01

13.32

(vi) Land Conversion (vii)Timber Tax (viii) Tax on animals & vehicles

1

2

B.ASSIGNED TAX (i) Duty on transfer of property

69063

14.95

58138

10.1

125677

18.11

72881

8.6

94554

11.31

120457

Vahicle Tax Compensation

10000

2.17

50000

8.68

40000

5.76

30000

3.54

26300

3.15

37500

4.15

II. NON-TAX REVENUE

76691

16.6

93751

16.28

100026

14.41

116111

13.7

149774

17.91

128229

14.18

C. SHARED TAX

A.LICENCE FEES

16003

3.46

16431

2.85

30364

4.37

34817

4.11

35097

4.2

38783

4.29

(i) D&O Licence

2863

0.62

3021

0.52

5848

0.84

6343

0.75

8351

1..00

9272

1.03

(ii) P F A

123

0.03

119

0.02

242

0.03

250

0.03

284

0.03

332

0.04

(iii) Cinematograph

20

(iv) Place of public resort

63

22 0.01

62

48 0.01

76

306

0.01

21

21

83

90

21 0.01

96

0.01

(v) Private slaughter house (vi)Private market

1 1365

(vii) Ocupation of purampoke

9

(viii) Cart stand/halting places

5

0.3

9

6

2

1

28

35

46

59

9 16

(ix) Dogs & Pigs

2

(x) Building permits

11556

2.5

13181

2.29

24113

3.47

28079

3.31

26303

3.15

29000

3.21

B. RAGISTRATION FEES

67

0.01

220

0.04

217

0.03

263

0.03

373

0.04

339

0.04

(i) Private hospital

10

4

(ii) Private paramedical Intn

1

5

(iii) Tutorial & parallel colleges (iv) Contractors regn

19

29

(v) Births & death regn

40

155

(vi) Arch:/ engineers regn

8

36

27 0.03

139

25 0.02

51

27

113

0.01

260

125

0.01

75

70 0.03

172

0.02

88

C.GATE FEES

4542

0.98

7454

1.31

7446

1.07

9436

1.11

12911

1.54

11898

1.32

(i) Private market

2333

0.51

4086

0.71

3848

0.55

5185

0.61

6984

0.84.

5818

0.64

(ii) Public slaughter houses

1125

0.02

419

0.07

790

0.11

629

0.07

770

0.09

978

0.11

(iii) Cart stand bus stand

1652

0.36

1710

0.3

1220

0.18

1962

0.23

3309

0.4

2973

0.33

(iv) Comfort station

139

0.03

1046

0.18

1344

0.19

1400

0.17

1541

0.18

1722

0.19

(v) Cloak room

306

0.07

284

0.05

244

0.04

260

0.03

307

0.04

407

0.05

D.USER CHARGES

21881

4.74

27740

4.82

30447

4.39

32981

3.89

37229

4.45

39065

4.32

(i) Search fee

43

(vi) River sand 34

35

34

36

50

(ii) Extract fee

114

0.02

74

0.01

106

0.02

77

222

0.03

107

0.01

(iii) Service cahrges

188

0.04

386

0.07

571

0.08

561

0.07

746

0..09

932

0.1

(iv) Municipal property

21529

4.66

23109

4.01

29726

4.28

32308

3.81

36225

4.33

37976

4.2

(v) Water charge

7

4.56

64164

7.67

38144

4.22

0.16

15591

1.86

5144

0.57

0.26

2260

0.25

6

(vi) Connetion Charge E.OTHER SOURCES

34198

(i) Conrtib & donation

18

7..40

9

4131

0.72

41815

7.26

30

31552

1 4.55

(ii) Endowment & Interest on End.

1

(iii) Fine & Penalitite

761

(iv) Cattle Pound

26

0.16

2489

38614

58 0.43

34

2437

1340 0.35

15

1 0.16

15

2195 15

16

(v) Fishing (vi) Usufructs

45

67

0.01

100

0.01

60

(vii) Lease of land

2025

0.44

4008

0.7

5088

0.73

4873

488

0.07

968

0.11

1126

0.13

1158

0.13

1935

0.42

2114

0.37

2117

0.31

2524

0.3

2761

0.33

2632

0.29

(viii) Library (ix) Ferry service

0.57

93

0.01

143

0.02

5344

0.64

5286

0.58

(x) Others

29388

6.36

33073

5.74

21248

3.06

27466

3.24

37038

4.43

21535

2.38

III. GRANT IN AID*

17416

3.77

46857

8.14

51676

7.45

250167

29.51

62733

7.5

63332

7..00

(i) General purpose grant

3181

0.69

3017

0.52

3017

0.43

3017

0.36

3017

0.36

3017

0.33

(ii) Specific purpose grant

4710

1.02

7082

1.23

6799

0.98

8842

1.04

5104

0.61

1350

0.15

(iii) Other grants

8678

1.88

2400

0.42

14810

2.13

23752

2.8

3028

0.36

7032

0.78

(iv) State sponsered schemes

847

0.18

29856

5.18

5758

0.83

175786

20.74

4482

0.54

3000

0.33

4502

0.78

21292

3.07

38770

4.57

47102

5.63

48933

5.41

IV. LOANS

5845

1.27

9337

1.62

7694

1.11

9997

1.18

58261

6.97

22461

2.48

(i) Government

714

0.15

1333

0.16

253

0.03

126

0.01

(ii) Others

5131

1.11

9337

1.62

7694

1.11

8664

1.02

58008

6.94

22335

2.47

V. DEBT

49848

10.79

68916

11.97

77922

11.23

77405

9.13

103891

12.42

134679

14.89

(v) Centrally sponsered schemes

(i) Deposit

6651

1.44

7731

1.34

4277

0.62

3989

0.47

5387

0.64

8400

0.93

(ii) Advance

10285

2.23

8603

1.49

16399

2.36

18683

.2.20

13963

1.67

12267

1.36

(i) LIbrary Cess

953

0.21

863

0.15

5608

0.81

5976

0.7

7099

0.85

15008

1.66

(ii) Provident fund/ pension fund

18063

3.91

34459

5.98

37795

5.45

28055

3..31

46487

5.56

55306

6.12

(iii) Sales tax/Income tax etc

13896

3.01

17260

3

13843

1.99

20702

2.44

30955

3.7

43698

4.83

TOTAL

461821

100

576078

100

697465

100

867487

102

835874

100

903998

100

AM -Amount PTR - Percentage to total revenue * Excluding grant in aid for peoples' plan campaign 307

Annexure 3.7-2 ABSTRACT OF TOTAL RECEIPTS OF MUNICIPAL CORPORATIONS UNDER OWN REVENUE Item

1993-94

1994-95 AM

1995-96

1996-97 AM

1997-98 PTR

AM

PTR

PTR

AM

PTR

1. Direct Tax

232958

50.44 249079

43.26

294470

42.43 310926 36.68 340361

40.71 397340

43.94

2. Assigned Tax

69063

14.95 58138

10.1

125677

18.11 72881

11.31 120457

13.32

8.6

AM

1998-99

94554

PTR

AM

PTR

3. Shared Tax

10000

2.17

50000

8.68

40000

5.76

30000

3.54

26300

3.15

37500

4.15

4. Licence Fees

16003

3.46

16431

2.85

30364

4.37

34817

4.11

35097

4..20

38783

4.29

5. Registration Fees

67

0.01

220

0.04

217

0.03

263

0.03

373

0.04

339

0..04

6.Gate Fees

4542

0.98

7545

1.31

7446

1.07

9436

1.11

12911

1.54

11898

1.32

7. User Charges

21881

4.74

27740

4.82

30447

4.39

32981

3.89

38229

4.45

39065

4.32

8. Other Sources

34198

7.4

41815

7.26

31552

4.55

38614

4.56

64164

7.67

38144

4.22

9. General Purpose Grant

3181

0.69

3017

0.52

3014

0.43

3017

0.36

3017

0.36

3017

0..33

10. Specific Purpose Grant

4710

1.02

7082

1.23

6799

0.98

8842

1.04

5104

0.31

1350

0.15

Total

396603

85.88 461067

80.04

569989

81.72 541777 62.45 619110

AM :- Amount in Rs.Thousand

PTR:- Percentage to Total revenue

74.07 687893

PERCENTAGE SHARE OF TAXES TO DIRECT TAX (MUN CORPORATIONS) Item

1993-94 AM

1994-95 PDT

AM

Annexure 3.7-3

1995-96 PDT

76.09

1996-97

AM

PDT

AM

182092 19471 2216 90033 377

61.84 6.61 0.75 30.57 0.13 0..00 0.1 0..00 100

189803 20413 2889 97357 337

1997-98 PDT

1998-99

AM

PDT

AM

PDT

197693 23483 4365 114014 509 202 93 2 340361

58.08 6.9 1.28 33.5 0.15 0.06 0.03 0..00 100

241597 32947 4242 117888 389 180 97

60..80 8.29 1.07 29.67 0.1 0.05 0.02 0..00 100

A. DIRECT TAX (I) Property & service Tax (M) Prolesslon tax (IN) Advertisement Tax (iv) Ent: 8 Add: Ent: Tax (v) Show tax & S C on ST (vi) Land conversion (vii) Timbertax (viii) Tax on animals & vehicles Total AM :- Amount in Rs.Thousand

137017 11756 1527 81746 521

58.82 174600 59.26 5..05 18017 7.23 0.66 1885 0.76 35.09 81059 32.54 0.22 341 0.14 0..00 0..00 391 0.17 177 0.07 0..00 0..00 232958 100 249079 100 PDT:- Percentage of direct tax

281 294470

61.04 6.57 0.93 31.31 0.11 0..00 126 0.04 1 0..00 310926 100

PERCENTAGE INCREASE OF TAXES OVER PREVIOUS YEAR (MUN CORPORATIONS)

397340

Annexure 3.7-4 (Rs. in Thousand)

Items (I) Property & service Tax (II) Profession tax (III) Advertisement Tax (iv) Ent: & Add: Ent: Tax (vi)l Show tax & surcharge on ST (vi) Land conversion (vii)Timbertax (viii)Tax on animals & vehlcles Total

1995-

1996-

1997-

1998-

1993-94

1994-95 %

96

%

97

%

98

%

99

%

& Over

137017 11756 1527 81746 521

147600 18017 1885 81059 341

7.72 53.26 23.44 -0.84 -34.55

182.92 19471 2216 90033 377

23.37 8.07 17.56 11.07 10.56

18980 20413 2889 97357 337

4.23 4.84 30.37 8.13 -10.61

4.16 14.04 51.09 17.11 51.04

177

-54.73 281

58.76

126

-55.16

24159 32947 4242 11788 389 180 97

22.21 40.3 -2.82 3.4 -23.58 -10.89 4.3

76.33 180.3 177.8 44.21 -25.34

391

19769 23483 4365 11401 509 202 93

232958

249079

6.92

294470 18.22

308

1 31092 5.59

-26.19

2 100.00 34036 9.47

39734 16.74

-75.19 70.56

Annexure 3.7 -5 PERCENTAGE INCREASE OF OWN REVENUE OVER PREVIOUS YEAR (MUN CORPORATIONS)

(Rs in Thousands)

Item

1993-94

1994-95 %

1995-96 %

1996-97 %

1997-98 %

1998-99 %

1. Direct Tax

232958

249079

6.92

294470 18.22

310926 5.59

340361 9.47

397340 16.74

70.6

2. Assigned Tax

69063

58138

-15.82

125677 116.17

72881

94554

120457 27.39

74.4

-42.01

29.74

% Over

3. Shared Tax

10000

50000

400

40000

-20

30000

-25

26300

-12.33

37500

42.59

275

4. Licence Fees

16003

16431

2.67

30364

84.8

34817

14.67

35097

0.8

38783

10.5

142.3

5. Registration Fees

67

220

228.36

217

-1.36

263

21.2

373

41.83

339

-9.12

406

6.Gate Fees

4542

7545

66.12

7446

-1.31

9436

26.73

12911

36.83

11898

-7.85

162

7. User Charges

21881

27740

26.78

30447

9.76

32981

8.32

38229

12.88

39065

4.93

78.5

8. Other Sources

34198

41815

22.27

31552

-24.54

38614

22.38

64164

66.17

38144

-40.55

11.5

9. General Purpose Grant

3181

3017

-5.16

3014

0..00

3017

0..00

3017

0..00

3017

0..00

-5.2

10. Specific Purpose Grant 4710

7082

50.36

6799

-4

8842

30.05

5104

-42.28

1350

-73.55

Total

461067

16.25

569989 23.62

396603

541777 -4.95

619110 14.27

687893 11.11

-71.3 73.4

Annexure 3.7 -6

SHARE OF TAXES IN TOTAL OWN REVENUE (MUN CORPORATIONS) Item

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

AM

PTOR

AM

PTOR

AM

PTOR

AM

PTOR

AM

PTOR

AM

PTOR

(I) Property & service Tax

137017

34.55

174600

32.01

182092

31.95

189803

35.03

197693

31.93

241597

35.12

(M) Prolesslon tax

11756

2.96

18017

3.91

19471

3.42

20413

3.77

23483

3.79

32947

4.79

(IN) Advertisement Tax

1527

0.39

1885

0.41

2216

0.39

2889

0.53

4365

0.71

4242

0.62

(iv) Ent: 8 Add: Ent: Tax

81746

20.61

81059

17.58

90033

15.8

97357

17.97

114014

18.42

117888

17.14

(v) Show tax & S C on ST (vi) Land conversion

521

0.13

341

0.07

377

0.07

337

0.06

509

0.08

389

0.06

0..00

202

0.03

180

0.03

(vii) Timbertax

391

0.1

0.02

93

0.02

97

0.01

232958

58.74

0..00

(viii) Tax on animals & vehicles Total (Direct Tax)

0..00 177

0.04

249079 461067

0..00

OWN REVENUE 396603 100 AM - Amount in Rs Thousand PTOH - Percentage of Total Own Hevenue

0..00 281

0.05 0..00

1

0..00

2

0..00

54.02

294470

51.66

310926

57.39

340361

54.98

397340

57.76

100

569989

100

541777

100

619110

100

687893

100

0

126

0..00

Annexure 3.7 -7

SHARE OF ITEMS UNDER OWN REVENUE (MUN. CORPORATIONS)

Item

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

AM

POR

AM

POR

AM

POR

AM

POR

AM

POR

AM

POR

1. Direct Tax

232958

58.74

249079

54.02

294470

51.66

310926

57.39

340361

54.98

397340

57.76

2. Assigned Tax

69063

17.41

58138

12.61

125677

22.05

72881

13.45

94554

15.27

120457

17.51

3. Shared Tax

10000

2.52

50000

10.84

40000

7.02

30000

5.54

26300

4.25

37500

5.45

4. Licence Fees

16003

4.04

16431

3.56

30364

5.33

34817

6.43

35097

5.67

38783

5.64

5. Registration Fees

67

0.02

220

0.05

217

0.04

263

0.05

373

0.06

339

0.05

6.Gate Fees

4542

1.15

7545

1.64

7446

1.31

9436

1.74

12911

2.09

11898

1.73

7. User Charges

21881

5.52

27740

6.02

30447

5.34

32981

6.09

38229

6.01

39065

5.68

8. Other Sources

34198

8.62

41815

9.07

31552

5.54

38614

7.13

64164

10.36

38144

5.55

309

9. General Purpose Grant

3181

0.8

3017

0.65

3014

0.53

3017

0.56

3017

0.49

3017

0.44

10. Specific Purpose Grant

4710

1.09.

7082

1.54

6799

1.19

8842

1.63

5104

0.82

1350

0.2

Total

396603

100

461067

100

569989

100

541777

100

619110

100

687893

100

AM - Amount in Rs Thousand POR - Percentage on Own Revenue

Annexure 3.7-8 TOTAL EXPENDITURE OF MUNICIPAL CORPORATIONS 1993-94 TO 1998-99 (Excluding expenditure under People’s Plan Campaign) Item

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

Amount PTE

Amount PTE

Amount PTE

Amount PTE

Amount PTE

Amount PTE

I. GENERAL ACCOUNT

260.85

1. Management & Collection

42447

62.13 265454 47.58 328938 52.38 376970 52.93 412640 53.05 435910 48.82 10.13 50363

9.03

604593 9.63

67554

9.48

73394

9.44

83731

9.38

(1) Salary /Honararium etc Office 1290 (2) Establilshment Cost of Secretaries & Staff 32213

0.31

580

0.1

1210

0.19

2507

0.35

2471

0.32

3235

0.36

7.69

39428

7.07

45628

7.27

49428

6.94

55124

7.09

64526

7.23

(3) Other expenses

2.13

10355

1.86

13621

2.17

15619

2.19

15799

2.03

15970

1.79

77498

8944

2. Public Work

61604

14..70 53078

9.51

56747

9.04

(1) Establishment charge (2) Maintanance of Roads.Bridges ,Park& Gardens

16398

3.91

3.43

20804

3.31. 26168

38313

9.14

29820

58.34 33320

5.31

48184

6.76

45177

5.81

49096

5.5

(3) Contigenies

6893

1.64

4128

0.74

0.42

31146

0.44

4154

0.53

8829

0.99

19130

2623

10.88 83569

10.74 91439

10.24

3.67

4.4

3.75

34238

33514

3.(a) Town Planning

2986

0.71

2830

0.51

5452

0.87

4262

0.6

5446

0.7

6892

0.77

(1) Establishment charge

2657

0.63

2663

0.48

3414

0.54

3882

0.55

5000

0.64

5231

0.59 0.19

(2) Other Charges

329

0.08

167

0.03

2037

0.32

377

0.05

446

0.06

1661

3.(b) Land Development

315

0.08

32

0.01

667

0.11

692

0.1

174

0.02

1457

0.16

(1)Town survey establishment cost

30

0.01

7

0..00

644

0.1

657

0.09

17

0..00

22

0..00

(2) Other Charges

258

0.07

25

0..00

23

0..00 35

0..00 157

0.02

1435

0.16

4. Education & Culture

930

0.22

1084

0.19

1426

0.23

1260

0.18

1732

0.22

2728

0.31

(1) Establishment charge

701

0.17.

851

0.15

807

0.13

787

0.11

1082

0.14

1026

0.11

(2) Other Charges

229

0.05

230

0.04

619

0..10 473

0.07

650

0.08

1702

0.19

5. Water Supply

5759

1.37

19708

3.53

43660

6.95

26293

3.69

37688

4.85

42883

4.8

(1) Establishment cost

188

0.04

0

0

745

0.12

744

0.1

555

0.07

705

0.08

(2) Maintanace

50

0.01

15007

2.69

31666

5.04

18401

2.58

29593

3.8

31410

3.52

(3) Other Petty Works

5521

1.32

4701

0.84

11249

1.79

7148

1

7540

0.97

10768

1.21

6. Public Health

120689 28.8

(1) Establishment charge

99588

23.76 87559

15.69 99805

(2) Operational Cost

18275

4.36

24465

4.38

25219

4.02

27624

3.88

29203

3.75

30851

3.45

(3) Maintanance Charge

210

0.05

109

0.02

95

0.02

151

0.02

158

0.02

503

0.06

112549 20.17 126053 20.07 166633 23.39 164081 21..10 160925 18.02 15.89 114214 16.04 133906 17.22 128665 14.41

(4) Other Charges

2616

0.62

419

0.08

934

0.15

24644

3.46

814

0.1

906

0.1

7. Street Lighthing

16997

4.06

16388

2.94

26645

4.24

15718

2.21

28190

3.62

17162

1.92

(1) Establishment charge

84

0.02

50

0.01

128

0.02

71

0.01

73

0.01

49

0.01

(2) Current Charge

16685

3.98

15243

2.73

18621

2.96

15282

2.15

17872

2.3

15363

1.72

(3) Other Charges

228

0.05

1095

0.2

7896

1.26

365

0.05

10245

1.32

1750

0..20

8. Municipal Properties

2930

0.7

5281

0.95

3996

0.64

4464

0.63

11261

1.45

7902

0.88

(1) Establishment charge

68

0.02

546

0.1

369

0.1

274

0.04

119

0.02

99

0.01

(2) Maintanance

2862

0.68

4735

0.85

3357

0.53

4190

0.59

11142

1.43

7803

0.87

9. Other Expenditure

5728

1.37

2013

0.36

1502

0.24

2047

0.29

5784

0.74

19401

2.17

(1) Audit Fee

0

0..00

397

0.07

490

0.08

0

0..00 4322

0.56

506

0.06

(2) Interest on borrowings'

5728

1.37

1616

0.29

1012

0.16

2047

0.29

1462

0.19

18895

2.12

10549

10 . Extra Ordinray Items

0

0..00

2131

0.38

2332

0.37

1.48

1321

0.17

1390

0.16

(1) Reception to important

0

0..00

20

0..00

0

0..00 412

0.06

0

0..00

349

0.04

(2) Grants, Awards etc

0

0..00

2111

0.38

2332

0.37

1.42

1321

0.17

1041

0.12

II CAPITAL ACCOUNT

100146 23.89 177281 31.77 177936 28.33 216179 30.35 249533 32.08 320731 35.92

1. Management

18371

4.38

20322

3.64

27556

4.39

2. Loan Repayment

3916

0.93

6187

1.11

5352

0..85 5664

0.80. 5272

3. Plan Schemes

45458

10.85 205817 18.97 78676

12.53 84068

11.8

310

10137 39694

5.57

36987

4.76

25176

2.82

0.68

2697

0.3

117402 15.09 223492 25.03

(a) Communication

30222

7.21

78514

14.02 41993

6.69

63038

8.85

89749

11.54 92667

10.38

(b) Town Improvement

8778

2.09

19334

3.47

4.23

12371

1.74

20412

2.62

10.56

Govt.Sponsered Programmes

0..00

26585

0..00

0..00

0..00

94302

0..00

0..00

(a) Town Improvement Scheme

0

0..00

0

0..000 7900

1.26

3693

0.52

4267

0.55

33403

3.74

(b) Poverty Allevation

6458

1.54

2869

1.48

0.35

4966

0.7

2974

0.38

3120

0.35

4. Education

2674

0.64

1353

0.24

4970

0.79

1313

0.18

2653

0.34

5338

0.6

5. Water Supply &drainage

19319

4.61

26795

4..80

41341

6.58

45121

6.33

49970

6.42

43516

4.87

(a) New water supply schemes

0

0..00

724

0.13

478

0.08

439

0.06

1610

0.21

1738

0.19

(b) Deposits to water authority

160

0.05

118

0.02

9387

1.49

97

0.01

119

0.02

0

0..00

(c) Surface Darinage

19129

4.56

25953

4.65

31476

5.01

44585

6.26

48241

6.2

41778

4.68

2198

6. Public Health

835

0.2

7729

1.39

10068

1.6

16075

2.26

19203

2.47

3895

0.44

(a) Building &Vehicles,equipment

835

0.2

5538

0.99

9538

1.52

7711

1.08

13073

1.68

3160

0.35

(b) Solid Waste Management

0

0..00

2191

0.39

530

0.08

8364

1.07

6130

0.79

735

0.08

7. Street Lighthing

9573

2.28

9075

1.63

8828

1.41

24244

3.4

18045

2.32

16617

1.86

8. Endowment and Investments

0

0..00

3

0..00

1145

0.18

0

0..00 1

0..00

0

0..00

III. DEBT HEADS

58583

13.98 115224 20.65 121162 19.29 119119 16.72 115590 14.86 136337 15.27

(1) Refund of Deposit

5301

1.26

14146

3.08

6120

0.97

3197

0.45

1945

0.25

18105

2.03

(2) Advance Recoverd

13027

3.11

28687

4.96

24010

3.82

31906

4.48

23396

3.01

21475

2.4

(3) PF/Pension fund

28034

6.69

51459

9.22

62853

10.01 54256

7.62

616642 7.93

72086

8.07

(4) Sinking Fund

561

0.13

2652

0.48

72

0.01

0

0..00 43

0.01

128

0.01

(5) Library Cess

382

0.09

500

0.09

800

0.13

700

0.1

0.13

0

0..00

(6) Sales Tax

653

0.16

1274

0.23

2315

0.37

4410

0.62

5189

0.67

4322

0.48

(7) Others

10625

2.54

14476

2.59

24992

3.98. 24650

3.46

22355

2.87

20221

2.26

TOTAL

419114 100

557959 100

628036 100

712268 100

1000

777763 100

892978 100

Annexure 3.7-9

PERCAPITA EXPENDITURE OF MUNICIPAL CORPORATIONS Item

1993-94 Amount

1994-95 PC

Amount

PC

1995-96

1996-97

1997-98

1998-99

Amount PC

Amount PC

Amount PC

Amount PC

I. GENERAL ACCOUNT

260.85

168.46 265454

170.35 328938 209.38

376970 238.01 412640 258.41

435910 270.77

1. Management & Collection

42447

27.46

50363

32.32

604593 38.48

67554

42.65

73394

45.96

83731

25.01

(1) Salary /Honararium etc Office

1290

0.83

580

0.37

1210

0.77

2507

1.58

2471

1.55

3235

2.01

32213

20.84

39428

25.3

45628

29.04

49428

31.21

55124

34.52

64526

40.08

(2) Establilshment Cost of Secretaries & Staff (3) Other expenses

8944

5.79

10355

6.65

13621

8.67

15619

9.86

15799

9.89

15970

9.92

2. Public Work

61604

39.86

53078

34.06

56747

36.12

77498

48.93

83569

52.33

91439

56.8

(1) Establishment charge

16398

10.61

19130

12.28

20804

13.24

26168

16.52

34238

21.44

33514

20.82

Roads.Bridges,Park& Gardens

38313

24.76

29820

19.14

33320

21.21

48184

30.42

45177

28.29

49096

30.5

(3) Contigenies

6893

4.46

4128

2.65

2623

1.67

31146

1.99

4154

2.6

8829

5.48

3.(a) Town Planning

2986

1.93

2830

1.82

5452

3.47

4262

2.69

5446

3.41

6892

4.28

(1) Establishment charge

2657

1.72

2663

1.71

3414

2.17

3882

2.45

5000

3.13

5231

3.25

(2) Maintanance of

(2) Other Charges

329

0.21

167

0.11

2037

1.3

377

0.24

446

0.28

1661

1.03

3.(b) Land Development

315

0.2

32

0.02

667

0.42

692

0.44

174

0.11

1457

0.91

(1)Town survey establishment cost 30

0.02

7

0..00

644

0.41

657

0.41

17

0.01

22

0.01

(2) Other Charges

258

0.18

25

0.02

23

0.01

35

0.02

157

0.1

1435

0.89

4. Education & Culture

930

0.6

1084

0.69

1426

0.91

1260

0..80

1732

1.08

2728

1.69

(1) Establishment charge

701

0.45

851

0.55

807

0.51

787

0..50

1082

0.68

1026

0.64

(2) Other Charges

229

0.15

230

0.15

619

0.39

473

0..30

650

0.41

1702

1.06

5. Water Supply

5759

3.73

19708

12.65

43660

27.79

26293

16.6

37688

23.6

42883

26.64

311

(1) Establishment cost

188

0.12

0

0..00

745

0.47

744

0.47

555

0.35

705

0.44

(2) Maintanace

50

0.03

15007

9.63

31666

20.16

18401

11.62

29593

18.53

31410

19.51

7.16

7148

4.51

7540

4.72

10768

6.69

(3) Other Petty Works

5521

3.57

4701

3.02

11249

6. Public Health

120689

78.08

112549

72.23

126053 80.24

166633 105.21 164081 102.76

160925 99.96

(1) Establishment charge

99588

64.43

87559

56.19

99805

114214 72.11

133906 83.86

128665 79.92

63.53

(2) Operational Cost

18275

11.82

24465

15.7

25219

16.05

27624

17.44

29203

18.29

30851

19.16

(3) Maintanance Charge

210

0.14

109

0.07

95

0.06

151

0.1

158

0..10

503

0.31

(4) Other Charges

2616

1.69

419

0.27

934

0.59

24644

15.56

814

0.51

906

0.56

7. Street Lighthing

16997

11..00 16388

10.52

26645

16.96

15718

9.92

28190

17.65

17162

10.66

(1) Establishment charge

84

0.05

50

0.03

128

0.08

71

0.04

73

0.05

49

0.03

(2) Current Charge

16685

10.79

15243

9.78

18621

11.85

15282

9.65

17872

11.19

15363

9.54

(3) Other Charges

228

0.15

1095

0.7

7896

5.03

365

0.23

10245

6.42

1750

1.09

8. Municipal Properties

2930

1.9

5281

3.39

3996

2.54

4464

2.82

11261

7.05

7902

4.91

(1) Establishment charge

68

0.04

546

0.35

369

0.41

274

0.17

119

0.07

99

0.06

(2) Maintanance

2862

1.85

4735

3.04

3357

2.14

4190

2.65

11142

6.98

7803

4.85

9. Other Expenditure

5728

3.71

2013

1.29

1502

0.96

2047

1.29

5784

3.62

19401

12.05

(1) Audit Fee

0

0..00

397

0.25

490

0.31

0

0..00

4322

2.71

506

0.31

(2) Interest on borrowings'

5728

3.71

1616

1.04

1012

0.64

2047

1.29

1462

0.92

18895

11.74

10 . Extra Ordinray Items

0

0..00

2131

1.37

2332

1.48

10549

6.66

1321

0.83

1390

0.86

(1) Reception to important

0

0..00

20

0.01

0

0..00

412

0.26

0

0..00

349

0.22

(2) Grants, Awards etc

0

0..00

2111

1.35

2332

1.48

10137

6.4

1321

0.83

1041

0.65

II CAPITAL ACCOUNT

100146

64.79

177281

113.77 177936 113.26

216179 136.49 249533 156.27

320731 199.23

1. Management

18371

11.89

20322

13.04

39694

25176

15.64

2. Loan Repayment

3916

2.53

6187

3.97

5352

3.41

5664

2697

1.68

3. Plan Schemes

45458

29.41

205817

67.91

78676

50.08

84068

(a) Communication

30222

19.55

78514

50.19

41993

26.73

63038

(b) Town Improvement

8778

5.68

19334

12.41

26585

16.92

0..00

0..00

(a) Town Improvement Scheme

0

0..00

0

0..000 7900

(b) Poverty Allevation

6458

4.18

2869

5.31

4. Education

2674

1.73

1353

0.87

Govt.Sponsered Programmes

0..00

27556

17.54

25.06

36987

23.16

3.58

5272

3.3

53.08

117402 73.52

223492 138.83

39.8

89749

56.21

92667

57.56

12371

7.81

20412

12.78

94302

58.58

5.03

3693

2.33

4267

2.67

33403

20.75

2198

1..40

4966

3.14

2974

1.86

3120

1.94

4970

3.16

1313

0.83

2653

1.66

5338

3.32

0..00

0..00

0..00

5. Water Supply &drainage

19319

12.5

26795

17.2

41341

26.31

45121

28.49

49970

31.29

43516

27.03

(a) New water supply schemes

0

0..00

724

0.46

478

0.3

439

0.28

1610

1.01

1738

1.08

(b) Deposits to water authority

160

0.12

118

0.08

9387

5.98

97

0.06

119

0.07

0

0..00

(c) Surface Darinage

19129

12.38

25953

16.65

31476

20.04

44585

28.15

48241

30.21

41778

25.95

6. Public Health

835

0.54

7729

4.96

10068

6.41

16075

10.15

19203

12.03

3895

2.42

(a) Building &Vehicles,equipment

835

0.54

5538

3.55

9538

6.07

7711

4.87

13073

8.19

3160

1.96

(b) Solid Waste Management

0

0..00

2191

1.41

530

0.34

8364

5.28

6130

3.84

735

0.46

7. Street Lighthing

9573

6.19

9075

5.82

8828

5.62

24244

15.31

18045

11.3

16617

10.23

0..00

3

0..00

1145

0.73

0

0..00

1

0..00

0

0..00

8. Endowment and Investments 0 III. DEBT HEADS

58583

37.9

115224

73.94

121162 77.12

119119 75.21

115590 72.39

136337 84.69

(1) Refund of Deposit

5301

3.43

14146

11.02

6120

3.9

3197

2.02

1945

1.22

18105

11.25

(2) Advance Recoverd

13027

8.43

28687

17.77

24010

15.28

31906

20.14

23396

14.65

21475

13.34

(3) PF/Pension fund

28034

18.14

51459

33.02

62853

40.01

54256

34.26

616642 38.62

72086

44.78

(4) Sinking Fund

561

0.36

2652

1.7

72

0.05

0

0..00

43

128

0.08

312

0.03

(5) Library Cess

382

0.25

500

0.32

800

0.51

700

0.44

1000

0.63

0

0..00

(6) Sales Tax

653

0.42

1274

0.82

2315

1.47

4410

2.78

5189

3.25

4322

2.68

(7) Others

10625

6.87

14476

9.29

24992

15.91

24650

15.56

22355

14..00

20221

12.56

TOTAL

419114

271.15 557959

358.06 628036 399.76

712268 449.7

777763 487.07

892978 554.69

Annexure 3.7 -10 Total receipts and expenditure of Municipal Corporations at a glance (Rs in lakhs) Receipt A. General Account B. Capital Account Total (A+B ) C. Debt Head Total (A + B + C)

1993-94 1 994- 1995-96 1996-97 1997-98 1998-99 4053.46 4635.89 5851.88 5659.36 6224.25 6952.31 66.92

436.95

347.44 2245.53 1098.45

743.94

4120.38 5072.84 6199.32 7904.89 7322.70 7696.25 498.48

689.16

779.22

774.05 1038.91 1346.79

4618.86 5762.00 6978.54 8678.94 8361.61 9043.04 Expenditure

A. General Account

2603.85 2654.54 3289.38 3769.70 4126.40 4359.10

B. Capital Account

1001.46 1772.81 1779.36 2161.79 2495.33 3207.31

Total (A+B )

3605.31 4427.35 5068.74 5931.49 6621.73 7566.41

C. Debt Head Total (A + B + C) Closing balance

585.83 1152.24 1211.62 1191.19 1155.90 1363.37 4191.14 5579.59 6280.36 7122.68 7777.63 8929.78 427.72

182.41

313

698.18 1556.26

583.98

113.26

Annexure 4. I DETAILS OF TRANSFER OF INSTITUTIONS AND STAFF TO LSGIs A. Institutions and posts transferred to Grama Panchavats

1. Agriculture Department

Krishi Bhavans of the respective places.

2. Animal Husbandry Department

Veterinary sub-centre, Veterinary Dispensary/Hospitals of respective places One Dairy Extension Officer and Auxiliary posts (this unit should be transferred to one of the Grama Panchayats in the Block and this should cover all the Grama Panchayats in the block). One Fisheries Sub Inspector (in the Grama Panchayat wherever necessary) Two Village Extension Officer posts (including lady V.E.O) (if it is not possible to deploy two posts for a Grama Panchayat from a Rural Development Block one post can be deployed for the present and additional post can be deployed as and when necessary subject to availability) Day care centres and Anganwadis of the respective places.

3. Dairy Development Department

4. Fisheries Department 5. Rural Development Department

6. Social Welfare Department 7. S.C. Development Department

Balawadies, Balawady-cum-feeding centre, seasonal day care centre and dormitories of the respective places.

8. Tribal Development Department

Balawadies, Medical unit, Nursery schools, Midwifery centres & Ayurvedic dispensaries of the respective places. 9. Health Services Department (Allopathy) Primary Health Centres and Government Dispensaries 10.Health Department (Indian System of Government Ayurvedic Dispansaries and Medicine) Hospitals of the respective places. 11.Health Department (Homoeo) Government Homoeo Dispensaries and Hospitals of the respective places. 12.General Education Department Government Lower Primary Schools of the respective places. 13.Public Works Department One Public Works Overseer post (this post should be given to a Grama Panchayat in which there are no engineering posts and the incumbent should work in three similar Grama Panchayats.

314

B. Institutions and Posts transferred to Block Panchavats. 1. Agriculture Department

One post of Assistant Director and Auxiliary posts

2. Industries Department

One post of Industries Extension Officer.

3. Rural Development Department

The post of Block Development Officer and other posts of Block Development Office.

4. Social Welfare Department

Care Homes, Old-age Homes and similar respective places.

5. S.C. Development Department

(1) Pre-matric Hostels of the respective places. (2) The post of Block Extension Officer (his services should be made available to all Grama Pnchayats in the Block

6. ST Development Department

Tribal Extension Officer (his services should be made available to all Grama Panchayats in the Block)

7. Health Services Department(Allopathy)

Block

level

Centre/Community

Primary

Health

Health

Centre,

Taluk Hospitals/Government Hospitals. 8. Health Department (Indian System of

Taluk Hospitals of the respective

Medicine) 9. Health Department (Homoeo)

places. Taluk Hospitals of the respective places

315

C. Institutions and posts transferred to District Panchavats 1. Agriculture Department

2. Animal Husbandry Department

3. Fisheries Department 4. Minor Irrigation Department 5. Industries Department 6. Rural Development Department 7. General Education Department 8. Technical Education Department 9.Co-operation Department

(i) Two posts of Deputy Director and auxiliary posts. (ii) The post of District Soil Conservation officer and auxiliary posts. (iii)One Assistant Executive Engineer and connected posts. (iv) Soil Testing Laboratory of the respective places. (v) Mobile Soil Testing Laboratory. (vi)District Sales Counter (vii) District Agriculture Farm/Coconut nursery (These institutions which are transferred to District Panchayat should serve other districts also where such institutions do not exist). Veterinary Polyclinic, ICDP area office, Mobile Veterinary Dispensary, Mobile Farm Unit, Clinical Laboratories not attached to District Veterinary Centres, (the services of mobile units and clinical laboratories should be extended to urban areas also) The fisheries Schools of respective places. One section consisting of one Assistant Engineer and connected staff. From the District Industries Centre, one Manager post and connected staff One post of Assistant Development Commissioner and the District Women's Welfare Officer and Auxiliary staff. (i) The Upper Primary Schools and High Schools of the respective places. (ii) One Section from the Deputy Director's Office. (i) Tailoring and Garment making Training Centre of the respective places. (ii) Tailoring Trade Centres of the respective places. One post of Assistant Registrar and one post of Clerk.

10. Public WorksDepartment One division consisting of Executive Engineer and auxiliary staff, (from among Local Works Division, Special Division, Building Division) Now all the District level officers have been transferred to the District Panchayats along with staff. District Hospitals arealso with the District Panchayats NB. Through follow-up government orders, majority of beneficiary oriented welfare and development schemes were transferred to the PRIs. Of special interest is the fact all the centrally-sponsored anti-poverty programmes including SGSY, IAY, and EAS have been fully transferred to them. Likewise all the pension/social assistance Schemes - for the Destitutes and Old aged, Handicapped, Widows, Agriculture Labourers, Unemployed are implemented by the Village Panchayats. 316

D. Institutions and posts transferred to Municipal Councils/Municipal Corporations 1. Agriculture Department

2. Animal Husbandry Department 3. Fisheries Department 4. Industries Department 5. Health Services Department (Allopathy) 6. Health Department (Indian System of Medicine)

(i) Krishi Bhavans of respective places. (ii) One post of Deputy Director of Agriculture, (this post should be under the Municipality of District headquarters but his services should be extended to all Municipalities of the District). The Veterinary Polyclinie, Sub-centre. Dispensary of the respective places One post of Fisheries Sub Inspector, (to the Municipalities wherever necessary) One post of Industries Extension Officer. Community Health Centres, Government Hospitals, Taluk Hospitals of the respective places. Taluk Hospitals of the respective places.

7. Health Department (Homoeo)

Taluk Hospitals of the respective places.

8. General Educalion Department

Government Primary Schools and High Schools of the respective places.

9. Co-operative Department

One post of Senior Co-operative Inspector (this post should be under the Municipal Council of District Head Quarters and the concered officer will attend to tha works in all the Municipalities of the District.)

317

Annexure 4.2.1 PHYSICAL ACHIEVEMENT OF THE PROJECTS EXECUTED BY THE PANCHAYATS UNDER PEOPLE'S PLAN CAMPAIGN

ltem

Village Panchyat 1997-98

1998-99

Block Panchayat 1999-2000

1997-98

1998-99

1999-

District Panchayat 1997-98

1998-99

1999-2000

Fallow land made cultivable(in

1500214.738 91948.859

70324

12045.9

15956.76 18093.35 2725

9320.277 5239.53

hectres) No.of new tractors in agriculture

1166

539

732

10

91

5

6

20

2

No. of new trillers for agnculture

209

25 S

822

74

64

48

11

32

3

No. of calves distributed

48414

27017

16217

3 1 60

835

463

1622

No.of lambs distributed

1053 84

27550. 178 1 1892

6408

441

840

188

119

0

No. of chiks distributed

1064028

228223

175715

12269

1600

280f

15467

804. I

5500

No. of cattle sheds constructed

19657.99

0

22477

27879

2052

361

153

284

1201

600

No.of tailoring machines distributed 26728

13031

2959

4323

516

209.7

575

74

1

No of industrial units stalled

2464.85

3529

2018

724.4047

720

348

69

349

99

No. of persons newly employed in

9774

16193

12321

3481

4073

3859

610

340

421

industrial No. of house-sites provided Tor

3273

3458

4406

92S

1338.27

1436

114

1 165

497

weaker sections No. of houses constructed for

3495 1

37017

904 1 3

8834

13408

34068

7987

7970

62197

31189.96

20201

3 1 555

4860

1729

1879

2008

120

822

No.of toilets constructed

114294.3

89179

100217

11849.62

9865

8659

3052

294

340

No. of houses electrified

31232

25825

-24516

4774

1133

2459

626

46

0

No.of wells newly constructed

21636

22366

25097

2546

1585

1868

694

0

91

No. of new street taps installed

6673

7252

7931

1165

715

1719

607

210

843

No.of private taps installed

4034

1658

2375

308

107

175

16

0

15

No.of street lights installed

19670

1 35 81

42471

386

1515

211

693

23

39

No.of tanks renovated

4796

2309

1660

109.73

176

16

36

4

No.of pump sets installed

15261

16541

16573.00

2082

558

96

16

20

weaker sections No. of houses of weaker sections repaired

Length of new roads constructed

(a) Earthern Roads

318

216

(I) 8 metres wide

47890.15

37696.963

52332

6739.85

8608.52

4230.76 3085.31

61

104.55

(ii) 6 to 8 metres wide

71738.903

101178.16

63095

1482.17

5314.91

5509.68 2657.83

895.715

2117.8

(iii) less than 6 metres wide

155221.205

120720.36

2812661.00 5799.02

3123.08

3198.92 8587.8

102.691

5.6

50899

55317.432

32075

848.19

3729.76

1335.39 3124.2

2753.2

17472

(ii) 6 to 8 metres wide

80481.94

86742.408

72607

52.35.27

6546.53

1861.48 995.69

143.61

1.01

(iii) less than 6 metres wide

88568.971

74H43.774

11105.83

5563

577.64

371.8

30.02

5910

(I) 8 metres wide

43059.41

140131.49

63 1 73

12645.2

13353

14747.71 872.79

14515.7

345.48

(ii) 6 to 8 metres wide

104653.612

121529.54

172892

5876.51

10534.65 7821.1

289.98

41.6

(iii) Less than 6 metres wide

124699.883

139311.75

141308

6669.56

2833.88

1549.31 213151

287.755

18974.24

No. of new culverts constructed

5921.415

1355.928

1279

255

432

355

61

31200.5

48

No. of bridges constructed

339

601.05

416

27

57

7

89

26

No. of Institutions registered under

249.25

52

186

23

73

0

52

0

constructed

13755.13

24395.06

26761

7328.55

14183.17 17870.69 22137.51 0

No. of Annanavadi Buildings

2091

729

1830

115

325

constructed Plinth Area of Hospital Building

28985.06

66067.53

38113

106868.87 7200.04

19416.39 339.49

58

2846

10642.21

36039.02

225419

6005.42

13429.7

20668.5 4986

917

2951.8

constructed Plinth Area of Marketting Complex 92135.52

11417.95

44558

149.5

3252.52

1450.52 0

12187

600

2322.7751

10412 .666 199.43

2189.61

3.2

(b) Metalled Road (I) 8 metres wide

23218

(c) Tarred Roads

22

534.9

charitable Plinth Area of School Building 134

23

7812.08

77198.81 54

constructed Plinth Area of Office Building

constructed Area of land acquired (in Hectres)

6992.5711

23470.54 79.85

319

3.23

Details of physical achievements under Peoples' Plan Compaign (Municipalities) SI No Items I Fallow land made cultivable (in hectres) 2 Distribution of Seedings (Number of beneficiaries) Distribution of Fertilizers/Insecticides 3 (Numberof beneficiaries) 4 No of new tractors for agriculture 5 No. of new trillers for agriculture 6 No. of coconut trees cut and removed due lo disease (Financial assistance given only) 7 No. of calves distributed 8 No of lambs distributed 9 No. of chiks distributed 10 No. of cattle pound constructed 11 No. of tailoring machines distributed 12 No. of industrial units started 13 No of persons newly employed in industrial units 14 No.of house-sites provided for weaker sections 15 No. of houses constructed for weaker sections 16 No.of houses of weaker sections repaired 17 No. of toilets constructed 18 No. of houses electrified 19 No of smokeless chulas distributed 20 No. of wells newly constructed 21 No of new street taps installed 22 No. of private taps installed 23 No. of street lights installed 24 No. of tanks renovated 25 No.of pump sets installed 26 (ii) 6 to 8 metres wide 27 (I) 8 metres wide 28 (iii) less than 6 metres wide 29 (I) 8 metres wide 30 (ii) 6 to 8 metres wide 31 (iii) less than 6 metres wide

1997-98 Total

1998-99 Total

GS SCP 1860 252 137874 7203

TSP 0 50

Total 2112 14512

43558 11 7

2803 0 1

62 0 0

46423 11 8

15327 4 9

474 0 0

15 0 0

15816 4 9

34818 4 18

677 0 1

2 0 0

35516 4 19

35823 2624 7347 100581 1204 1071 6461 777 119 2006 1760 3853 968 5808 705 595 122 1563 39 572 3702 42 4135 31 37 25397

1757 1068 1664 14177 245 1205 39 202 138 1905 1710 4288 2355 601 200 111 31 90

30 1 12 6 0 0 0 12 8 91 27 42 14 0 1 4 0 0 0 0 1 1 0 0 0 0

37610 3693 9023 114764 1449 2276 6500 991 265 4002 3497 8183 3337 6409 906 710 153 1653 48 623 3710 52 4140 40 54 26066

17064 787 458 31888 1744 217 301 1746 248 4150 3386 4556 2227 493 1249 793 342 2614 133 693 1084 37 262 23 170 2883

1921 690 245 2546 239 30 32 315 151 1995 771 956 819 75 203 47 167 125 3 56 17 6 0 5 3 1189

43 6 0 24 0 0

19028 1483 703 34458 1983 247 334 2075 453 6159 4191 5539 3059 568 1466 842 509 2739 137 749 1102 44 262 28 173 4072

16593 631 296 11105 1069 155 245 842 355 9218 5279 5878 1898 409 1847 1876 610 3801 94 1022 3107 350 1852 884 20 3804

572 195 90 485 65 10 29 63 295 2795 1597 1112 760 52 327 2Q 55 220 33 42 2 14 741 10 1 507

14 0 0 0 0 0 0 1 35 23 10 25 6 0 0 0 0 10 1 1 1 0 0 0 0 0

17179 826 386 11590 1134 165 274 906 685 12036 6886 7015 2664 461 2174 1914 665 4031 128 1065 3110 364 2593 894 21 4311

11

51 7 9 5 9 17 669

320

GS 109 59750

SCP 4 438

TSP

1999-2000 Total

0 10

14 59 14 34 27 13 0 14 2 0 0 1 0 1 1 0 0 0 0

Total 1141 64140

GS 154 3445

SCP

TSP

49 1 105

0 10

Total 159 35566

32 (I) 8 metres wide 33 (ii) 6 to 8 metres wide 34 (iii) less than 6 metres wide 35 No. of new culverts constructed 36 No of bridges constructed 37 No. of Co-operative Societies for which financial assistance rendered 38 No. of Institutions registered under charitable 39 Plinth Area of School Building constructed (plinth 40 No. of Anganavadi Buildings constructed 41 Plinth Area of Hospital Building constructed including extension (in sq.m.) 42 Plinth Area of Office Building constructed including 43 Plinth Area of Marketting Complex constructed in sq m) 44 Area of land acquired (in Hectres)

26 213 2720 62 2

3 1 144 2 0

0 0 0 0 0

29 214 2864 64 2

31 25 4327 38 3

6 3 1106 3

24 7 3898 60

3 3 0 3

1 0 2 0

28 10 3900 63

24 5 6705 43

6 3 0 4

2984 200

0 0

0 0

2984 200

4096 3274

0 81

0 48

0 0

0 129

5382 185

0 0 1 0 1 0

37 28 5434 41 4

33 168 4409 41 5

0 0 0

8 6705 47

31 18 9 5671 195

0 0

0 0

4096 3274

0 0

0 0

5382 185

1

Details of Physical achivements under People’s Plan Campaign (Corporations)

1997-98 Total Sl.No

Items

1 Fallow land made cultivable (in hectres) Distribution of Seedings (Number of 2 beneficiaries) Distribution of Fertilizers/Insecticides 3 (Numberof beneficiaries) 4 No of new tractors for agriculture 5 No. of new trillers for agriculture No. of coconut trees cut and removed due to 6 disease (Financial assistance given only) 7 No. of calves distributed 8 No of lambs distributed 9 No. of chiks distributed 10 No. of cattle pound constructed 11 No. of tailoring machines distributed 12 No. of industrial units started 13 No of persons newly employed in industrial

GS

SCP

Total

0

0

0

38042

1600

0

0

0

0

0

0

0

0

0

GS

SCP

TSP

0 0 0 0 0

37 168

5 1 0 2

1 0 0 0

24 10 5671 197

9645 5220

0 8000

0 0

9645 13220

9225 122

0 72

0 0

9225 194

Annexure 4.2.3

1998-99 Total

TSP

4 0 142 2 1

1999-00 Total Total

GS 0

SCP

TSP

0

0

6472 10580

3350

Total

0

0

0

0

0

0

0 39642

4822

1650

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

129

0

0

129

144

0

0

144

149

35

0

184

983

0

0

983

1230

0

0

1230

5830

2360

0

8190

44835

0

0 44835 31570

0

0

31570

8080

0

0

8080

1650 15580

90

0

0

90

298

0

0

598

166

0

0

169

590

0

0

785

0

0

0

0

209

0

0

209

0

180

15

0

1

0

0

1

78

0

0

78

0

0

0

0

90

17

1

90

267

0

0

267

321

4551 43 6

units No.of house-sites provided for weaker 14 sections No. of houses constructed for weaker 15 sections 16 No.of houses of weaker sections repaired 17 No. of toilets constructed 18 No. of houses electrified 19 No of smokeless chulas distributed 20 No. of wells newly constructed 21 No of new street taps installed 22 No. of private taps installed 23 No. of street lights installed 24 No. of tanks renovated 25 No.of pump sets installed 26 (ii) 6 to 8 metres wide 27 (I) 8 metres wide 28 (iii) less than 6 metres wide 29 (I) 8 metres wide 30 (ii) 6 to 8 metres wide 31 (iii) less than 6 metres wide 32 (I) 8 metres wide 33 (ii) 6 to 8 metres wide 34 (iii) less than 6 metres wide 35 No. of new culverts constructed 36 No of bridges constructed No. of Co-operative Societies for which assistance rendered No. of Institutions registered under charitable 38 societies act Plinth Area of School Building constructed (plinth area in sq.m.) 37 financial

39

40 No.

of Anganavadi Buildings constructed Plinth Area of Hospital Building constructed 41 including extension (in sq.m.) Plinth Area of Office Building constructed 42 including extension (in sq.m) Plinth Area of Marketing Complex constructed 43 in sq.m)

0

0

0

51

0

454

0

18

0

22

0

27

413

51

0

886

2041

393

2

2495

1776

251

0

2028

228

468

5

411

2100

428

3

2495

2340

435

0

2780

1485

173

10

2188

1307

48

1

1738

1198

350

0

1550

540

683

20

611

183

0

0

232

0

41

0

41

1375

71

0

1397

0

33

0

0

0

0

0

0

19

20

2

19

40

0

0

73

15

5

0

20

0

0

0

0

27

150

20

27

0

0

0

0

968

0

0

1200

810

0

0

980

40

0

0

40

750

230

2

750

744

0

0

744

131

0

0

131

0

0

0

0

0

0

0

0

0

0

0

0

340

0

0

340

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

1800

0

0

1800

0

0

0

0

0

0

0

0

0

0

0

0

6

0

0

6

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

800

0

0

800

0

0

0

0

0

0

0

0

0

0

0

0

4824

0

0

4824

4643

0

0

4643

976

0

0

976

0

0

0

0

265

0

0

265

7462

0

0

7462

7260

0

0

7260

5385

0

0

5385

2775

0

0

2775

33198

0

0 33198 22873

0

0

22873

5219

0

0

5219

12

0

0

12

10

0

0

10

11

0

0

11

0

0

0

0

0

0

0

0

0

0

0

0

14

1

0

15

3

0

0

3

38

0

4

42

0

0

0

0

0

0

0

0

0

0

0

0

816

0

0

816

546

0

0

546

4380

0

0

4380

37

0

0

37

6

0

0

6

4

0

0

4

300

0

0

300

0

0

0

0

200

0

0

200

1000

0

0

1000

0

0

0

0

0

0

0

0

0

0

0

0

520

0

0

520

287

0

0

287

322

44 Area

of land acquired (in Hectres)

4

0

0

4

323

5

0

0

5

3

0

0

3

Annexure 4.3 FUNCTIONS OF LOCAL SELF GOVERNMENT INSTITUTIONS 1. VILLAGE PANCHAYAIS A. Mandatory functions of Village Panchayats 1. Regulation of building construction. 2.Protection of public land from encroachment 3.Protection of traditional drinking water sources. 4. Preservation of ponds and other water bodies 5. Maintenance of water-ways and canals under their charge 6. Collection and disposal of solid waste and control of liquid waste disposal. 7. Storm water drainage 8. Maintenance of environmental hygiene 9. Management of markets 10. Vector control 11. Regulation of slaughtering of animals and sale of meat, fish and other perishable food items. 12. Regulation of eating establishments 13. Prevention oj food adulteration, 14. Maintenance of roads and other public assets 15. Street lighting and their maintenance. 16. Immunization 17. Carrying into effect national and State level strategies and programmes for disease prevention and control. 18. Opening and maintenance of burial and burning grounds. 19. Licensing of dangerous and offensive trades 20. Registration of births and deaths. 21. Provide bathing and washing ghats 22. Providing ferries, 23. Provide parking space for vehicles 24. Provide waiting-sheds for travelers 25. Provide toilet facilities in public places 26. Regulate conduct of fairs and festivals. 27. Licensing of pet dogs and destroying strav dogs. B. General functions 1. Collection and updating of essential statistics. 2. Organising voluntary labour and contribution for community works. 3. Carrying out campaigns for thrift. 4. A warencss building on control of social evils like drinking, consumption of narcotics, dowry and abuse of women and children. 5. Ensuring maximum people's participation in all stages of development. 6. Organising relief during natural calamities. 7. Inculcating environmental awareness and motivating local action for environmental npgradalion. 8. Promoting co-operatives. 9. Enhancing communal harmony. 10. Mobilizing local resources in cash and in kind, including free surrender of land for development purposes. 11. Spreading legal awareness among the weaker sections. 12. Campaigning against economic crimes 13. Organising neighbourhood groups and self-help groups with focus on the poor. 14. Awareness building on civic duties

324

Sector-wise distribution o responsibilities I. AGRICULTURE 1. Bring into cultivation waste lands and marginal lands 2. Bring ahoiit an optimum utilisation of land 3. Soil conservation 4. Production of organic manure. 5. Establishment of nurseries. 6. Promotion of co-operative and group farming. 7. Organising self-help groups among cultivators 8. Promotion of horticulture and vegetable cultivation, 9. Fodder development 10. Plant protection. 11. Seed production 12. Farm mechanisation. 13. Management of Krishi Bhavans. II.

ANIMAL HUSBANDRY AND DAIRY

1. Cattle improvement programmes. 2. Dairy farming. 3. Poultry farming, bee keeping, piggery development, goat rearing, rabbit rearing. 4. Running or veterinary dispensaries. 5. Running of 1C DP suh-centres. 6. Preventive health programmes for animals 7. Prevention of cruelty to animals. 8. Fertility improvement programmes. 9. Control of diseases of animal origin. III. MINOR IRRIGATION All minor irrigation schemes within the area of a Village Panchayal. 1. All micro irrigation schemes. 2. Water conservation. IV.

FISHERIES

1.Development of fisheries in ponds and fresh water and brackish water fish culture, mari culure. 2. Fish seed production and distribution. 3. Distribution of fishing implements. 4. Fish marketing assistance. 5. Provision of basic minimum services for the families of fishermen 6. Welfare schemes for fishermen. V. SOCIAL FORESTRY /. Raising of fodder, fuel and fruit trees 2. Organising campaigns for tree planting and environmental awareness. 3. Afforestation of waste lands. VI. SMALL SCALE INDUSTRIES /. Promotion of cottage and village industries 2. Promotion of handicrafts 325

3. Promotion of traditional and mini industries VII. HOUSING 1. Identification of homeless people and poramboke dwellers and provide house sites and houses. 2. Implementation of rural housing programmes. 3. Implementation of shelter upgradation programmes. VIII. WATER SUPPLY 1. Running oj water supply schemes covering one village panchayat. 2. Setting iiji of water supply schemes covering one village panchnyat. IX. /. 2.

ELECTRICITY AND ENERGY

Street lighting Promotion of bio-gas.

X. EDUCATION /. Management of Government pre-primary schools and Government primary schools. 2. Literacy programme's. XL PUBLIC WORKS /. Construction and maintenance of village roads within the village panchayat, 2. Construction of buildings for institutions transferred. XII. PUBLIC HEALTH AND SANITATION /. Management oj dispensaries and primary health centres and subcentres (in all systems ofmedicine). 2. Management of child welfare centres and maternity homes. 3. Immttnisation and other preventive measures. 4. Family Welfare 5. Sanitation. XIII. SOCIAL WELFARE /. Running of anganwadies. 2. Sanctioning and distribution of pensions to destitute, widows, handicapped and agricultural labourers. 3. Sanctioning and distribution of unemployment assistance, 4. Sanctioning of assistance for marriage of the daughters of widows. 5. Management of group insurance scheme for the poor. XIV. POVERTY ALLEVIATION /. Identification of the poor. 2. Self employment and group employment schemes for the poor especially women. 3. Providing community assets of continuing benefit to the poor. XV. SCHEDULED CASTES AND SCHEDULED TRIBES DEVELOPMENT 1. Beneficiarv oriented schemes under SCP and TSP. 2. Management oj nursery school for Scheduled Castes and Scheduled Tribes. 3. Provision of basic amenities in Scheduled Castes and Scheduled Tribes habitats. 4. Assistance to Scheduled Castes and Scheduled Tribes students. 326

5. Discretionary assistance to Scheduled Castes and Scheduled Tribes in need.

XVI. SPORTS AND CULTURAL AFFAIRS Construction of play grounds. XVII. PUBLIC DISTRIBUTION SYSTEM /. Examination of complaints against the public distribution system and taking oj remedial measures. 2. Organisation of campaigns against weights and measures offences. 3. General supervision and guidance of ration shops and maveli stores and other public distribution centres and if necessary starting new public distribution centres.

XVIII. NATURAL CALAMITIES RELIEF /. Management of relief centres 2. Organisation of relief works 3. (Repair works to assets will he divided and carried out by the Panchayat in charge of the assets) XIX. CO-OPERATIVES /. Organisation of co-operatives within the jurisdiction of the Panchayat. 2. Payment oj Government grams and subsidies within the jurisdiction. II. BLOCK PANCHAYA IS A. General functions of Block Panchayats 1. Pool technical expertise both Government and non-government at the Block level. 2. Provide technical services to Village Panchavats. 3. Prepare plans after taking into account the plans of Village Panchayat to avoid duplication and provide the backward and forward linkages. B. Sector-wise distribution of responsibilities. 1

II.

AGRICULTURE 1. Faemers' training for the programmes implemented at the village level. 2. Arrangements of agricultural inputs required for schemes at the village level. 3. Condiict of agricultural exhibitions. 4. Integrated watershed management in watersheds falling within Block Panchayat area. 5. Mobilize agricultural credit. 6. Sericulture. ANIMAL HUSBANDRY AND DAIRY

/. Running of Veterinary Polyclinics and Regional Artificial Insemination Centres. 2. Provide specialily services in Animal Husbandry. 327

3. Conduct cattle and poultry shows. III.

MINOR IRRIGATION All lift irrigation schemes and minor irrigation schemes covering more than one village Panchayat.

IV.

FISHERIES Development of traditional landing centres.

V. SMALL SCALE INDUSTRIES 1. Selling up of mini industrial estates. 2. Promotion of industries with investment limit of one-third of SSI. 3. Self employment schemes in industrial sector. VI. HOUSING 1. Popularisation of low cost housing. 2. Promotion of housing co-operative soeielies. VII. ELECTRICITY AND ENERGY Promotion of non-conventional energy sources. VIII. EDUCATION Management of Industrial Training Institutes. IX. PUBLIC WORKS 1. Construction and maintenance of all village roads connecting more than one Village Panchayal and other District Roads within the block Panehayat. 2. Construction of buildings for institutions transferred. X.

PUBLIC HEALTH AND SANITATION Management of community health centres and taluk hospitals within the Bloek Panehayat area in all systems ol medicine.

XI.

SOCIAL WELFARE Management of ICDS.

XII. POVERTY ALLEVIATION 1. Planning and implementation of Employment Assurance Schemes in eo-ordination with the Village Panehayats. 2. Skill upgradalion of the poor for self employment and wage employment for people below poverty line. XIII. SCHEDULED CASTES AND SCHEDULED TRIBES DEVELOPMENT 1. Management of pre-matric hostels. 2. Promoting Scheduled Castes and Scheduled Tribes Co-operatives. XIV. CO-OPERATIVES 1. Organisation of co-operatives within the jurisdiction of Block Panchayat. 2. Payment of Government grants and subsidies within the jurisdiction. III.

DISTRICT PANCHAYATS 328

A. General functions of District Panchayats 1. Mobile the technical expertise available from government and non-government institutions. 2. Provide technical service to the Block Panehayats and Village Panchayats and the Municipalities, 3. Prepare plans after taking into account the plans of (he Village Panehayats and Block Panehayats lo avoid duplication and to provide backward and forward linkage.

B. Sector-wise distribution of responsibilities AGRICULTURE 1. Running of agricultural farms other than regional farms and research centres and establishment of new farms. 2. Integrated watershed management in watersheds covering more than one Block Panehayat area. 3. Provision of agricultural inputs. 4. Soil lesting. 5. Pest control. 6. Marketing of agricultural produce. 7. Cultivation of ornamental plants. 8. Promotion of agricultural co-operatives. 9. Promotion of commercial crops. 10. Biotechnology applications. 11. Field trials and pilot projects to popularise innovation. 12. Locally appropriate research and development. ANIMAL HUSHANDRY AND DAIRY 1. Management of district level veterinary hospitals and laboratories. 2. Management of dairy extension service units. 3. Promotion of milk co-operatives. 4. Management of farms oilier than regional farms, breeding farms and research centres. 5. District level training. 6.

Implementation of disease prevention programmes.

7. Field trials and pilot projects on innovative practces. 8. Locally relevant research and development. MINOR IRRIGATION 1.Development of ground water resources. 2.Construction and maintenance of minor irrigation schemes covering more than one Block Panchayat 3.Command area development. FISHERIES 1. Arrangements for marketing offish. 2. Management of Fish Farm Development Agency. 3. Management of district level hatcheries, net making units, lish markets, feed mills, ice plants and cold storages. 4. Management of fisheries schools. 5. Introduction of new technologies. 6. Provide inputs required for fishermen. 7. Promotion of fishermen's co-operatives. 329

SMALL SCALE INDUSTRIES 1. 2. 3. 4. 5. 6. 7. 8. 9.

Management of District Industries Centre. Promotion of small scale industries. Selling up of industrial estates. Arranging exhibitions for sale of products. Entrepreneur development programmes. Marketing of products. Training. Input service and common facility centres. Industrial development credit planning.

I. HOUSING 1. Housing complex and infrastructure development. 2. Mobilizing housing finance. II. WATER SUPPLY 1. Running of water supply schemes covering more than one Village Panchayat. 2. Taking up of water supply schemes covering more than one Village Panchayat. III. ELECTRICITY AND ENERGY 1. Taking up of micro-hydcl projects. 2, Determining priority areas for extension of electricity. [V. EDUCATION 1. Management of Government high schools (including LP section and UP section attached to high schools) 2. Management of Government higher secondary schools. 3. Management of Government technical schools. 4. Management of vocational training centres and polytechnics. 5. Management of vocational Higher Secondary schools. 6. Management of District Institute for Education and Training. 7. Co-ordinate centrally and Stale sponsored programmes related to education. V.

PUBLIC WORKS

1. Construction and maintenance of all district roads other than State Highways, National Highways and Major District Roads. 2. Construction of buildings for institutions transferred. VI PUBLIC HEALTH AND SANITATION !. Management of district hospital in all systems of medicine. 2. Selling up of centres lor care of special categories of disabled and mentally ill people. 3. Co-ordination of centrally and State Sponsored programme at the district level. VII. I'

SOCIAL WELFARE Payment of grants to orphanages. 330

2.

Shilling of welfare institutions for the disabled, destitutes etc.

VIII

POVERTY ALLEVIATION

Providing infrastructure for self-employment programmes. IX.

SCHEDULED CASTES AND SCHEDULED TRIBES

DEVELOPMENT 1. Management of post matric hostels. 2. Management of vocational training centres for Scheduled Castes and Scheduled Tribes. X.

SPORTS AND CULTURAL AFFAIRS Construction of stadiums.

XI.

CO-OPERATIVES

1. Organisation of co-operatives within the jurisdiction of District Panchayats. 2. Payment of Government grants and subsidies toco-operatives within the jurisdiction." IV. MUNICIPALITIES AND MUNICPAL CORPORATIONS A. Mandatory functions of Municipalities 1. 2. 3. 4.

Regulation of building construction Protection of public land from encroachment Protection of traditional drinking water sources Preservation of ponds and other water bodies 5. Maintenance of water-ways and canals under their charge 6. Collection and disposal of solid waste and control of liquid waste disposal 7. Storm water drainage 8. Maintenance of environmental hygiene 9. Management of markets 10. Vector control 11. Regulation of slaughtering of animals and sale of meat, fish and other perishable food items 12. Regulation of eating establishments 13. Prevention of food adulteration 14. Maintenance of roads and other public assets 15. Street lighting and their maintenance 16. Immunisation 17. Carrying into effect national and State-level strategies and programmes for disease prevention and control 18. Opening and maintenance of burial and burning grounds 19. Licensing of dangerous and offensive trades and industries 20. Registration of births and deaths 21. Provide bathing and washing ghats 22. Provision of ferries 23. Provide parking space for vehicles 24. Provide waiting-sheds for travellers 331

25. Provide toilel facilities in public places 26. Regulate conduct of fairs and festivals 27. Licensing of pet dogs and destroying stray dogs 28. Provision of basic minimum service in slums 29. Amenities for pedestrians including foot path and road crossing facilities 30. Preparation of detailed town plans and action,plan for,phased implementation B. GENERAL FUNCTIONS 1.Collection and updating of essential statistics 2.Organising voluntary labour and contribution for community works 3.Carrying out campaigns for thrift 4.Awareness building on control of social evils like drinking, consumption of narcotics, dowry and abuse of women and children 5.Ensuring maximum people's participation in all stages of development 6. Organising relief during natural calamities 7. Including environmental awareness and motivating local action for environmental upgradation . 8.Promoting co-operatives 9.Enhancing communal harmony 10. Mobilising local resources in cash and in kind, including free surrender of land for development purposes 11. Spreading legal awareness among the weaker sections 12. Campaigning against economic crimes 13. Organising neighborhood groups and self-help groups with focus on the poor. 14. Awareness building on civic duties XV.

C . SECTOR-WISE DISTRIBUTION OF RESPONSIBILITIES

XII

AGRICULTURE 1. Bring into cultivation wastelands and marginal lands 2. Bring about an optimum utilisation of land 3. Soil conservation 4. Production of organic manure 5. Establishment of nurseries 6. Promotion of co-operative and group farming 7. Organising self-help groups among cultivators 8. Promotion of horticulture and vegetable cultivation 9. Fodder development 10.Plant protection 11.Seed production 12.Farm mechanisation 13.Management of Krishi Bhavans. 14.Conduct of agricultural exhibitions

XIII.

ANIMAL HUSBANDRY AND DAIRY 1. Cattle improvement programmes 2. Dairy farming 3. Poultry farming, bee keeping, piggery development, goat rearing, rabbit rearing, 4. Running or veterinary dispensaries 5. Running of ICDP sub-centres 6. Preventive health programmes for animals 7. Prevention of cruelty to animals 8. Fertility improvement programmes 332

9. Control of diseases of animal origin 10.Running of veterinary poly clinics and Regional Artificial Insemination Centres 11. Provide speciality services in animal husbandry 12.Conduct cattle and poultry shows

XIV MINOR IRRIGATION I. All minor irrigation and lit't schemes within the area of a Municipality 2. All micro irrigation schemes 3. Water conservation 4.Development of ground waster resources IV. FISHERIES

333

1.Development of fisheries in ponds and fresh waster and brackish waster fish culture 2.Fish seed production and distribution 3.Distribution of fishing implements 4.Fish marketing assistance 5.Provision of basic minimum services for the families of fishermen 6.Welfare schemes for fishermen 7.Development of traditional landing centres 8.Management of fisheries schools V.SOCIAL FORESTRY 1. Raising of fodder, fuel and fruit trees 2. Organising campaigns for tree planting and environmental awareness 3. Afforestation of waste lands VI. SMALL SCALE INDUSTRIES 1. 2. 3. 4. 5. 6. 7. 8.

Promotion of cottage and village industries Promotion of handicrafts Promotion of traditional and mini industries Setting up of mini industrial estates Promotion of industries with investment limit of one-third of SSI Self employment schemes in industrial sector Promotion of small scale industries Entrepreneur development programmes

VII. HOUSING 1. Identification of homeless people and porambokc dwellers and provide house sites and houses 2.

Implementation of rural housing programmes

3.

Implementation of shelter upgradation programmes

4.

Popularisation of low cost housing

5.

Promotion of housing co-operative societies

6.

Housing complex and infrastructure development

7.

Mobilising housing finance

VIII. WATER SUPPLY 1. Running of water supply schemes covering one Municipality 2. Setting up of water supply schemes covering one Municipality IX. ELECTRICITY AND ENERGY 1. Street lighting 2. Promotion of bio-gas 3. Promotion of nonconventional energy sources

334

V. EDUCATION 1.Management of Government pre-primary schools. Government primary schools and Government High Schools. 2. Literacy programmes 3. Management of Industrial Training Institutes in the municipal area 4.Management of Government higher secondary schools in the municipal area 5.Management of Government technical schools in the municipal area 6.Management of vocational training centres and poly technics in the municipal area 7.Management of vocational higher secondary schools in the municipal area XL PUBLIC WORKS I.

Construction and maintenance of roads within the Municipality other

than National Highways. State Highways and Major Districts Roads 2.

Construction of buildings for institutions including those got

transferred from Government XII.PUBLIC HEALTH AND SANITATION 1. Management of dispensaries and .primary health centres and sub-centres in all systems of medicine) 2.

Management of child welfare centres and maternity homes

3.

Immunisation and other preventive measures

4.

Family welfare

5.

Sanitation

6

Management of community health centres and taluk hospitals within the

municipal area in all systems of medicine XIII. SOCIAL WELFARE 1. Running of anganwadies 2.

Sanctioning and distribution of pensions to destitutes, widows, handicapped and agricultural labourers

3.

Sanctioning and distribution of unemployment assistance

4.

Sanctioning of assistance for marriage of the daughters of widows

5.

Management of group insurance scheme for the poor 335

6.

Payment of grants to orphanages

7.

Staring of welfare institutions for the disabled,.destitutes, clc.

XIV. POVERTY ALLEVIATION 1. Identification of the poor 2. Self employment and group employment schemes for the poor especially women 3. Providing community assets of continuing benefit to the poor 4. 5.

Sill upgradation of the poor for self employment and wage employment for people below poverty line Providing infrastructure for self-employment programmes

XV.

SCHEDULED CASES AND SCHEDULED TRIBES DEVELOPMENT

1. Beneficiary oriented schemes under SCP and TSP 2. Management of nursery school for Scheduled Castes and Scheduled Tribes 3. Provision of basic amenities in Scheduled Castes and Scheduled Tribes 4. Assistant to Scheduled castes and Scheduled Tribes Students 5. Discretionary assistance to Scheduled Castes and Scheduled Tribes in need 6. Management or pre-matric hostels in the municipal area 7. Promoting Scheduled Castes and Scheduled Tribes co-opcralives 8.

Management of post matrie hostels in the municipal area

9. Management of vocational training centres for Scheduled Castes and Scheduled Tribes in the municipal area XVI. I XVII. 1 2 3

SPORTS AND CULTURAL AFFAIRS Construction of play grounds and stadiums PUBLIC DISTRIBUTION SYSTEM Examination of complaints against the public distribution system and taking of remedial measures Organisation of campaigns against weights and measures offences General supervision and guidance of rational shops and maveli stores and other public distribution centres and if necessary starting new public distribution centres

XVIII. NATURAL CALAMITIES RELIEF 1. Management of relief centres 2. Organisation of relief works (Repair works to assets will be divided and carried out by the Municipality in charge of the assets) XIX.CO-OPERA TIVES 1. Organisation of co-operatives within the jurisdiction of the Municipality 2. Payment of Government grants and subsidies within the jurisdiction.

336

Annexure 5.1 Status of implementation of the recommendations of the First SFC 1) Relating to Devolution of Funds

RECOMMENDATION STATUS OF IMPLEMENTATION I . Basic Tax rates to be doubled and the additional amount distributed among the District Panchayats and Block Panchayats in the ratio 3:2. All these recommendations accepted and The Urban Local Bodies (ULBs) to be implemented except the one on minimum eligible for Basic Tax grant. Also minimum land tax to be fixed at Rs.5/- in rates. Urban Local Bodies have not yet Rural areas, Rs.7.50 in Municipalities and been-given their share of the Basic Tax grant. Rs.10/- in Corporations. 2 Village Road Maintenance Grant to be merged with Vehicle Tax Compensation and 25% of the net collection of Motor Vehicle Tax to be fixed as share of Village Panchayats and ULBs.

Reduced amount of 20% of net collection of Motor Vehicles Tax accepted and implemented in full. Though accepted, the recommendation has become infructuous with Government doing away with giving exemptions from Building Rules. Accepted but not yet operationalised. Amendment to the Building Tax Act is necessary. Accepted but not yet operationalised.

3 Building exemption fee to be shared equally with local governments. 4 Building Tax to be assigned to Village Panchayats and Municipalities. 5 25% of income from sale of Court Fee Stamps to be earmarked to the LSGIs.

6 25% of funds for centrally sponsored anti- Accepted. The entire funds are given to poverty programmes to be at the disposal the LSGIs. of LSGIs. 7 One per cent of State Revenues to be Not accepted. distributed among urban and rural pools. 8 Maintenance grants calculated at current Not accepted. replacement cost and suitably scaled up for price escalation to be given to LSGIs. 9 50% of trie maintenance cost to be sought The II11 Finance Commission'has not agreed to it. from Government of India. The 1llh Finance Commission has not agreed to it. Share of LSGIs has been 10. 5% (if the Central revenues to go to LSGIs. fixed at about 3 % of Central revenues. 337

2) Relating to augmentation of resource mobilization by LSGIs

. Cable TV Operators to be liable for annual Accepted - not operationalised. licence fee as well as Entertainment Tax

1

2. Central Government buildings to be brought under Property Tax with Government of India's consent. 3. District Panchayat to levy one per cent of tax on sale price of immovable properties where the sale price is more than Rs.25,000/4 The Library Cess collected by local governments to be used for improving infrastructure of educational institutions. 5 Service Tax to become an independent tax. 6Two per cent penal interest to be charged on delayed payment. 7 Profession Tax to be uniform for urban and rural areas to be unified and new slabs to be notified. 8 Slab rates of Profession Tax to be notified for self employed professionals like Doctors, Lawyers, Accountants etc. 9 Government to fix minimum Advertisement Tax rates. 10 Licence Fees to be enhanced. Only minimum licence fee to be specified. 11 . Municipalities and Village Panchayats to collect daily fee from persons using road poromboke without conferring any right on these persons. 12 Local Development Fund to be created.

13

Power of attorneys to be registered and this Stamp Duty given to local governments 338

This has been rejected by the 11th Finance Commission. First accepted, then rejected.

Not accepted. Accepted. The modified rules for Village Panchayats yet to be issued. (Under consideration gf the Subject Committee). For ULBs no change has been initiated. Implemented. Implemented. New slabs notified only for Village Panchayats but not for ULBs. Accepted - not yet operationalised. Amendment to the Rules required. Accepted - Amendments to the Acts brought about. Rules and byelaws yet t be issued. Implemented for most of the items. Bu the principle of fixing the minimum alone has not been The matter is being examined by Government, Accepted - but not operationalised. (More or less infructuous now.) Examined by Government and rejectee

3) Relating to rationalization of fiscal systems of LSGIs. a) General points. I . Government to revert to the old system of automatic credit of Implemented. surcharge of Stamp duty to local governments. 2. LSGI to decide on utilization of nonImplemented. plan grants. 3. Formula based allocation for CFC grant and Rural and Urban Pool. K5% of CFC grant to be earmarked for Village Panchayats and the remaining 15% distributed among Implemented with a simplified formula. Block & District Panchayats in the ratio 3:2. Plan funds and other grants to be distributed with 90% wcightage for population and 10% for area. 4. Additional Entertainment Tax and Entertainment Tax to be merged into a single tax. 5. Show tax and surcharge on Show tax to be merged into one. .6. Enabling provision for levying Entertainment Tax based on seating capacity. 7. Heads of office to furnish details of employees to Village Panehayats and ULBs. . 8. Land Cess to be abolished if tax on sale of property is introduced.

Implemented. Implemented. Enabling provision introduced in the Entertainment Tax Act but Rules not yet framed. Implemented. Land Cess has been abolished but tax on sale of property has not been introduced.

. 9. Minimum land value to be fixed in Accepted - but not yet finalised. consultation with local governments. 10. Urban Pool and Rural Pool to be created. 11. Increase in ceiling rate of surcharge to be brought down from 5 to 4% 12. All local governments to do tax mapping and go in for unique premises numbering.

Rural pool created; Accepted- not implemented. Accepted. But operational instructions not issued. 339

b) Rationalisation of Property Tax. 1. Unauthorised buildings to be Legal provision brought into the brought under the Property Tax Panchayat Raj Act. Rules not prepared. net.

2. Minimum Property Tax to be fixed.

Necessary modifications have been made in the Kerala Municipality Act 1994. Enabling provision brought into the KPR Act but Rules not yet amended.

Introduced into the Panchayat Raj Act and 3. Prescribe time limit for revisions enabling provision is there in the Municipality Act for which rules are to be and appeals. framed. 4. Round off annual and half yearly payment of tax to nearest Implemented. rupee. 5. Residential buildings to be charged property tax based on plinth area with rebates of 10% for buildings below 25 years and 20% for those above 25 years and with a surcharge of 25% for rented buildings. Buildings less than 20 sq. metres with mud walls and thatched roof to be exempted from payment of tax. For commercial properties the system of assessment based on rental value to continue with rebate of 10% for owner occupied commercial building.

The Acts have been amended to introduce plinth area based assessment for all buildings both residential and nonresidential, But the Rules have not been framed.

6. Revision of Property Tax to be made every four years. Necessary provisions made in the Kerala Municipality Act. In the case of Village Panchayats, Rules are to be amended.

340

4) Miscellaneous Issues. I. Creation of a special Cell in Finance Department. 2. Untied funds to taper off. Expert Group to go into format of budget and /elated matters auditing and including accounting. 4. LSGIs to be empowered to execute Civil works without intervention of Government agency. 5. The Rural Development Board should only be a funding agency. 6. Rural Development Board and KUDFC to have soft loan windows. 7. Kerala Water Authority to write off arrears before 1.4.1984 and to recover arrears for the remaining period by adjustment. 8.Village Panchayats and ULBs to be empowered for fixing special kinds of lamps in streets and the responsibility for maintenance and replacement be given to willing local governments. Also energy charges to be collected on metercd basis. 1. Reorganise Revenue Villages in such a way that no village falls in more than one Panchavat/ULB. 2. Statutory authority to give Annual Report to the Governor on the quantum of devolution to LSGIs.

Implemented .

Implemented . The task has been entrusted to Institutionof Public Auditors of India. Implemented as part of People's Planning Campaign. Necessary amendments to the Act made. Accepted - but not operationalised.

Accepted. Being operationalised. Write off has not been done. Part of the arrears has been adjusted.

Accepted. Maintenance responsibility handed over to local governments. Metering of energy consumption is to be implemented.

This is under examination.

Chief Secretary has been the Statutory Authority.

341

made

Annexure 6.1 Proposed Formula for Inter Se Distribution of Plan Funds In 1998-99 the Government of Kerala transferred a total sum of Rs. 950 crores to the local bodies as plan grants. Of the total plan grants, 75.37 per cent was allocated to the general sector, 20.53 per cent as the special grants for scheduled castes and 4.10 per cent as special grants for the scheduled tribes. In the general sector, the rural local bodies were given Rs. 426 crores and urban local bodies were given Rs. 107 crores. The general sector component of grant was distributed on the basis of the following five criteria suggested by the Working Group on Evolving Formula for Inter-se Distribution of Plan Grants to Local Bodies (also see Table 3.29, Chapter 3). 1. 65 per cent of the grant was divided in proportion of the Non-SC/ST population. 2. 15 per cent of the grant was divided in proportion of the population of agricultural workers, and people engaged in livestock, fishing and forestry. 3. 5 per cent of the grant was divided in proportion of the geographical area of trie panchayat. 4. 5 per cent of the grant was divided in proportion of the area under paddy field. 5. 10 per cent of the grant was divided in the inverse proportion of the difference between own income and the highest income of any panchayat. We have proposed inclusion of an additional criterion in the calculation of inter se distribution of plan funds. It is recommended that a part of the grant that is given on the basis of population, up to a maximum of 10 per cent of the total grant, be divided only among the panchayats that increase their own revenue over the previous year. The fund distributed by the revenue effort criterion is distributed among local bodies of a particular tier by the following formula: ARj = (Pj.rj/Σ(Pj.rj))R where ARj is the allocation by the resource effort criterion for j local body, R is the total amount allocated by the revenue effort criterion, PJ is the population of 11th panchayat and rj is the percentage increase in own revenue of the jth panchayat with an upper limit. Set j includes only those local bodies that increased their own revenue in the previous year. This exercise calculates the inter se distribution of plan funds for year 1998-99 for gram panchayats, municipalities and municipal corporations using the proposed formula and compares the pattern of allocation with the allocations based on the existing formula. The concept of the revenue effort criterion and the method of computation are explained in detail in Chapter 6. It has been recommended that an upper limit be applied in the calculation of increase in own revenue (rj); all local bodies with an increase higher than the upper limit must be considered to have had an increase equal to the upper limit. This upper limit is required to avoid a skewed distribution of this grant in favour of a few local bodies that might be able to make a large increase in own revenue because of certain 342

specific circumstances.

343

As mentioned before, a lower limit of zero per cent increase is applied to the local bodies that show a reduction in their own revenue over the previous year. It is noteworthy that the allocation by the proposed formula requires that a local body with non-SC/ST population pi must at least increase its own revenue by Σ (pi.ri)/ Σ pi (ri being the percentage increase in the own revenue with an upper and lower limit) so as to maintain its plan grant at the level of the allocation by the existing formula. This implies that not only the local bodies that do not increase their own revenue but also the local bodies that increase their own revenue by an extent lower than Σ (pi.ri)/ Σ pi would get a lower plan grant under ihe proposed arrangement. It must however be clarified that this reduction is not because these local bodies are being penalised for not increasing their revenue by the desired extent but merely because of a smaller amount of funds being allocated by the population criterion. In case of the local bodies for which the increase in Own revenue is positive but less than Σ (pi.ri)/ Σ pi the reward for increasing the own revenue is outweighed by an overall decline in the grant distributed on the basis of population. The local bodies that show a reduction in own revenue are considered to have a zero increase (and not a negative increase! in the calculation of allocation by revenue effort criterion. The simulations in this exercise use data on 973 panchayats (out of a total of 990). 55 municipalities and 3 municipal corporations. Seventeen panchayats thai did not furnish complete data on sources of revenue and resource mobilisation had to be excluded from this exercise. It may also be noted that these simulations use data on the increase in own revenue between 1998-99 and '1997-98 for calculation of the grants given by the revenue effort criterion for 1998-99. In practice; however, the grants would be estimated using the increase in the previous year over the year before that. That is, for example, the estimation of grants for 2001-02 will be based on the increase in own revenue between 2000-01 and 1999-2000. Gram Panchayats: In this exercise the proposed formula was applied for estimating the allocations for 973 panchayats for which data are available for 1998-99. Table I shows the amount of plan grant for the gram panchayats for 1998-99 divided on the basis of the existing formula and on the basis of the proposed formula. In comparison with the own revenues in 1997-98, 896 panchayats registered an increase in their own revenues. Therefore, as per the proposed revenue effort criterion, 8.96 percent of the plan funds (Rs. 3582 lakhs) would have been divided only among the 896 panchayats that increased their revenue. Correspondingly, 56.04 per cent of the plan grant (Rs. 22403 lakhs) would have been divided on the basis of population criterion. For the purpose of this exercise, we tried three levels of upper limits 011 the extent of increase in own revenue (r,): 20 per cent. 25 per cent and 30 per cent. Table 2 compares the estimated plan grants with the grants as per the existing formula. When the upper limit on increase in own revenue was assumed to be 30 per cent, a total of 835 panchayats were rewarded for 344

increasing their n\\n revenue. Given the non-SC/ST populations and extent of increase of own ivu'nue of different panchayats in 1998-99. a panchayat needed to increase its

345

revenue hy at least 18.1 percent Σ (pi.ri)/ Σ pi) to maintain its level of plan grants. There were 138 panchayats that did not increase their own revenues in 1998-99 hy ihis extent. This includes 77 panchayats showing a decline in the own revenue and 61 panchayats that increased the revenue hut hy less than 26.76 percent. The revision of formula lor inler-se distribution led to an increase in plan granl for S3 5 oin of 973 panchayats. The median change in the plan grants because of the revision in the formula was an increase of 0.39 lakhs. The highest increase in the plan grants was 1.21 lakhs and the highest reduction was 7.68 lakhs. In proportional terms, the highest increase in plan grants was 1.40 per cent and the highest reduction was I 1.54 per cent. Table I Plan grants for gram panchayats distributed by the Working Group formula and the proposed formula (Rs.Lakhs) Items

Working Group Weightage

Formula Proposed formula Weightage Amount Amount

65 15

25985.8 5996.7

56.04 15.00

22403.8 5996.7

5

1998.9

5.00

1998.9

Area under paddy cultivation

5

1998.9

5.00

1998.9

Panchayat's own income (inverse) Revenue effort

10

3997.8

10.00

3997.8

Total Grant Distributed for 973 panchayats takenup for the estimation* Amount divided on the basis of: Population Population of agricultural labour and persons engaged in forestry, livestock, Fisheries Geographical area

--8.96 3582.0 Sources: GoK 1998-99 Appendix IV. Budget for 1998-9 Notes: The lotal amount of grants used here was computed by adding the actual grants of these 973 panchayats. From this amount Rs. 25 lakhs corresponding to the special grants given to the pilgrim centers was deducted. The upper limits of increase in own revenue at 20 per cent and 25 per cent gave similar results. When the upper limit was kept at 20 per cent, a panchayal needed to increase its revenue by 18.1 percent to maintain its level of plan grants. As a result, plan allocations increased for 857 panchayats. When the upper limit was kept at 25 per cent, a panchayat needed to increase its revenue hy at leasi 22.45 percent to maintain its level of plan grants. In this case, plan allocations increased for 842 panchayats 346

because of inclusion of a revenue effort criterion.

347

Table 3. Comparison of plan grants to gram panchayats allocated by the proposed formula with the allocations by the Working Group formula lor the year 1998-99 (10 per cent allocation by revenue effort criterion) Difference in plan grants Upper limit of increase in own revenue 20 per 25 per 30 percent cent cent Median (Rs. lakhs) 0.34 0.37 0.39 Maximum increase (Rs. lakhs) 1 .05 1.14 1.21 Maximum proportional increase (percent) 1.25 1.31 1.40 Maximum decline (Rs. lakhs) 7.68 7.68 7.68 Minimum proportional decline (percent) 11.54 1 1 .54 11 Coefficient of variation of per capita grants (cov .190697 .19075 .190861 for allocations by existing formula = 0.189144) No. of panchayats with lower grants 116 131 138 Number of panchayats with increase in revenue but 39 54 61 lower grants Minimum percentage increase in own revenue for 18.10 22.45 26.76 a panchayat to maintain the level of its plan grant in comparison with the existing criterion Number of panchayats with an increase in 851 838 822 revenue greater than the upper limit It would be important to look at the characteristics of the panchayats that would have faced reduced plan grants to ensure that the resource constrained panchayats do not suffer because of the inclusion of revenue effort criterion. Table 4 gives the summary statistics for per capita own revenue of all the panchayats and the panchayats that face reduction in plan grants as a result of inclusion of the revenue effort criterion. It is clear from the table that the average own revenue of the panchayats for which the grants would have been reduced is in fact more than the average own revenue of all the panchayats. Figure I shows ihc distribution of panchayats by extent of increase in plan allocation due to inclusion of a revenue effort criterion and per capita own revenue of the panchayats. It is clear that the panchayats that face reduced grants are scattered across the spectrum of the per capita own revenue of the panchayats and do not primarily constitute the low-income panchayats. Table 4. Per capita own revenue of the panchayats Panchayats with reduced grants when upper limit All of increase in own revenue is fixed at panchayats 30 per cent 25 per cent 20 per cent Mean 191.85 208.48 207.66 195.05 Median 1 60.40 169.78 167.95 164.16 COV 0.66 0.73 0.75 0.63

348

Figure I. Distribution of panchayats by extent of inerease in plan allocations and per capita own revenue

-9.00

-8.OO

-7.00

-6.00 -5.00 -4.00 -.3.OO -2.00 Increase in plan allocations (Rs. laklis)

-1.00

Note: Based on 30 per cent upper limit on the extent of increase in own revenue. Urban Local Bodies: A revenue effort criterion similar to the panehayats has also been proposed for the formula for inter se distribution of plan funds among the urban local bodies. A maximum of 10 percent of the total plan grant is to be distributed only among the municipalities and municipal corporations that show an increase in ihe own revenue over the previous year. The actual amount to be distributed by !he revenue effort criterion will he calculated as: R= (0. l())p.n/N, where P is the total plan grant for a particular tier, n is the number of municipalities/municipal corporations showing an increase in the own revenue over the previous year, and N is the total number of municipalities/municipal corporations. A similar exercise as done for the panehayats was also carried out for the urban local bodies to see the pattern of plan allocations for municipalities and municipal corporations for the year 1998-99. Municipalities: Table 5 gives the amount of grants for municipalities in year 1998-99 divided on the basis of Ihe existing formula and the proposed formula. Of the 55 municipalities, 45 municipalities increased their own revenue during 349

1998-99. As a ivsnll. 8.18 per cent (-10x45/55 per cent) of the total plan grant (Rs. 581.43 lakhs) would be allocated by the revenue effort criterion.

350

Table 5: Plan grants for municipalities distributed by the Working Group formula and the proposed formula

Population( non SC/ST) Area Houses without latrines and houses without electricity Revenue effort Total

Working Group Formula Weightage ' Amount (Rupees lakhs) 75 5340.96 5 353.40 20 1 00

Proposed Formula Weightage Amount (Rupees lakhs) 66.82 4759.53 5.00 355.40

1421.59

20.00

7117.9?

8.I8 100.00

14421.59 581.43 7 1 1 7.95

The plan grants for the municipalities were estimated with upper limit on the increase in own revenue at 10 per cent, 20 per cent, 25 per cent and 30 per cent. When the upper limit on the increase in own revenues was assumed to be at 30 per cent, the municipalities that increased their revenues more than 9.74 per cent were rewarded on account of the revenue effort criterion. This benefited a total of 30 municipalities. The plan allocations of the rest of the 25 municipalities decreased correspondingly. The municipalities that faced a reduction in plan allocation include 18 municipalities whose own revenues declined in 1Q98-99 over the previous year and 7 municipalities that increased their revenue by less than 9.74 per cent. The highest reward in plan grant of a municipality was about Rs. 29.9 lakhs. Among the municipalities that did not increase their revenue, the highest decline in plan grants was Rs. 9.98 lakhs. In proportional terms, the highest increase was 27.66 per cent and highest reduction was 9.98 per cent. Lowering the upper limit on increase in own revenue to 25. 20 or 10 per cent reduces the reward given for increasing own revenue, and therefore the incentive to do so. The minimum increase in own revenue required to maintain the level of the plan allocation was 8.86 percent when the upper limit \\as kept at 20 percent and 9,37 percent when the upper limit vvas kept at 25 per cent. There were 15 municipalities that showed a positive increase that was smaller than the minimum required and therefore faced a reduction in plan allocation, Table 7 shows the summary statistics of per capita own "revenue of the municipalities that would have faced a reduction in plan grant on account of the revenue effort criterion. It is clear that the municipalities whose grants were reduced had higher-than-average per capita own revenue. Figure 2 shows the diMnbution of municipalities by the extent of increase in plan allocations and per capita own revenue of the municipalities. The graph shows that the municipalities thai iaeed reduction in the plan allocations \\ere not the most resource constrained of the municipalities.

351

Table 6. Comparison of plan grants to municipalities allocated by the proposed formula with the allocations by the Working Group formula for the year 1998-99 (10 per eenl allocation hy revenue effort criterion) Upper limit of increase in own revenue 30 per 25 pei- 20 pei- 10 peicent cent cent cent Difference In plan grants Median (Rs. lakhs) 1.07 1.37 1.82 3.16 Maximum increase (Rs. lakhs)

29.9

25.60

20.75

15.08

Maximum proportional increase (percent) Maximum decline (Rs, lakhs)

27.66

1 3.67

1 1.08

6.24

39.73

39.73

39.73

39.73

Maximum proportional decline (percent) 9.98

9.98

9.98

9.98

Coefficient of variation of per capita plan grants (cov for allocations by existing formula = 0.10188} No, of Municipalities with lower grants

.14014

. 1 3502 . 1 3042 . 1 1 762

25

25

25

17

15

15

15

7

9.74

9.37

8.86

0

4

9

Number of Municipalities with increase in revenue but lower grants Minimum percentage increase in own revenue for a municipality to maintain the level of its plan grant in comparison with Number of municipalities with an increase in revenue greater than the

6.12

29

Table 7. Per capita own revenue of the municipalities

Mean Median COV

All Municipalities Municipalities with reduced grants when upper limit of increase in own revenue is 25 per cent 20 per cent 10 percent 36 1 .4 369.54 369.54 411.31 309.0

329.58

329.58

35 1 .95

.793

0.598

0.598

0.502

352

Figure 2. Distribution of municipalities by extent of increase in plan allocations and per capita own revenue

Municipal Corporations: Of the three municipal corporations in the state, two corporations increased their revenue in 1998-99 over the previous year. Therefore, allocation by the proposed formula would require that 6.67 per cent of the total plan grant (-10x2/3 per cent, 241.59 lakhs) be distributed by the revenue effort criterion onlv to these two corporations. Table 8. Plan grants for municipal corporations distributed by the Working Group formula and the proposed formula Working Group Formula Proposed Formula Weightage Amount Amount (Rupees Weightage (Rupees lakhs) lakhs) Population(non SC/ST) 75 2716.54 68.33 2474.95 Area 5 181.10 5.00 181.10 20 724.41 20.00 724.41 Houses without latrines' and houses without electricity Revenue effort -6.67 241.59 Total 3622.05 3622.05 The increase in the own revenue of both of these corporations was about 13 per cent. Therefore, for an upper limit higher than 10 per cent, r, would have been equal to the actual increase in the own revenue of these corporations. In that case, the plan grants of these corporations would have increased by Rs. 31.1 lakhs and Rs. 39.3 lakhs. The municipal corporation showing a decline in the own revenue would have faced a decline of 70 lakhs in the plan grant. Fixing the upper limit of r, at 10 per cent changes this pattern only marginally.

353

Annexure 9.1 PROPOSED RATE OF PRESUMPTIVE PROFESSION TAX IN RESPECT OF SELF EMPLOYED PERSONS EXCERSING PROFESSION/ TRADE/ ART/CALLING Class of Profession/Trade/Art/Callings

Half yearly Tax(Rs) Panchayat/Municipality /Corporation 120

1 Legal practitioner(below 5 years practices) 2 Legal practitioner (above 5 years and Notaries)

1000

3 Private Medical practitioner of Allopathy(below 5years practices)

120

4 Private Medical practitioner of Ayurvedha (above 5years practices)

1000

5 Private Medical practitioner of Allopathy(below 5years practices)

120

6 Private Medical practitioner of Allopathy(above 5years practices)

1000

7 Private Medical practitioner of Homeothy (below 5years practices)

120

8 Private Medical practitioner of Homeothy (above 5years practices)

1000

9 Private Medical practitioner of Sidha / Unani

60

10 Person engaged in other similar Medical Professions or calling of a paramedical

120

nature (below 5 years practice) 11 Person engaged in other similar Medical Professions or Calling of a paramedical

1000

12 Private Engineer/Private Architect/Private Engineering Supervisors(below 5years

120

13 Private Engineer/Private Architect/Private Engineering Supervisors(above 5years

1000

14 Charterd Accountant (below 5 years practice)

120

15 Charterd Accountant (above 5 years practice)

1000

16 Owner/Lessess Film Producer

1250

17 Film Distributor

1000

18 Performing Artist (a) Leading Cine Artist who have at least one film in a year

1250

(b) Dramaartist/Circus performer/Magician/Dancer etc

120

19 Music Troupers

300

20 Writer/Artist who does not come under any of the categories mentioned above

300

21 Owners of Professional Drama Truopes/Dance Truopes

600

22 Holder of permit for Transport Vehicles (a) Taxi car

300

(i) Upto 2 Vehicles

60

(ii) For each Vehicle exceeding 2 Vehicles (b) Lorry truck/Bus

480

(i) Upto 2 Vehicles

100

(ii) For each Vehicle exceeding 2 Vehicles (c) Three wheelers passenger/Godds Vehicle

300

(i) Upto 2 Vehicles

60

(ii) For each Vehicle exceeding 2 Vehicles 23 Contractor (a) Taking work of Rs.10 lakhs and above in a year

1250

(b) Taking work of Rs.5 lakhs but less than Rs.10 lakhs in a year

600

(c) Taking work of 2 lakhs and above but less than 5 lakhs in a year

300

(d) Others

120

24 Tution Master (a) Professional course

240

(b) Other Academic courses

120

25 Owner of Tutorial/Parallel college/Coaching Centre

300

26 Person consducting Real Estate business

1250

27 Planter (a) Agriculturist holding land below 2 acres

120

(b) Agriculturist holding land above 2 acres

300

28 Catere/Supplier

60

29 Cable T.V Operator

300

30 Persons conducting video/audio cassette centre/photo studio/Xerox centre/DTP

300

centre/Typewriting institute/STD booth

354

31 Document Writter

60

32 LIC Agent

120

33 Unit trust agent

120

34 Stock and share agent

120

35 Other Professionals not specified above

60

36 Trader/Dealer/Firm coming under the dangerous and offensive trades and factories rules Category A

1250

Category B

300

Category C

60

37 Campaies registred under Indian Companies Act engaged in Profession or Trade

1250

(those not coming undet item 35 above) 38 Banking Companies as defined in the Banking Regulation Act (Scheduled banks,

1250

their branches and other bankers, their branches) 39 (a) State level and District level Co-Operative Societies registred undet the Co-operative

1250

Socities Act and engaged in any provision trade or calling (including State Co-operative Bank, District Co-operative Banks,Urban Banks etc, and their branches (b) Other Co-operative Societies (below State and Distirct Levels)

600

PROPOSED LICENCE FEE FOR TRADERS S.232 of Kerala Panchayat Raj Act 1994 and S.447 of the Kerala Municipality Act 1994

Items to be classified Areted waters-Manufactering Aloe fibre and yearn-Storing,Packaging,Pressing,Cleansing, Preparing or manufacturing by any process whatsover Aluminium -Manufacturing Storing, Selling Ammunition- storing,Packaging,Pressing,Cleansing ,Preparing or manufacturing by any process whatsover Arecanuts-Soaking of Articles made of flour-Baking,Preparing,Keeping, Storing for human consumption (for other than domestic or sifting) Ahses storing,packing,pressing,cleaning,preparing or manufacturing by any process whatever dumping or sifting

Annexure9.2

Proposed minimum rate in panchyat

Proposed minimum rate in municipality

Proposed minimum rate in Corporation

Category

Category

Category

A

B

C

100 100

75 75

A 50 50

B

C

A

B 300 200

C

200 120

150 100

75 60

200 150

100 100

200

150

100

500

300

175

3000 2000 1000

5000

3000

2000

150

100

50

1000

750

500

100

50

25

100

75

50

300

150

75

100

75

50

200

150

100

300

200

150

75

50

25

100

75

50

150

100

75

Audio Cassette- Recording,storing.selling

300

200

150

300

200

150

500

300

200

Automobile oil and lubricants-Mixing ,storing,selling

300

200

150

300

200

150

500

300

200

Automobile Spare parts-Manufacturing,storing, selling

300

225

175

500

300

200

750

500

250

Automoblie tyre and tube-Manufacturing,storing,selling

400

300

200

400

300

200

600

400

250

Bamboos-Storing for sale,hire or manufacture Bathis-Manufacture,storing,selling Bettals-Storing,.selling

75

50

25

100

75

50

150

100

75

100

75

50

125

100

75

200

150

100

75

50

25

75

50

25

100

75

50

Battery- Manufacturing,storing,selling Biscuts-Baking,preparing,keeping,or storing for human consumption(other than for domesticuse Blood-Storing,packing,pressing,cleaning,preparing,or manufacturing by any process whatsoever

300

200

100

500

300

150

600

400

200

150

100

50

450

300

150

600

400

200

75

50

25

100

75

50

125

100

75

Bones-Storing,crushing,selling

350

250

150

400

300

200

600

350

250

Book- Manufacturing,storing,selling Bread-Baking,preapring,keeping,storing for human consumption (other than domestic use)

500

300

150

500

300

150

600

400

200

150

100

50

150

100

50

150

100

50

Bricks- Manufacturing, atoring for sale

300

200

100

300

200

100

500

300

150

Beuty Parlour- Management

500

450

400

600

500

450

750

600

500

Building meterial-Manufacturing, storing,selling

300

200

100

400

250

150

750

500

200

355

Camphor -Storing,packing,pressing,cleaning,preapring or manufacturing by any process

35

whatsover or bolling Candles-Packing,pressing,cleaning,manufacturing, by any process whatsoever

25

15

75

50

24

150

100

50

75

50

25

100

70

40

150

100

50

150

100

75

300

200

100

500

300

150

1000

500

200

1000

500

200

1500

750

300

150

100

50

300

200

100

500

300

150

Cat gut-Storing, packing,pressing, cleansing,preapring

125

100

75

150

125

100

200

150

125

Cable TV Opreation

500

300

150

750

500

250

1000

750

500

Cement-Manufacturing,packing,storing

500

250

150

500

250

150

750

500

250

Charcoa-Dumping, sifting,selling or storing Chemicals- Storing,packing,pressing,cleansing,preapring or manufacturing for processwhatsoever Chillies,Corriamdum,Turmeric, etc-Granting by mechinary Chillies,Corriamdum,Turmeric, etc-(dried)Storing,packing,sellling (tried) Clorite mixture-Storing,paking,pressing,cleansing,preparing or manufacturing by any process whatsoever Cinders-Storing,packing,pressing,cleansing,preapring or manufacturing by any process whatsoever

150

100

50

250

150

75

300

200

100

Carpets-Manufacturing, storing for sale Cashewnuts and its Kernel-Storing,packing,preparing or manufacturing by any process whatsoever Cattle feeds-Manufacturing,mixing,packing,storing selling

200

125

75

250

175

100

500

200

150

300

250

200

300

250

200

500

300

250

300

250

200

300

250

200

500

300

250

150

100

75

300

200

100

500

250

150

100

75

50

100

75

50

125

100

75

Cloths- Dyeing,storing,selling

400

300

200

500

350

250

1500

1000

50

Coal-Dumping,sifting,selling or storing Cocont fibre-Storing,packing,pressing,cleansing preparing or manufacturing by any process whatsoever

150

100

50

250

125

75

300

200

100

200

125

75

300

150

100

500

300

150

Cocont husks and cadjan leaves-soaking of

200

125

75

300

150

100

500

300

150

Coconut shells-Storing

200

150

75

300

200

100

500

300

150

Coffee- Processing, grinding,packing,storing, selling Coir yarn-Storing,packing, pressing, cleansing, preparing or manufacturing by any process whatsoever

175

150

125

200

175

150

500

300

200

125

100

75

300

200

100

500

300

150

Combusite meterials- Storing Comsumables-Baking,Preapring,keeping ,or storing for human consumption(othet than for doemsticuse)

500

400

200

750

500

250

1000

750

500

150

125

75

300

150

100

500

250

150

Condiments- Manufacturing Confectionary-Baking,preparing,keeping, or storing for human consumption(otherthan domestic use)

150

100

50

150

100

50

300

150

100

300

200

100

500

300

150

750

400

200

Copra-Preparing,or storing or selling wholesale Cotton,cotton refuse,cotton seedStoring,packing,pressing,cleaning, prearing or manufacturing by any process whatsoever Cow-dung cakesStoring,packing,pressing,cleansing,prearing or manifacturing by any proces whatsoever

200

125

75

300

150

100

500

300

150

400

225

125

500

300

150

750

500

200

75

50

25

150

100

50

150

100

50

Items to be classified

Proposed minimum rate Proposed minimum in panchyat rate in municipality

Proposed minimum rate in Corporation

Category

Category

A

Category

B

C

A

B

C

A

B

C

Crockery-Manufacturing,storing,selling

300

150

100

500

300

150

750 500

250

Cutlery-Manufacturing,storing,selling

200

150

100

500

300

150

750

500

250

Cycle-Manufacturing,Assembling,storing,selllung,reparing DTP Centre(including typewriting,xerox copies, institute managament)Running and Management Dry cleaning-Management Dyes-Packing,pressing, cleansing,preparing or manufacturing by any process whatsoever

400

200

100

400

200

100

500

300

150

400

200

100

500

300

150

750

500

250

Egg-Storing,selling

400

200

100

500

300

150

750

500

250

Electrical appliances-Manufacturing, storing,selling Explosives-Storing,selling

200

150

100

500

300

150

750

2000

250

250

200

150

300

250

200

400

400

250

500

300

150

600

400

200 1000

750

250

1000

500

250

1500

1000

500 3000

2000

1000

Fast food-Preaparing or selling

300

200

100

500

300

150

600

400

200

Fibre-Selling or storing

150

125

75

200

150

100

500

300

150

356

Fat-Storing,packing,pressing,cleansing,preparing or manufacturing by any process whatsoever Fire wood-Selling or storing Fire works-Storing ,packing,pressing,cleansing,preparing or manufacturing by any process whatsoever Fish-Storing ,packing,pressing,cleansing,preparing or manufacturing by any process whatsoever Fish oil -Storing ,packing,pressing,cleansing,preparing or manufacturing by any process whatsoever Flax-Storing ,packing,pressing,cleansing,preparing or manufacturing by any process whatsoever Fileshing-Storing ,packing,pressing,cleansing,preparing or manufacturing by any process whatsoever Flour -Storing ,packing,pressing,cleansing,preparing or manufacturing by any process whatsoever

200

125

75

250

150

100

300

200

150

150

100

75

300

200

100

750

500

250

1000

500

250

1500

1000

500 3000

2000

1000

150

125

75

300

200

100

500

300

150

150

125

75

200

150

100

500

300

200

150

125

75

200

150

100

500

300

200

150

125

75

200

150

100

500

300

200

250

150

100

300

200

150

500

300

200

250

150

75

300

200

100

400

250

150

Frozen food- Storing or sellling

250

1775

125

500

250

150

600

400

200

Fuel-Using for any industrial purpose Fulminate of mercury- Storing,packing,cleansing,preparing or manufacturing by any process whatsoever

350

200

125

500

250

150

600

400

200

500

250

150

600

400

200

750

500

250

Fruits- Using for any industrial purpose

300

200

100

500

300

150

600

350

250

Furniture-Making or storing for sale or lending Gas- Storing ,packing,pressing,cleansing,preparing or manufacturing by any process whatsoever Ghee- Storing ,packing,pressing,cleansing,preparing or manufacturing by any process whatsoever

300

200

100

600

400

200

750

500

250

500

300

150

500

300

150

600

400

200

100

350

250

150

1000 5000

3000

1500 200

Flowers-Storing,processing,selkling

200

125

75

300

150

2000

1000

500

4000

2500

Grain- Storing,selling

300

150

100

500

300

150

600

400

Grass-Storing

150

100

50

200

150

100

250

200

150

Gram-Husking by mechinary

125

100

75

200

150

100

250

200

150

Grioundbut-Selling or storing Gum Ctotton- Storing ,packing,pressing,cleansing,preparing or manufacturing by any process whatsoever Gunny bag- Storing ,packing,pressing,cleansing,preparing or manufacturing by any process whatsoever Gum powde keeping ,packing,pressing,cleansing,preparing or manufacturing by any process whatsoever Hair-Storing,packing,cleaning, preparing or manufacturing ybbbb6 sny process whatsoceevee

100

75

50

150

100

75

200

150

100

125

100

75

200

150

100

250

200

150

100

75

50

150

100

75

200

150

100

3000

2000

1000

3000

2000

1000 5000

3000

1500

125

100

75

250

150

100

300

175

124

600

400

200

750

500

250 1000

600

300

Gold-Refining,storing,selling

Hard ware- manufcaturing. storing.selling Hay-Selloing or storing

125

100

50

150

125

100

175

150

124

Haides- Manufacturing,storing.packing.pressing,cleansing Hemp- Storing,packing,pressing, cleansing,preparing or manufacturing by any process whatsoever Hoops-Storing,packing,pressing, cleansing,preparing or manufacturing by any process whatsoever

300

200

100

400

300

150

500

350

200

200

150

100

250

200

150

400

300

200

500

300

150

750

500

250 1000

600

300

Honey-Storing,selling Horns-Storing,packing,pressing, cleansing,preparing or manufacturing by any process whatsoever

100

75

50

100

75

100

75

300

200

100

400

300

Hospitals-Running,storing,tincture,phrarmacutical items

2500

1500

750

3000

2000

50

125

150

500

350

200

100 5000

3000

1500

Ice-Manufacturing

400

200

125

500

300

150

750

400

200

Imation gold-Manufacturing, storing,selling Jaggery-Storing,packing,pressing, cleansing,preparing or manufacturing by any process whatsoever

400

250

150

600

400

200

750

500

250

300

200

100

400

300

150

500

400

200

Jewels-Manufacturing,storing,selling Jute-Storing,packing,pressing, cleansing,preparing or manufacturing by any process whatsoever Kakhi- Preparing Lac-Storing,packing,pressing, cleansing,preparing or manufacturing by any process whatsoever Lead- Melting Leather-Storing,packing,pressing, cleansing,preparing or manufacturing by any process whatsoever

1500

1000

500

1500

1000

500 3000

2000

1000

150

125

75

200

150

100

250

300

150

150

125

75

200

150

100

250

200

150

150

125

75

200

150

100

250

200

150

150

125

75

200

150

100

250

200

150

500

300

200

750

500

250 1000

600

300

357

Proposed minimum rate in Proposed minimum

Proposed minimum

panchyat

rate in Corporation

rate in municipality Category

Items to be classified

A

B

Category C

A

B

Category

C

A

B

C

LIme-Storing,selling,packing,pressing,cleaning,preapring or 75

50

25

75

50

25

100

75

50

100

75

50

150

100

75

250

150

100

or manufacturing by any process whatsoever

125

100

75

250

150

100

500

300

150

Machinary-Using for any industrial purpose

600

400

200

750

500

250 1000

750

500

Marbles-Manufacturing,storing,selling

750

500

250

800

600

300 1200

800

600

200

150

75

300

200

100

500

300

150

400

200

100

500

300

150

600

400

200

250

150

75

350

200

150

500

400

200

200

500

350

250

1000 5000

3000

1500

manufacturing by any process whatsoever Lime ShellsStoring,selling,packing,pressing,cleaning,preapring or manufacturing by any process whatsoever Manure-Storing,selling,packing,pressing,cleaning,preapring

Matches-Storing,selling,packing,pressing,cleaning,preapring or manufacturing by any process whatsoever Meat-Storing,selling,packing,pressing,cleaning,preapring or manufacturing by any process whatsoever Metals- Including precious metalsbeating,breaking,hammering,castig Medicine- Manufacturing, storing,selling

350

250

150

400

300

Metal Crushing- Crushing,storing, selling

3000

2000

1000

3000

2000

400

200

100

500

300

150

750

500

250

,manufacturing

200

150

100

250

200

150

400

300

200

Mosaic-Manufacturing,polishing,storing,selling

750

500

200

800

600

300 1200

800

600

Motor car-Storing,selling,servicing,reapiring,paintinf

750

500

200

900

600

300 1000

800

400

Motor car electrical appliances-Manufacturing,storing,selling

300

200

100

400

300

200

500

350

250

300

200

100

400

300

200

500

350

250

Milk and milk product-Storing,manufacturing,selling Molases-Storing,selling,packing,pressing,cleaning,preapring

Motor car paint and accessaries-Manufacturing,storing, selling Microphone and loud speaker-Manufacturing,storing,selling

400

300

200

500

400

300

600

450

350

Musical Instruments- Manufacturing,selling,storing

200

150

100

300

200

150

500

300

200

400

300

200

500

400

300

600

450

350

400

300

200

500

400

300

600

450

350

400

300

200

500

400

300

600

450

350

150

125

75

200

150

100

250

200

150

600

400

200

750

500

250 1000

600

300

Notrocompund-Storing ,selling,packing,pressing,cleaning,preapring or manufacturing by any process whatsoever Notro-glycrineStoring,selling,packing,pressing,cleaning,preapring or manufacturing by any process whatsoever Nitro-mixtureStoring,selling,packing,pressing,cleaning,preapring or manufacturing by any process whatsoever Offal-Storing,selling,packing,pressing,cleaning,preapring or manufacturing by any process whatsoever Oil-Storing,selling,packing,pressing,cleaning,preapring or manufacturing by any process whatsoever Office equippments-Manufacturing,packing,storing,selling

400

251

150

500

350

250

600

400

300

Optical-Manufacturing,storing , polishing,selling

500

300

200

600

400

300

750

450

350

Paddy-Boiling or husking by machinery

300

200

150

400

300

200

500

350

250

358

Paper-,packing,pressing,cleaning,preapring or manufacturing by any process whatsoever

300

200

150

Paints-Manufacturing,storing,selling

600

400

75

50

400

Plantain leaves- Storing, selling Pesticides-Manufaturing,mixing, storing,selling

400

300

200

500

350

250

200

750

500

250 1000

25

100

75

50

125

600

300

100

75

250

150

500

350

250

750

600

300

1250

750

300

1500

1000

500 2000

1500

1000

350

250

150

400

300

350

250

Petrolium productsStoring,selling,packing,pressing,cleaning,preapring or manufacturing by any process whatsoever Pitch-Storing,selling,packing,pressing,cleaning,preapring or manufacturing by any process whatsoever

200

500

Pottery-Storing,selling,packing,pressing,cleaning,preapring or manufacturing by any process whatsoever

300

200

100

400

300

150

750

400

200

Photoghraph meterial-Manufacturing,precessing,storing

400

250

150

500

350

250

600

400

300

Manufacturing,preapairing,storing,selling

400

300

200

500

350

250

600

400

300

Plastic meterials-Manufcaturing,. storing,selling

600

400

150

800

500

250 1000

750

300

Photo frame and laminating-

Private hospitals/Paramedical Institutions&Lab-Management

800

600

400

1000

750

500 1500

1000

750

Radio- Manufacturing, Assembling,servicing,and repairing

600

400

200

750

500

250 1000

750

500

reddy made Garments- Manufacturing, storing ,selling

250

150

75

400

250

100

500

300

150

,preapring or manufacturing by any process whatsoever

200

100

75

300

150

100

400

250

150

Refrigerator-Storing,repairing,selling

750

500

300

1000

750

500 1500

1000

750

restorant,Canteen,Coffee,hotel,Tea shop(including cool bar)

750

500

250

1000

750

500 2000

1500

1000

75

50

25

100

75

50

150

100

75

Rubber goods-Manufacturing, storign,selling

300

250

150

400

300

200

50

350

250

Rubber stamp- Manufacturing,storing,selling

200

100

75

250

150

100

300

200

150

Resin(including rosin)Storing,selling,packing,pressing,cleaning

Rose water-manufacturing,storing,selling

Rugs-Storing,selling,packing,pressing,cleaning,preapring or manufacturing by any process whatsoever

200

100

75

250

150

100

300

200

150

Sago-Manufacturing, or distilling

150

125

75

250

150

100

400

250

150

or manufacturing by any process whatsoever

400

250

150

500

300

200

750

500

250

Sandal-Processing,storing,selling

600

4000

200

750

500

250 1000

750

500

Manufacturing,storing,selling

600

4000

200

750

500

250

800

600

300

Seekai-Powedering,storing,selling

300

200

100

500

300

150

600

400

200

400

300

200

500

350

250

650

450

300

600

400

200

750

500

250 1000

600

300

saltpeter- toring,selling,packing,pressing,cleaning,preapring

Sanitary and plumbing meterials-

Shellac-Storing,selling,packing,pressing,cleaning,preapring or manufacturing by any process whatsoever Silks-Storing,selling,packing,pressing,cleaning,preapring or manufacturing by any process whatsoever Items to be classified

A

B

C

A

B

C

A

B

C

Skins-Storing,selling,packing,pressing or manufacturing by any process whatsoever

200

150

100

250

200

150

300

250

200

Soap-,packing,pressing or manufacturing by any process whatsoever

400

250

150

600

400

250

750

500

300

Soft drink- Manufacturing, Storing,selling

150

100

75

200

150

100

250

175

125

1500

1000

750

2000

1500

1000 5000

3000

1500

Spirit/Foriegn liquid-Storing,selling,packing,pressing or

359

manufacturing by any process whatsoever Stainless steel- manufacturing,.storing,selling

400

300

200

500

350

250

600

400

300

Steel-Manufacturign,storing,selling

600

400

250

750

550

460 1000

750

600

Stiching-Tailoring,manufacturing

125

100

75

150

125

100

250

200

150

Stiching meterials-Manufacturing,storing,selling

125

100

75

150

125

100

750

200

150

any process whatsoever

400

300

200

500

400

0.3

500

500

400

Sugar-candy-Packing,pressing ,cleansing,prepairing or

350

250

150

400

300

200

750

350

250

400

300

200

500

400

300

750

500

400

400

300

200

500

400

300

500

500

400

300

200

150

350

300

250

400

400

300

250

200

150

300

250

200 3000

350

250

2000

1000

500

2000

1000

500

500

200

1000

300

200

150

400

300

200 2000

350

250

1500

1000

750

1500

1000

750

800

1500

1000

Textile-Manufacturing,storing.selling

600

400

200

750

500

250

500

600

300

Tachting meterial

250

200

150

300

250

200 2500

300

250

Manufacturing,storing,selling,serving ,repairing

2000

1500

1000

2000

1500

1000 8000

2000

1500

Tiles-Manufacturing

5000

3000

2000

5000

3000

2000 2000

5000

3000

Timber-Selling or storing

1000

750

500

1000

750

500

500

1500

1000

process whatsoever

400

300

200

400

300

200

150

3530

250

Tuber crops-Storing,selling,preparing

100

75

50

125

100

75

250

125

100

manufacturing by any process whatsoever

150

125

100

150

125

100 1000

200

150

Tyre-Manufacturing,storing,sellingretreadings,vuclanizing

600

500

400

700

600

500

600

750

600

Umberlla-Manufacturign,storing,selling

350

200

100

500

250

150

500

300

200

Upholstery meterials- Manufacturing,storing,selling

300

250

150

400

300

200

600

350

250

Vegetables-Storing,selling

400

250

100

500

300

150

600

350

200

Vedio Cassette-Recording,storing,selling

400

300

200

500

350

250

600

400

300

Sugar-Storing,selling,packing,pressing or manufacturing by

Sulphur-Storing,selling,packing,pressing or manufacturing by any process whatsoever Surki-Storing,selling,packing,pressing or manufacturing by any process whatsoever Sweet-meats-Baking,preparing,keeping or storing, for human consumption (other than domestic use) Tallow-Storing,selling,packing,pressing or manufacturing by any process whatsoever Tar-Storing,selling,packing,pressing or manufacturing by any process whatsoever Tea- Processioning.packing,storing,selling Television set,VCP,VCR-Storing,selling.lending reapiring,Tatching meterials storing or selling

Three Wheelers and two wheelers-

Tobao(including snuff,cigerates,ciggerates and beedies)Storing,selling,packing,pressing or manufacturing by any

Trupentine-Storing,selling,packing,pressing or

Watch-manufacturing,storing,selling,lending

400

250

150

500

300

200

500

400

250

Wooden Carvings-Manufacturing,polishing,storing,selling

300

250

150

400

300

200

500

350

250

Wool

300

250

150

400

300

200

500

350

250

Yarn-Dyeing

100

150

100

250

200

150

500

300

200

Guiding or electro-plating

150

100

50

200

150

75

300

200

100

75

50

25

75

50

25

100

75

50

5000

4000

3000

6000

5000

4000 7500

6000

5000

Keeping a shaving or hair dressing saloon Keeping and maintaning Kalyanamandapam or Auditorium or hall where marriages are conducted with provision for catering

360

Keepign together pigs,or ten or more sheep or goats ro two or more buffalloes or ten or more head of cattle

150

100

50

150

100

50

200

150

100

400

350

250

500

400

300

600

450

350

125

100

75

150

125

100

250

200

150

Manufacturing articles from which offensive or unwholesome smells,fume,dust or noise arise Washing soiled cloths and keeping soiled cloths for purpose of washing them and keeping washed clothes

EXISTING AND PROPOSED FEE FOR PERMISSION FOR THE INSTALLATION OF MACHINERY OR MANUFACTURING PLANT S. 233 of Kerala Panchayat Raj Act 1994 S. 448 Kerala Municipality Act 1994 Item

Minumum rate Proposed Existing Rate in Existing Rate in Municipality/Corp Panchyat panchayat Municipality/Corporat oration ion

(A) Installation ot Marlimerv Controlled hv Electric Power Installation of rectifier and transformer in all places including Cinema theatres irrespective of HP

25

15

35

50

Installation not exceeding one HP

10

3

15

25

Installalion not exceeding five HP

50

15

75

100

Installalion exceeding live HP hut not exceeding ten HP

100

50

150

200

Inslallation exceeding ten HP hut not exceeding iwenty HP

200

75

300

350

Inslallatkin exceeding twenty HP hut not exceeding fifty HP existing in Municipality) Installalion exceeding twenty HP hut not exceeding thirty HP

-

100

-

-

300

-

500

750

Installation exceeding thirty HP hut not exceeding forty HP

400

-

600

900

Inslallalinn exceeding forty HP hut not exceeding fifty HP

500

-

750

1 250

retaliation exceeding fifty HP hut not exceeding hundred HP

1000

150

1 500

2250

Installation exceeding hundred HP (existing in Municipality

-

200

-

-

2000

-

3000

4500

Installation exceeding two hundred HP hut not exceeding five hundred HP

-

-

4500

6000

For each HP exceeding five hundred HP

-

25

30

15

Installation exceeding hundred HP hut not exceeding two hundred HP

(B Installation of Machinery Controlled by Power other than Electric Power Installation for Domestic purposes

Nil

Installation for Domestic purposes exceeding two HP

-

3

Installation for not exceeding one HP

5

5

10

Installation exceeding one HP but not exceeding five HP

25

25

50

75

Installation exceeding live HP hut not exceeding ten HP

50

50

75

100

Installation exceeding len HP hut not exceeding twenty HP

100

75

125

150

Installation exceeding twenty HP hut not exceeding thirty HP

150

100

200

250

Installation exceeding thirty HP hut not exceeding forty HP

200

125

250

300

Installation exceeding forty HP hut not exceeding hundred HP

500

-

-

-

Installation exceeding forty HP hut not exceeding fifty HP Installation exceeding fifty HP hut not exceeding hundred HP

-

150 200

400 750

600 1000

250

1000

1500

Installation exceeding hundred HP hut not exceeding Iwo hundred HP

361

5

Installation exceeding two hundred HP hut not exceeding five hundred HP For each HP exceeding five hundred HP

362

2000

4000

15

20

Annexure 9.3 EXISTING AND PROPOSED FEE FOR PERMISSION FOR CONSTRUCTION AND RECONSTRUCTION OF BUILDINGS, INSTALLATION OF MACHINERY etc. FOR CINEMATOGRAPHIC EXHIBITIONS S. 6 of the Kerala Cinemas (Regualtion) Act, 1958 read with Rule 1901 of The Kerala Cinemas (Regulation) Rules, 1988

Item

Existing Rate Rs Type of Construction

Proposed Rate Rs Municipality/ Village Panchayat

Temporary Theatre

Rs. 5007-

Thatched / Tiled

Permanent Theatre

Rs. 10007-

A. Single storied concreate buildings upto 150 M2

Corporation

Re. 1 / M2

Re. 1 /M2

Rs. 1.50/M2

Rs. 2.50/M2

ii) First floor

Rs. 2 / M2

Rs. 2.50/M2

Iii) Second floor

Rs. 3/M2

Rs. 4 / M2

B. Buildings of area exceeding 150 M2 of any number of floors 1) Cellar or basement floor and ground floor (ii) First floor

Rs. 6/M2

Rs. 7/M2

Rs. 8/M2

Rs. 10 /M2

(iii) Second floor

Rs. 12 /M2

Rs. 15 /M2

Rs. 40 / M2

Rs. 50 / M2

Rs. 75 / M2

Rs. 100/M2

C Accessory Building

Rs. 15 /M2

Rs. 25 / M2

D Well E Bath Room F Compound Wall or Fense including gate and grill

Rs. 75 / Unit Rs. 75 /Unit Re. 1 /1 Meter. length

Rs. 100 /Unit Rs. 100 /Unit Re. 2/1 Meter. length

i) Cellar or basement loor and ground floor

(iv) Third floor and upto and inclusive of Sixth floor (v) Above sixth floor

363

G Conversion of Poof

364

Rs. 30 /M2

Rs. 50 / M2

Annexure 9.4 EXISTING AND PROPOSED LICENCE FEE FOR PRIVATE MARKETS

Item

(1) For openig new Market Area not exceeding 0.1 hectare Area not exceeding 0.2 hectare Area exceeding 0.2 hectare (II) Renewal of existing licence

S.222(4) Kerala Panchayat Raj Act 1994 S. 460 of the Kerala Municipality Act 1 994 Existing Rate in Existing Rate in Panchyat Mun icipality / Corporation

Minimum Rate Proposed for Panchayat / Municipality / Corporation

Minimum of Rs. 200 Minimum of Rs. 50 Minimum of Rs. 400 Minimum of Rs. 100

Rs. 2000 Rs. 4000

Minimum of Rs. 500 Minimum of Rs. 150

Rs. 5000

Not exceeding one third of the income that the licensee has earned from the market during the previous year

365

Not exceeding one third of the income that the licensee has eamec from the market during the previous year

Not exceeding one thirc of the income that the licensee has earnec from the market during the previous year subject to the minimum of Rs. 2000 in the case of market area not exceeding 0.1 hectare, Rs. 4000 in case of market area not exceeding 0.2 hectare and Rs. 5000 in the case of market exceeding 0.2 hectare

Annexure9.5 EXISTING AND PROPOSED LICENCE FEE UNDER THE PLACES OF PUBLIC RESORT ACT Kerala Places of Public Resort Act 1963 read with Rule 28 of Kerala Places of Public Resort Rules 1965 Item

:

Existing Rate Rs

Township/ Municipality/Corp oration 1. For the grant or renewal of licence for one year in respect of Perrnanent building a) For an area of 100 Sq. meters or less b) For every additional 50 Sq. meters or fraction there of 2. For the grant or renewal of temporary licence in respect of permanent building

a)

For an area of 100 Sq. meters or less

b) For every additional 50 Sq. meters or fraction there of 3. For the grant or renewal of a temporary licence in a temporary building

a)

For an area of 100 Sq. meters or less

b) For every additional 50 Sq. meters or fraction thereof

Proposed Minimum Rate Rs

Municipality/ Corporation

Panchayst

Panchayat

75

20

2000

1500

37.50

10

1000

750

3s 900 per mensem or Rs. 20 per mensem mensem or Re. Rs. 30 per day or Rs. 21- per day subject o a minimum 00 Rs. 7.50 per mensem or Re. 1 per day

Rs. 3 per 3s. 450 per mensem mensem or Ps. or Is. 15 per day 50 per day

3s. 800 per mensem Rs. 75 per mensem Rs. 27 per day mensem or Re. or Rs. 2 per day subject o a minimum 100 Rs. 37. 50 per mensem or Re 1 per day

Rs. 10 per Rs. 400 per mensem mensem or Ps. or 3s. 14 per day 50 per day

4.

For the grant or renewal of a licence for one year in t of an enclosure without any roof or superstructure a)

Rs. 850 per mensem or 29 per day ubject to a minimum of 00 Rs. 425 or Rs 4 per day

Rs. 750 per mensem or 25 per day subject to a minimum of 100 Rs. 375 per mensem or Rs. 13 per

For an area of 100 Sq. meters or less

75.00

750

600

500

b) For every additional 50 Sq. meters or fraction thereo 5. For the grant or renewal of a temporary licence for an enclosure without any roof or superstructure

7.50

3.75

300

250

Rs. 300 per a)

For an area of 100 Sq. meters or less

b) For every additional 50 Sq meters or fraction thereof

Rs. 7.50 per mensem or Rs. 2 per day

1 0 per day Rs. 3.50 per Rs. 400 per mensem o subject to a mensem or Re Rs. 14 per day minimum of 1 per day R 1 00 per day

Rs. 3.75 per mensem or Re. 1 pe day

Rs. 1.75 per Rs. 150 per Rs. 200 per mensem o mensem or Ps. mensem or Rs. 7 per day 50 per day Rs. 5 per day

366

Annexure 9.6 RATE OF LICENCE FEES FOR KEEPING ANIMALS FOR COMMERCIAL PURPOSES

S. 444 of Kerala Municipality Act Similar provision proposed in the Kerala Panchayat Raj Act

Existing Rate in Municipality/ Corporation

Item

Proposed Minimum Rate for Panchayat / Municipality/ Corporation

1. Stable, veterinary, infirmary, stand, shed, yard or other place for keeping goats, sheep, pigs and dogs Rs. 25

Between 2 and 10 numbers

Council fixes the rate as it is not prescribed in the Act

Above 10 numbers 2. Stable, veterinary, infirmary, stand, shed, yard or other place for keeping cattle and other animals

Rs. 50

Rs. 35

Between 2 and 10 numbers

Rs. 70

Above 10 numbers

367

Annexure 9.7 EXISTING AND PROPOSED RATE OF GATE FEE FOR PUBLIC AND PRIVATE MARKETS

S. 221 and 223 of the Kerala Panchayat Raj Act 1994 S. 452 of the Kerala Municipality Act 1994 Item

1.

Existing Rate in Municipality/ Corporation

Minimum Rate Proposed for Panchayat / Municipality/

Fee for entry on Vehicles or pack animals

or on persons. Hand load Head load Cycle load Cart load / Goods Auto Moped Motor Vehicle load (Lorry)

Nil 1

Nil 3

3

10

15 Nil

Council fixes the rate as is not prescribed in the Act

25 15

Jeep / Car / Van / Mini lorry load

40 Nil

100 50

Load or goods in valloms of one meter or less girth

15

25

20

50

5

10

Occupying space-having area of 1 Sqm.

2

5

Occupying space-having area of more than 1 Sqm. but not more than 5 Sqm.

8

15

Occupying space-having area of more than 5 Sqm. but not more than 10 Sqm.

10

25

Occupying space-having area of more than 1 0 Sqm. but not more than 20 Sqm.

25

50

1

5

Having plinth area of 10 Sqm. or less

10

20

Having a plinth area of above 1 0 Sqm. but upto 20 Sqm.

15

30

Having a plinth area of above 20 Sqm. but upto 30 Sqm.

30

50

1

5

Sheep, Goat

2

5

Ass, Pig

3

5

Cow bull, buffalo

5

25

Loads of goods in Valloms of more than one meter of girth Cattle, Horse or Ass load 2.

Existing Rate in Panchayat

Fee for Space Occupied

Occupying space having an area of more than 20 Sqm., for every additional 1 Sqm. 3. For use of Shops, Stalls, Pens or Stands on Market days (excluding the rent for permanent use)

For every additional plinth area of 1 Sqm. Exceeding 30 Sqm. 4. Fee on Animals brought for sale into or sold

368

Poultry (grown up fowls)

1

369

1

Annexure 9.8 EXISTING AND PROPOSED RATE FOR PUBLIC HALTING AND PARKING PLACES S. 227 and 228 Kerala Panchayat Raj Act 1994 S. 472 of Kerala Municipalities Act 1994

Item

(a) Fee for use of Halting place/Cart stand

Existing Rate in Panchayat

Maximum fee for a period not exceeding 24 hrs

Maximum fee for a period nut exceeding 24 hrs

if no amenities are provided

if amenities, are provided

Minimum Rate Existing Rate in Proposed for Municipali ty/ Panchayat / Municipality / Corporation Corporation

if amenities are provided or not Council fixes the rate as it is not prescribed in the Act

(i) For Every hand - drawn Cart rickshaws, Cycle or Cycle rickshaws

1

2

(ii) Auto rickshaws

2

3

10

2

4

5

4

8

15

6

10

25

2

3

(iii) For every Cart or Vehicle drawn by one or more animals (iv) For every Mini bus. Tempo, Trucker, Mini lorry (v) For every Bus. Lorry (vi) For every horse, mule, bull, bullock, cow or buffalo b) Fee for a single halt

1

5

Minifnum Rate Council fixes the rate as it is no prescribed in the Act

Motor boat or steam launch

3

6

Steam or motor tug

4

10

15

Cabin boat

1

2

15

Valloms of capacity or one lone or less

1

2

2

Valloms of above 1 tones upto 5 tones

1

2

5

Valloms of above 5 tones upto 10 tones

4

6

10

Valloms of above 1 0 tones

8

12

12

Changadom (Thangara)

1

2

3

Timber heaps upto 20 tones

8

12

15

1

2

2

Timber heaps above 20 tones for every additional (c) Fee for Storing any Goods

Rate fixed

Charges per day for storing goods in open space per 100 Sqft Rental charges per day A)

10

Single Room

370

5

10

25

35

b)

Double Room

(d) Fee for stay per day

40

50

5

15

Annexure 9.9 EXISTING AND PROPOSED RATE OF RENT AND FEE FOR SLAUGHTERING ANIMALS IN PUBLIC AND PRIVATE SLAUGHTER HOUSES S.229 and 230 of Kerala Panchayt Raj Act 1994 S.452 of Kerala Municiapality Act 1994 Item

Existing Rate

Existing Rate in

Minimum Rate Proposed

in Panchayat

Municipality/Corporation

for Panchayt/Municipality/Cor poration

Bullock, Cow, Buffalo

10

Council fixes the rate as it is

20

Sheep, Goat, Pig

5

not precribed in the Act

10

371

ACTION TAKEN REPORT ON THE FIRST PART OF THE REPORT OF THE SECOND STATE FINANCE COMMISSION.

ACTION TAKEN REPORT ON THE FIRST PART OF THE REPORT OF THE SECOND STATE FINANCE COMMISSION. Recommendation No.2: Devolution of Funds: Recommendation No.2(1) "Government may devolve to the LSGls, Plan funds (excluding State Sponsored Schemes) not less than one-third the annual size of the State Plan as fixed by the Planning Commission. This fund is to be used by LSGIs for planning and implementing locally relevant projects. The sectoral ceilings, if any, within this grant may be fixed by Government from time to time"

Action Taken: The State Government has decided that the question of transferring one third of the State's plan funds to LSGIs may be deferred for further examination. Nevertheless the State Government has been making substantial allocations. For example, out of the State plan outlay for the current year (2OO4-O5) ofRs.480O crore (including loan from the ADB), an amount of Rs.l35O crore has been provided in the Budget for devolving among LSGIs as Plan Grant This is one of the highest percentages for any state. Recommendation No.2(2) "Five and a half percent of the annual own tax revenue of the State Government may be devolved to the LSGIs as Grant-in-aid for- maintenance of assets under the control of the LSGIs including the transferred assets. This percentage may be determined on the figures certified by the Accountant General, which normally relates to the financial year two years before the Budget year. All expenses related to running of institutions except wages, supply of medicines to health institutions, educational concessions / scholarships to students, supply of books, equipments and consumables to schools and conducting noon-feeding in schools, shall be borne by the LSGIs. This should include payment of rents, repair of equipment including vehicles, and meeting of telephone charges and vehicle operating expenses."

Action Taken:

This recommendation has been accepted by Government From 1-4-2OO4 separate provision has been made in the Budget towards maintenance grant For 2004-05, the provision is Rs.273.66 crore for Panchayats and Rs.52.13 crore for Municipalities and Corporations.

Recommendation No. 2(3) ''Three and a half percent of the own tax revenue of the State Government based on the figures certified by the Accountant General could be devolved to LSGIs as General Purpose Grant, in lieu of assigned taxes, shared taxes and various statutory and non-statutory grants-in-aid, both specific purpose and general purpose. This grant-in-aid would subsume under it Basic Tax Grant., Surcharge on Stamp Duty, Vehicle Tax Compensation, Rural Pool Grants, the specific purpose and general purpose grants to Urban Local Bodies and all other non-plan grants-in-aid devolved to LSGIs from the Local Self Government Department."

Action Taken; The recommendation has already been accepted by the Government From 1-4-2OO4 separate provision has been made in the Budget towards Genera/ Purpose Grant. For 20O4-O5 the provision is Rs. 174.15 crore for Panchayats and Ks.31.17 crore for Municipalities and Corporations. Recommendation No.3

"The Eleventh Finance Commission grants to LSGIs should be passed down as such, over and above the grants suggested above."

Action Taken: The recommendation has been accepted with the modification that the grant due for LSGIs may be devolved as part of plan grant but shown separate/y for each LSGI.

Recommendation No.4 (a) Plan Grant-in-Aid: " The existing devolution formula as well as the distribution formula may continue. However up to ten percent of the non-SCP/TSP Funds may be distributed as an incentive for increased own revenue mobilization by the Village Panchayats and the Urban Local Bodies. The actual percentage to be distributed as incentive grant-in-ajd should be the same as the percentage of Village Panchayats and .Urban Local Bodies 'showing an increase in own revenue. And this amount could be shared

as per the formula given below: 0i = ri . P i /I ri . Pi 0i - share for LSG1 i ri - percentage increase in its revenue Pi - Population of the LSGI The date of effect of the incentive system may be indicated to LSGls well in advance."

Action Taken: The recommendation has been accepted. This will be reflected in the 2005-O6 allocation to LSGIs, Recommendation No.4(b) Maintenance Grant:

"The maintenance grants should be based on the current cost of replacement" and the initial norms (which has to be updated periodically) may be as follows: i)

Maintenance of buildings constructed before 1-4-1967 - 3% of capital cost.

ii)

Maintenance of buildings constructed after 1-4-1967 - 2% of capital cost

iii)

Current construction cost - Rs.400/- per Sq.ft.

iv)

Frequency of resurfacing of black-top/WBM Roads - Once in five years,

v)

Annual repair expenditure of Blacktop roads - Rs.25,0007- per K.M.

vi)

Annual repair expenditure of WBM roads - Rs.23,000/-per K.M.

vii)

Annual repair expenditure of Unsurfaced roads - Rs.2000 per K.M

viii)

Cost of re-surfacing black-top roads (3.8 Metre width) - Rs.1.65 lakhs per K.M

ix)

Cost of resurfacing WBM roads (3.8 Metre width) - Rs.1.84 lakhs per K.M."

Action Taken; Recommendation has been accepted.

Recommendation No.6; "The distribution of the maintenance grant could be as follows: 1.

On the basis of a price index work out what Rs.140 crores at 20002001 prices would amount to for the year for which the provision is being made. The deflator for the construction sector can be utilized for this purpose.

2.

One-seventh of this amount may be kept aside for the District and Block Panchayats and divided between them in the ratio 19:1. The share of the Block Panchayat should be divided equally among them. As regards District Panchayats, half the share should be divided according to the ratio of distribution of the transferred village roads and other district roads and the other half based on norms for repair of non-road assets in their control (other than those created after 1995).

3.

Seven-eighth

of

Municipalities

is

the to

share be

of

distributed

the among

Village the

Panchayats Village

and

Panchayats,

Municipalities and Corporations in the same ratio as VTC is currently divided;

one-eighth of the share of the Village Panchayats and Municipalities should be distributed according to the maintenance needs of non-road assets, own and transferred (other than those created after 1995) - as determined by norms. 4.

The division formula mentioned above needs to be corrected by a series of iterations.

5.

The remaining portion of the maintenance grant i.e. the excess over Rs,140 crores at 2000-01 prices may be distributed exactly in the same manner as Plan Grant-in-aid."

Action Taken; Recommendations has been accepted.

Recommendation No.6 (c) General Purpose Grant; 'The Government may determine as a one-time exercise, the share of District Panchayats and Block Panchayats in the General Purpose Grant, based on normative assessment of their establishment cost and office expense requirements. The remaining amount may be distributed as follows:

Village Panchayats Municipalities Corporations

78.50% 8.50% 13.00%"

Action Taken: Recommendation has been accepted.

Recommendation No. 7 "The inter se distribution among the Municipalities and Corporations should be entirely on the basis of population. As regards Village Panchayats, a corpus of Rs.10 crore may be set apart and be used as per a gap filling formula - to fill the gap between obligatory expenditure (reckoned as establishment expenses, street light and water supply charges) and the revenue usable for these purposes (calculated as the sum of own collected revenue and the share of the Village Panchayat from the General Purpose Grant). The entire gap could be filled up in the case of Second and Third Grade Village Panchayats, 50% of the gap in the case of

First Grade Village Panchayats and 25% of the gap in the case of Special Grade Panchayats. The remaining portion may be distributed according to the population criterion."

Action Taken: Suggestion has been accepted. Recommendation No.8

"In order to avoid hardships during transition period, it is recommended that no Village Panchayat or ULB should experience a real shortfall in its receipts on account of these transfers compared to the previous year." Action Taken: Recommendation has been accepted.

Recommendation No.8 (d) EFC Grants:

"Eleventh Finance Commission grants may be devolved on the basis of the population criterion in one instalment" Action Taken: Recommendation has been accepted. The devolution will be subject to release of grant from Gort. of India. The formula will be the same as for Plan Grant. -*

Recommendation No.9: Own Resource Mobilization by LSGIs:

Recommendation No.9 (1) "For Property Tax the recommendations of the First SFC may be operationalised and the following scheme is suggested for classifying buildings and fixing the tax. (i)

Location Zone - Four Zones,

(ii)

Type of building -

(a) Ordinary Building. (b) Medium type building. (c) Luxury building. (iii) Type of use: - (a) Commercial use (b) Non-commercial use (iv)The relative weights for the Zone could be - 1 : 1.5 : 2 : 2.5 (v) The relative weights for the type of building could be - 1 : 1.5 : 2

(vi)The relative weights between non-commercial and commercial use could b 1 : 3 (vii) Deduction for age and owner occupation may be as provided for in the Kerala Municipality Act." Recommendation No. 9 (2). "On no account should there be a cap on increase or a limit to decrease when the new system is introduced."

Action Taken,-

Since the L5GO has a/ready initiated action for implementation of the recommendation of the Ist SFC relating to Property Tax reforms, these recommendations (9(1) and 9(2) ) need not be pursued as such. However, early steps will be taken to amend the relevant provisions of the Act and to frame Rules, Recommendation No.9(3) "A dual system of numbering is suggested so that incomplete buildings can get a provisional number and their completion tracked properly." Action Taken Suggestion has been accepted. Recommendation No.9(4) "Presumptive Profession Tax may be introduced to bring certain self employed occupational groups into the tax net" Action Taken:

Recommendation has been accepted, ft has also been decided that Annexure 9(1) of the Report will be made exhaustive by incorporating the following items also:

Item

HalfyeartyRate(P anchayat, Municipalities and Municipal Corporations) Rs

1. Members of Stock Exchange

1000

2. Directors (other than those nominated by Govt.) of companies registered under the Indian Companies Act

1250

3. Persons engaged m the Films/T. V industry (a) Writers, Cameramen, Still Photographers

600

(b) Lyricists, Directors. Playback Singers, Recordists, editors

1000 1250

4. Cinema Theatre - Owner/ Licensee 125O

5. Money-lenders Iicensed under the law relating to money lending 1250

6. Individual/ Private Institutions conducting chitties under Chitties Act 1000

7. Air Travel Agents 600

8. Each partner of firms engaged in any profession, trade or calling

750

9. Advertising firms/ Agencies

45O 10. Courier Service, Internet cafe, Computer Training Institute

1250

11. Educational Institutions including self- financing Institutions other than those owned and aided by State or Central Govt 450

12. Driving Schools 1250 13. Owners of Kalyanamandapams/Halls other than those owned by religious institutions

6OO

14. Beauty Parlours / Dry cleaners 75O 15. Tax Practitioners

Recommendation No. 9(5) Entertainment Tax may be introduced for Cable and Internet." Government has decided that Entertainment Tax be introduced only for cable and not for internet. Action to amend the Entertainment Tax Act and Rules is being taken by the Local Self Government Department

Recommendation No. 9(6) "In the case of Advertisement Tax the Government may fix the minimum rates for taxation for different kinds of advertisement for different types of locations by issuing Advertisement Tax Rules, which could set out the guidelines for LSGIs to assess the tax."

Action Taken. Suggest/on has been accepted. Rules are being amended.

Recommendation No. 9(7) "There should be a system of authenticating advertisements to avoid unauthorized advertisements. Penal provisions for unauthorized advertisement should be at least five times the normal tax."

Action Taken Recommendation has been accepted. Rules are being amended.

Recommendation No.9 (8) "Conversion Tax may be realized at the rate of five per cent of the capital value in the case of conversion of paddy lands. Half this rate maybe made applicable for other kinds of conversions. In the case of conversions without prior permission a severe penalty of ten times the Conversion Tax should be realized in the case of conversion of paddy land and an amount equivalent to the Conversion Tax could be realized in other cases."

Action Taken: Recommendation has been accepted. However, it has been made clear that the rate specified in the Recommendation will be the post-conversion rate. Relevant Act (including KLU Act) and Rules will be amended.

Recommendation No.9 (9) "The Service Tax should be made compulsory and be linked to the cost of performing obligatory functions and calculated as a percentage of Property Tax." Action Taken: Recommendation has been accepted. Changes in Act and Rules are required. This will be pursued.

Recommendation No. 9(10) "The ceiling on Surcharges may be removed." Action taken: Recommendation has been accepted. Act and Rules have to be amended for which action is in progress.

Recommendation No.9 (11) In the case of Non-tax Revenue the Government should fix the minimum fees for various kinds of licences in the case of Municipalities and Corporations through notification. In the case of Village Panchayats only the minimum amount may be fixed in the rules."

Action Taken: It is observed as per Annexure 9.2 that storing and selling of various items In a single premises attracts levy of fees for each of the items. This may lead to difficulty in fixing license fees in the case of large shops like Margin Free shops/Departmental stores etc. Margin Free shops/Departments/ stores are premises where most of the items under provisions and stationery are stored and sold. Therefore, items which are coming under provisions and stationery, hardwares including plumbing, sanitary items, building materials etc. cart be grouped together in two groups and single license fees according to the size of the trade can be levied. It has been decided that the following shall be the classifications:

Provisions & Stationery: Chillies, Corriander, grains, tea, coffee, sugar, jaggery, flour items, turmeric, edible oils, spices, common salt, potato, onion, cattle feeds, cashew nuts etc. Soap, Talcum powder, Cosmetics, Plastic items, biscuits/ sweets, meats, squash, polythene item, candles, disinfectants etc. Baby food, fancy goods, matches, cigarettes, beedies, snuff, toys, rubber goods, bathies, office equipments, paper, rose water, batteries other than for motor vehicles etc. The rate applicable to them may be as follows: Panchayats-

A Rs.1500

Municipality -

Rs.2000

Municipal Corporations -Rs.25OO

B

C Rs.lOOO

Rs.500

Rs.1500

Rs.1000

RS..2OOO

Rs.1500

Hardwares including plumbing materials, steel and steel rods, wash basin, closet, paint, turpentine, AC sheet, light roof sheet, PVC/ Tin/Aluminium sheet, Fibre sheet, glazed tiles etc. The following rates may be made applicable to them. Panchayats -

A Rs.l500

B Rs.1200

C Rs.800

Municipality -

Rs.2250

Rs.1500

Rs.lOOO

Rs.2OOO

Rs.1200

Municipal Corporations-

Rs.2800

In other cases, the licence fees as recommended vide Annexure 9.2 of the SFC Report has been accepted. Recommendation No:9(12) "In the case of licences and permits, which are renewed periodically, 25% of the licence fee may be collected as fine for delay beyond a grace period often days; this penalty may be increased by 25% for every additional fortnight of delay."

Action Taken: Recommendation has been accepted. Recommendation No:9 (13) "There must be compulsory display by LSGIs on the spot for various items of revenue and in the case of auctions a district level public notice should be given in December about all the forthcoming auctions."

Action Taken: Recommendation has been accepted.

Recommendation No:9(14) "For trade licences the present practice in Village Panchayats of calculation based a turnover may be done away with and for both Village Panchayats and Urban Local Bodies, Government could notify the minimum rates for each trade with separate rates in each category for small, medium and large establishments."

Action Taken: Recommendation has been accepted.

Recommendation No:9(15) "A separate numbering system should be adopted for trade establishments." Action Taken: Suggestion has been accepted.

Recommendation No. 9(16)

(i) (ii) (iii) (iv)

"The following fees may be enhanced, Building fee for Theatres. Licence fee under the Kerala Places of Public Resort Act. Licence fee for Private Markets Licence fee for Private Slaughter Houses.

(v) Licence fee for Brokers, Commission Agents, Weigh men and Measurers (vi) Licence fee for Butchers, Fishmongers, Poulterers. (vii) Licence fee for premises where animals are kept for commercial purposes. (viii) Market fee. (ix) Gate fee for public halting and parking places. (x) Gate fee for slaughterhouses. (xi) User charges for burial grounds, burning ghats and electric crematoria

Action Taken: Proposal has been accepted.

Recommendation No:9(17) "The meat stalls and the right to fish in water bodies may be auctioned every year by the concerned LSGIs after giving due publicity." Action Taken: Recommendation has been accepted.

Recommendation No:9(18) " Village Panchayats may auction the right to set up temporary shops in public land just as Urban Local Governments are doing so under Section 376 of the Kerala Municipality Act. "

Action Taken: Recommendation has been accepted. It has also been decided that the maximum period for occupation shall be limited to 15 days during each fair/festival taking place in the local limit without any right over the land. Auction shall be for individual shops. Permission for occupation of the land will be allowed only on furnishing a written agreement in stamp paper of appropriate value to the effect that the temporary structure if any put up by the licensee shall be removed by him. Failure to comply with this shall entail removal of the structure by the local body concerned forfeiting his security amount and at his risk and cost.

Recommendation No: 10: Follow up of First SFC Recommendations. Recommendation No.10(1): "Rules for levy of Advertisement Tax in Village Panchayats and ULBs may be issued immediately"

Action Taken: Recommendation has been Accepted (See decision 9(6) ). Government Department is taking action.

Local Self

Recommendation No. 10(2) "Steps to finalise minimum land value for use in registering sales may be completed at the earliest." Action Taken: Recommendation has been accepted.

Recommendation No.10(3) "Tax mapping may be done immediately and unique premises numbering system introduced." Action Taken: Recommendation has been accepted. further action.

Local Self Government Department is taking

Recommendation No.10(4)

"A single financing agency for LSGIs may be set up by merging KUDFC and the Rural Development Board." Action Taken: Recommendation has been accepted. Action is being taken by the Local Self Government Department. Recommendation No. 10(5) "50% of building exemption fees and regularization fees may be given to the concerned Village Panchayats and ULBs." Action Taken: Recommendation has been accepted. Details are being worked out

Recommendation No. 10(6) ''The question of Village Panchayats and ULBs levying daily fee for use of poramboke may be examined and decided by Government without further delay." Action Taken:

Recommendation has been accepted. Further action is being taken by the Revenue Department.

Recommendation No. 10(7) "Rationalisation of Revenue Village and Village Panchayat/ULB boundaries may be done in such a way that no revenue village would lie within more than one Village Panchayat or ULB."

Action Taken: Government feels that the recommendation of the Commission can be Implemented even without reducing the total number of villages. It has been accepted accordingly. Further action will be taken by Revenue Department

Recommendation No. 10(8) "Shortfall in devolution of assigned and shared taxes vis-a-vis the accepted level may be made good by Government." Action Taken:

Recommendation has been accepted. Since the arrears have been almost cleared further action is not necessary.

Recommendation No.11 Procedural Safeguards Recommendation No. 11(1) : "Necessary amendments to the Kerala Panchayat Raj Act and the Kerala Municipality Act may be made to specify the minimum shares of LSGIs, of the Plan Grant, Maintenance Grant and General Purpose Grant."

Action Taken: Recommendation has been accepted. At present, the charges for noon-feeding for pupils are met from the pro vision set apart under the head of account for Education Department and the purchases are from Civil Supplies Corporation. Since difficulties are being experienced both in the Education Department and LSGIs to settle accounts with the Civil Supplies it has been decided that the fund may devolve to LSGIs. They may decide the source of purchase subject to observation of rules.

Recommendation No.ll(2)

"LSGIs should get automatic allocations at the beginning of every month." Action Taken: It has been decided that the recommendation need not be pursued since Orders have already been issued for ensuring automatic release of funds to the LSGIs by the Local Self Government Department Recommendation No. 11(3) "A survey of assets transferred to LSGIs as well as assets owned by them may be carried out to calculate the standard spending assessment for maintenance purposes and the result of the study should be utilized for devolution of maintenance funds."

Action Taken: Recommendation has been accepted.

Recommendation No.11(4) "A separate Budget document indicating LSGI-wise distribution of the three streams of grants-in-aid and grants-in-aid for pensions and for noon feeding may be prepared. For other grantsin-aid, district-wise figures may be indicated along with formula for devolving them to individual LSGIs.

Action Taken; Recommendation has been accepted. Planning Department is taking further action. Recommendation No. 11(5) " A legislative provision may be introduced for indexing non-tax revenue items, and taxes like Property Tax, Advertisement Tax and Service Tax. Two-yearly revisions are recommended for non-tax licence items and Advertisement Tax based on Consumer Price Index for non-manual workers for Thiruvananthapuram in the case of Urban Local Bodies and Consumer Price Index for agricultural labourers for the state in the case of Village Panchayats; four-yearly revision may be done for Professional Tax and Service Tax."

Action Taken: Recommendation has been accepted.

Recommendation No. 11(6) "All proposals for staff creation should be cleared by the Ombudsman." Action Taken: It has been decided that this recommendation need not be pursed in view of the fact that the size of Ombudsman has been reduced to one.

Recommendation No. 11(7) "A Local Government Staff Commission may be set up to suggest redistribution of staff among LSGIs as well as from Government to LSGIs." Action taken Recommendation has been accepted. Recommendation No.11(8) "AH LSGIs should prepare annual maintenance Plans." Action Taken: Recommendation has been accepted.

Recommendation No. 11(9) "Unpermitted diversion of funds should be penalized by charging a penalty of two percent per month from the persons responsible."

Action Taken: Recommendation has been accepted.

Recommendation No.11(10) "Village Panchayats, Municipalities and Corporations should have a single account for crediting all their own revenues." Action Taken: Recommendation has been accepted, Recommendation No. 11(11) "In the case of Plan Grant-in-aid and Maintenance Grant-in-aid, bill system of drawing from treasuries should be introduced in the place of PD Accounts." Action Taken: On the basis of the decision of the Council of Ministers in agenda item No. 2O96 dated 2-7-2003 orders have already been issued in G. O(P) 381/2003/Fin dated 9-7-20O3 for introducing bill system in the LSGIs with effect froml-4-2OO4. For 20O4-05, a special dispensation has been made from June 2O04 till 30-9-2004. Recommendation No. 11(12) "An Empowered Committee under the Chief Secretary may be set up to follow-up the accepted recommendations and implement them fully." Action Taken: Recommendation has been accepted. Recommendation No.12 "A Cell under the joint control of Finance and Local Self Government Departments may be created for concurrent monitoring of all financial matters of LSGIs."

Action Taken: "A Cell in the Finance Department is already monitoring all financial matters of LSGL The Local Self Government Department will also be associated for concurrent monitoring ".