For Confidential Use Only

For Confidential Use Only

INNOVATIVE FEATURES IN PANCHAYATI RAJ IN SELECTSTATES & SCOPE FOR THEIR REPLICATION: A QUICK STUDY

(Sponsored by Twelfth Finance Commission)

By

K SIVA SUBRAHMANYAM

V ANNAMALAI

National Institute of Rural Development

Rajendranagar, Hyderabad-500 030

PREFACE

The Twelfth Finance Commission had, in its wisdom, entrusted the task of conducting a quick study on the “innovative/best practices” that could be found in Panchayati Raj across the States which could be replicated in other States where such features / practices are not presently found to the NIRD. The project though originally sanctioned towards the end of July 2003, due to delays in according sanction to the posts of a Consultant and a EDP Assistant by the TFC, the actual work on the project could be started from September 2003 onwards. Therefore, visits by the Study Team consisting of a Consultant and one Assistant Director could be made from September to November for collection of statistical and other information relevant to the study. The time at the disposal of the Study Team to prepare and finalize the study report was a mere three months. However, considering the nature of the study, the delays in responses to the formats sent to the States, and the deficiencies in the information provided by them demand a timeframe of atleast six months for the submission of study report to the TFC. Despite these constraints, we consider that we have done a neat job in meeting the requirements of this Study. Within the prescribed limited time period, we had made all efforts to prepare and finalize the study report, though we don’t claim it to be a comprehensive one.

At this juncture, we consider it a privilege to profusely thank the TFC for reposing confidence in the competence of the NIRD to carry out the studies for them. Also we feel very grateful to Dr.A.V.S. Reddy, IAS, the former Director General, Shri Lalit Mathur, IAS, the present Director General, and Shri Mathew C Kunnumkal, IAS, Deputy Director General of our Institute not only for giving us the opportunity to work on this project but also for providing us all encouragement, advice and support. We also express our grateful thanks to Smt.V Vedakumari, Financial Advisor and Co-ordinator for the TFC project for her constant encouragement, guidance and help. Needless to emphasize, the secretarial assistance which is more crucial for a project to come to fruition, rendered to us by Ms.S.V.Lakshmi, MCA is very immense. Unmindful of office hours and holidays, she had extended excellent co-operation and help to the Study Team. We gratefully acknowledge her services to the project and remain thankful to her always. Besides, Ms.A.Santhisri, Steno working in the Institute had also given us her help and co-operation, despite her other official preoccupations, for which we thank her.

This study had dictated to us that a major study on several issues crucial for the success of Panchayati Raj is indeed warranted. Such a study needs to be allowed a timeframe of two years so as to make the scope of the study more comprehensive. It is however hoped that this quick study, despite certain unexpected constraints, will prove useful to the TFC as well as to other institutions and researchers in understanding the diverse features that can be found in Panchayati Raj across the country.

Dated: February 12, 2004 K SIVA SUBRAHMANYAM

V ANNAMALAI

CONTENTS

Chapter
No. / Title / Page No.
I. / Introduction
1 / The Prelude / 1
2 / Objectives / ToR of the Study / 1
3 / Methodology / 3
4 / Scope of the Study / 4
5 / Limitations of the Study / 4
6 / Parameters to assess the Performance of Panchayati Raj in States / 5
7 / a) Status of Compliance with Mandatory Constitutional provisions / 8
b) Status of Compliance with Discretionary Constitutional Provisions / 9
c) Legislative and Administrative Measures Taken by the States Beyond the provisions of STA Act / 9
8 / ‘Core’ Factors Contributing to the Success of Panchayati Raj / 11
9 / Chapter Division / 11
II / Status Of Compliance With Mandatory Constitutional Provisions
1 / Constitution of SEC and Conduct of Elections / 12
2 / Reservation of Seats and Offices of Chairpersons in Panchayats / 12
3 / Election of Chairperson of Panchayats / 15
4 / Disqualifications for Membership in Panchayats / 15
5 / Constitution of a State Finance Commission and Governor of a State to cause SFC Recommendations / 18
6 / Central Finance Commission to recommend ‘Measures’ / 21
7 / Constitution of District Planning Committee / 24
III / Status Of Compliance With Discretionary Constitutional Provisions
1 / Gram Sabha and its Empowerment / 32
2 / Composition of Panchayats / 41
3 / Devolution of Powers, Authority and Responsibilities on Panchayats / 43
4 / Physical and Administrative Infrastructure of Panchayats / 56
5 / Devolution of powers to impose Taxes, Duties, Tolls and Fees by Panchayats / 59
6 / Composition of SFC and Qualifications requisite of their Members / 94
7 / Audit of Accounts / 98
IV / Innovative Features Or Best Practices In Panchayati Raj (Legislative And Administrative) Found Across The States Beyond The Provisions Of The 73rd Amendment Act
1 / Political Aspects / 106
2 / Organizational Aspects / 112
3 / Administrative Aspects / 117
4 / Financial Aspects / 118
5 / Transparency and IEC / 123
V / Summary, Recommendations & Scope for Replication
1 / Summary and Recommendations / 136
2 / Desirability and Feasibility of Replication of Innovative Features in Panchayati Raj / 159
3 / ‘Core’ Factors that contribute to the success of Panchayati Raj / 164

LIST OF ANNEXURES

Sl. No. /

Title

/ Page No.
I / Format sent to the States for ‘Best Practices’ / 171
II / List of Officials with whom the Study Team interacted / 175
III / Status of Action Taken on the Recommendations of the FirstState Finance Commission of Kerala / 190
IV / Action Taken Report on the Recommendations of the Gujarat First Finance Commission / 205
V / Memorandum on the Action Taken on the Recommendations of the MadhyaPradeshState Finance Commission. / 216
VI / Powers and Functions of Gram Sabha in Madhya Pradesh / 227
VII / Functional Domain of PRIs in Kerala / 231
VIII / Functional Domain of PRIs in Gujarat / 242
IX / Functions and Powers of Panchayats in Madhya Pradesh / 257
X / Devolution of Powers and Transfer of Duties to Panchayati Raj Institutions by various Departments of Government in Madhya Pradesh / 266
XI / Functions transferred to Panchayats in Madhya Pradesh after 73rd Constitutional Amendment (in terms of Schedule XI of the Constitution) / 296

LIST OF TABLES

Table No. / Title / Page No.
1 / Reservation of Seats and Offices of Chairpersons to BCCs / 13
2 / Utilisation of the Tenth Finance Commission Grants / 23
3 / Utilisation of the EFC Grant by the Selected States / 23
4 / Membership in Panchayats in the Selected States / 42
5 / Transfer of Institutions and Staff to Panchayats in Kerala / 46
6 / Staffing Position in 4 selected Village Panchayats in Kerala / 57
7 / Staffing Position in 4 selected Village Panchayats in Gujarat / 58
8 / Staffing Position in 4 selected Village Panchayats in MP / 59
9 / Rates of Show Tax / 62
10 / Prescribed Minimum Rates of Service Taxes in Kerala / 63
11 / Specific Purpose Grants to Panchayats in Kerala / 68
12 / Schemes under the First Stream of Plan Assistance to the Local Government Institutions and the outlay proposed for 2002-03 / 70
13 / Allocation of I Stream of Plan Assistance to Panchayats in Kerala / 72
14 / Formula Adopted for Distribution of General Sector and EFC Grant in Kerala / 73
15 / Distribution of Plan Grants-in-aid to the PRIs in Kerala / 74
16 / District-wise Distribution of Plan Grant for 2002-2003 to Local Governments in Kerala for the year 2002-03 / 75
17 / Prescribed Minimum and Maximum Rates for the Tax on Buildings and Lands in Gujarat / 76
18 / Prescribed Minimum and Maximum Tax Rates for the Tax on Fairs, Festivals and Entertainments in Gujarat / 78
19 / Rates of Tax on Bicycles and Vehicles in Gujarat / 79
20 / Prescribed Rates of General Sanitary Cess (as Revised in 1991) in Gujarat / 80
21 / Prescribed Rates of Special Water Rate in Gujarat / 81
22 / Rate of Tax on Lands and Buildings in MP / 84
23 / Minimum and Maximum Tax Rates prescribed for Profession Tax in MP / 85
24 / Minimum and Maximum Fee Prescribed for Market Fees in MP / 86
25 / Minimum and Maximum Limits Prescribed for Fee on Registration of Animals Sold in MP / 86
26 / Minimum and Maximum Rates for the Levy of Theatre Tax in MP / 87
27 / Rates for the Optional Revenue Items Prescribed by the State Government in MP / 88
28 / Actual Use of Assigned Taxes and Non-Taxes by Village Panchayats / 92
29 / Rate Structure of Selected Village Panchayat Taxes / 93
30 / Prescribed Qualifications of the Chairmen and Members of SFCs / 94
31 / Distribution of Village Panchayats according to Population and Area / 118
32 / Status of Infrastructure for Computerization in Village Panchayats / 128
33 / Practices/Features in Panchayati Raj: Scope for Replication / 160

CHAPTER – I

INTRODUCTION

1.The Prelude

1.1The Finance Commission appointed by the President under Art.280 is required to make, inter alia, recommendations as to “the measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats in the State on the basis of the recommendations made by the Finance Commission of the State (appointed by the Governor under Art.243I)”. Accordingly, the Commission in its wisdom thought it fit to identify the “best practices and innovative features” in the area of Panchayati Raj in a few States with a view to exploring the feasibility and desirability of replicating the best features found in these States. For this purpose, the Commission had entrusted the responsibility to conduct a quick study on this subject to the NIRD and submit a report on the findings of such a study.

1.2Objectives/ToR of the Study

The objectives of the study as specified in our original proposal sought to focus on internal revenue mobilization (IRM) by the village-level panchayats. However, the Economic Adviser of the Commission, during his discussions with the Study Team at the Institute, suggested a comprehensive look at the Panchayati Raj system as a whole in three select States, rather than confining the scope of the study so the IRM of the panchayats. Accordingly, the objectives/ToR of the proposed study were slightly amended so as to locate the best practices or distinctive features of Panchayati Raj system in three States with a view to suggesting the extent of their replicability in other States.

The objectives of the study, on the lines suggested by the Economic Advisor of the Commission, are as follows:

a)to examine the extent to which the state statutes governing the panchayats, and the executive follow-up in terms of guidelines/rules issued by the State government, have empowered the panchayats to raise their own revenue (IRM).

In meeting this objective, we had scanned through the Panchayat Acts and the executive rules/instructions issued by the State governments in the three selected States. In addition, an effort is made to cull out, within the confines of the time available for the study, some of the distinctive features in the area of panchayat finances in other States. The results of this exercise can be seen in the Chapter II to IV.

b)to assess the physical and administrative infrastructure provided to or made available for the panchayats.

The physical infrastructure and the administrative infrastructure available for the selected village panchayats in each of the three selected States may be seen from paras 3.3.1 to 3.3.3 and 3.4.

c)to analyse the efficacy of the machinery and mechanisms /systems available to or evolved by the panchayats in their revenue administration.

The summary and recommendations of the study report provides a brief account on this issue as may be seen from Chapter V.

d)to identify the ‘innovative/best’ practices adopted by the panchayats either on their own or at the instance of the State government concerned, in the area of Panchayati Raj in the selected States.

Chapter IV of the present study report deals with the innovative/best practices found particularly in the three selected States.

e)to examine the factors contributing to the success of Panchayati Raj in the selected States.

Chapter-V indicates the ‘core’ factors responsible for the success of Panchayati Raj in the three selected States.

f)to explore the feasibility of replicating in other States, the best practices observed in the area of Panchayati Raj in the selected and in a few other States.

Chapter-V provides an account of the desirability and feasibility of replication of the best practices observed in the area of Panchayati Raj in the select States as well as in a few other States.

1.3Methodology

The methodology adopted for the present study comprise the following:

a)Preparation of a format and a list of documents needed from the State which was sent to all the 29 States; (Annexure-I)

b)Personal visits to States and conducting discussions with the senior-level officials of the State Departments of Finance and Panchayati Raj; (Annexure-II)

c)Visits to four village panchayats in each of the three States selected for the present study and discussions with the elected representatives and Secretaries of the panchayats concerned;

The timeframe provided for the study to cover all the States in the country being strictly limited, the NIRD had chosen three major States, namely, Kerala, Gujarat and Madhya Pradesh which, in its opinion, exhibit several distinctive features in the broad area of Panchayati Raj, for the present study. Accordingly, the Study Team of the Institute visited these three States during September-November 2003 for discussions with the senior-level officials of State Departments of Finance and Panchayati Raj, chairpersons and secretaries of four village-level panchayats in each State which were chosen by the relevant State government officials, and for collection of qualitative and quantitative information on various facets of Panchayati Raj in the specified States. Information required for the study, including the formats prepared by the Institute, was communicated to the State Secretaries of Panchayati Raj and Finance long sufficiently in advance of the visits of the Study Team to the States concerned. As the Twelfth Finance Commission had entrusted another quick-study to the NIRD which warranted visits to fifteen major States, including the three States selected for the present study, the opportunity of State visits to Kerala, Gujarat and MP was utilized also to collect some useful information for the second study[1].

1.4Scope of the Study

The present report is primarily based on the findings of our quick study in the three select States of Kerala, Gujarat and Madhya Pradesh. It does not however boast of being an exhaustive or comprehensive report. Within the confines of available time and information, an attempt is also made to cull out the important features of Panchayati Raj in other major States. Selection of the specified three States does not however imply that only these three possess the best features worth emulation by other States. Nevertheless, the report deals with the ‘parameters’ that we chose to assess the performance of the three select States in the area of Panchayati Raj and the results thereof, and the desirability and feasibility of their replicability in other States.

1.5Limitations of the Study

Among the constraints confronted by the Study Team, the important are the following:

a)Despite two to three months allowed for the States to provide us the requisite information in a format relating to ‘best practices’ and to send us the relevant documents, most of the States did not positively respond to our request, even after several reminders. Where the States supplied the quantitative information, they are shaky in several respects.

b)Several States like Bihar, UP, Punjab, Haryana, MP, Kerala and Karnataka, and Tamil Nadu had provided us a part of the qualitative information relevant to our study in their respective vernacular official languages. We found it extremely difficult to get all these documents and other qualitative information translated into english within a month or two. Translation of all these papers is time-consuming and hence we could not fully make use of such information in local languages provided for our study.

c)Many States are also handicapped in supplying the quantitative information relevant to our studies due to paucity of such information at their State level.

1.6Parameters to assess the Performance of Panchayati Raj in States

Although the process of democratic decentralisation which gained momentum in the first two decades of 1960s and 1970s following introduction of panchayati raj in the rural India, the initial interest and initiatives have gradually received a setback particularly since 1980s due to a variety of factors. Elections to the panchayats were not conducted on time, and several of their functional responsibilities, powers, staff support and fiscal base were gradually withdrawn from the domain of the panchayats. By the end of 1980s, the situation was so disquieting that the Union government, under Art.40 of the Indian Constitution, had to take fresh and far-reaching initiatives to regain the lost glory of Panchayati Raj. This culminated in the enactment of the 73rd Constitutional Amendment Act which came into effect from April 23, 1993.

The 73rd Amendment had conferred Constitutional status on panchayats and had provided for certain obligatory as well as discretionary provisions. Among the provisions which were made obligatory for the States relate to introduction of a system of three-tier/two-tier panchayats in the States depending upon their population, conduct of elections to the panchayats for every five years, composition of panchayats, prescription of electoral college for the election of chairpersons of the panchayats, reservation of seats as well as offices of chairpersons in the panchayats, mode of electing the chairpersons, constitution of SEC and SFC, etc. Another obligatory function cast on the State governments relate to constitution of a District Planning Committee, under the provisions of the 74th Amendment Act, which is of common concern to both the panchayats and municipalities. The discretionary powers of the States, in terms of the 73rd Amendment Act, include establishment of gram sabha and its empowerment, mode of election to the chairpersons of village-level panchayats, reservation of seats and offices of chairpersons of panchayats to OBCs, devolution of functions, powers and resources on panchayats, accounts and audit arrangements, etc.

State governments, by virtue of the matter ‘local government’ being included in the ‘State List’, have exclusive jurisdiction over the composition and grant of functions, powers and resources, and on all other matters relating to local government before the 73rd and 74th Amendment Acts were passed. Although the Constitutional Amendment Acts have brought some element of uniformity among the States in respect of the obligatory provisions made in the said Acts, the crucial area of functional and fiscal devolution has still been left to the discretion of the States resulting, wide inter-State variations in these areas. In fact, the fathers of the 73rd and 74th Amendment Acts seem to have deliberately made certain provisions of these Acts, including the issue of ‘devolution’, discretionary for the State governments with a view not to affecting the sensitivities of the State governments in these specific areas. As a result, the basic structure of the Indian polity has not been significantly altered and, not withstanding 73rd and 74th Amendment Acts, it still continues to consist of only two-tiers, viz., the Union and State governments.