INTERIM REPORT

OF THE

FIFTH STATE FINANCE COMMISSION

RAJASTHAN

(FOR 2016-17)

JAIPUR SEPTEMBER, 2016

INTERIM REPORT

OF THE

FIFTH STATE FINANCE COMMISSION

RAJASTHAN

(FOR 2016-17)

State Finance Commission, I-Floor, B-Block, Vitt Bhawan, Janpath, Jaipur. (Raj) Website: sfc.rajasthan.gov.in E-mail:sfc-5@rajasthan.gov.in

Jaipur September, 2016

1

Interim Report

Preamble

1. The Fifth State Finance Commission was constituted by an order of

H.E., the Governor of Rajasthan dated 29th May, 2015 under the Chairmanship of

Dr. Jyoti Kiran. The mandate given to the Commission includes review of financial

position of the Panchayats and Municipalities at all levels and to make

recommendations as to the principles which should govern the distribution

between the State and the Panchayats and Municipalities at all levels of the net

proceeds of taxes etc, and the grants to be given to these institutions. The

Commission has also been asked to identify the services rendered by these

institutions, standards of these services and the requirements and availability of

funds for these services. As required by the State Government, the Commission

submitted its earlier Interim Report on 15th September, 2015, which was accepted

and implemented.

2. Shri Pradhyumn Singh has been appointed a Member of the

Commission vide order of H.E., the Governor dated 17th September, 2015. Also

the tenure of the Commission, which was initially upto 30th November, 2015, has

been extended to 30th May, 2017.

3. The 73rd and 74th amendments to the Constitution of India and the

enactment of Rajasthan Panchayati Raj Act, 1994 as also the Rajasthan

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Municipalities Act, 2009 have laid down the required provisions and functions to

make these local bodies effective institutions of local governance. The successive

Central and State Finance Commissions have been recommending increased

financial allocations alongwith other recommendations for these bodies to enable

them discharge the functions assigned. It is evident from the review of the

reports of earlier Finance Commissions that the efficiency and welfare gains to be

achieved from the decentralization are well recognized. Yet, administrative

capacities and systemic constraints act as distortions for achieving allocative

efficiency. ‘Operational Optimization’ thus becomes a real challenge for any

discourse on federal finance.

4. Empowerment, enablement and accountability are the desired trio

for the local self governance. ‘Enablement’ mode of empowering the local

government requires a unique balance between ‘accountability’ and ‘autonomy’.

A ‘structural’ change in the financial architecture of the fund transfers is

imperative for strengthening these local bodies. They should act as vibrant, ideal

and efficient units of governance which are both autonomous and accountable.

To achieve this ambitious goal, a comprehensive analysis of ideal ‘requirements’

and actual ‘expenditure’ matrix becomes necessary. That too in a normative

frame work, which reflects people’s expectations. Thus, the Commission aims to

redefine this matrix by detailed studies, interactions, expert advice, surveys and

analysis of secondary and primary information and also studying the best

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practices in the other States. Therefore, the methodology of the Commission has

been an eclectic mix of the conventional practices adopted by earlier

Commissions and some new initiatives, for example use of Social Media, primary

survey and institution - academia interaction. With a view to conduct studies on

the normative requirement of funds for delivering these services at the standards

recommended and the gaps in resources for rendering these services, a unique

attempt has been made by the Commission to enter into a "Memorandum of

Understanding" with the NITI Aayog Chair, University of Rajasthan, Jaipur. Again

to inspire the rural elected representatives for the attitudinal change towards

panchayats' functioning and finances, a social media campaign was initiated with

Indira Gandhi Panchayati Raj Sansthan (IGPRS). A mechanism has been evolved

through which the financial devolution is institutionalized based on identified

needs of the local citizens.

5. When ‘co-operative federalism’ is being institutionalized in the

Centre-State financial relations, the task to percolate this spirit to the grassroot

level becomes a major challenge for us too. The Commission notes that an

integrated framework is to be engineered for the best results. And that actual

empowerment will come only with fiscal and functional self reliance. We also

realize that strengthening local bodies is not just about ‘normative’ or

‘appropriate’ devolution, Accountability, Transparency and strong ‘administrative

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will’ together build the desired ‘eco-system’ where it is possible to translate

political decentralisation into financial decentralisation.

6. First quarter of the financial year 2016-17 is over and the State

Government has made budget provision equivalent to the amount recommended

by this Commission in its earlier Interim Report. Now the State Government has

requested the Commission vide letter dated 1st July, 2016 to give another interim

report to enable release of funds to the Panchayati Raj Institutions (PRIs) and

Urban Local Bodies (ULBs) during the year 2016-17.

Issues

7. The 14th Central Finance Commission (CFC) has raised the level of

grants to local bodies substantially

as compared to the 13th Central

Finance Commission. Further the

14th CFC has brought out a

paradigm shift in its grants to rural

local bodies by providing entire

grant amount to the Gram

Panchayats. With this shift and increased funds transfer under the

recommendations of both the Central and State Finance Commissions, the

average receipts of funds by Gram Panchayats from CFC/SFC together has been

significantly increasing and about four fold increase is recorded in the year

Box 1

Issues

Increasing funds

Need for strengthening of local

governance system.

Lack of civic services and their

benchmarking.

Accounts and audit remain priorities.

Poor database.

Lack of manpower for efficient

functioning.

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2015-16 in comparison with the year 2010 -11. If the fund tranfer to Gram

Panchayats under CFC award and the anticipated fund transfer under SFC's

recommendation are extrapolated for year 2016-20, assuming the same levels of

transfer, the total projected fund flow to Gram Panchayats would be about Rs.

21806.32 crore. This has also been depicted in graph-1 in box-2. Thus, funds

constraints, as commonly perceived, is not the real issue, but optimum use of

these resources for rendering basic civic services to the satisfaction of people is

indeed ‘the’ issue.

8. Strengthening of local governance system is possible only when

adequate manpower and logistic support together with strong financial

management are in place at all levels of local bodies. It will require endogenous

planning, competent and trained manpower, proper budgeting, monitoring and

Box 2

Graph 1 - Gram Panchayat Finance: Trend Analysis (Rs. in crore)

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reporting systems to enable the Panchayati Raj Institutions to efficiently perform

the functions already devolved to them. Thus, these issues are to be addressed

with priority.

Empowering the Gram Sabhas

9. In April this year the Prime Minister launched “Gramodaya Se Bharat

Uday Abhiyan” in the Country. During this “Abhiyan” Gram Sabhas were

organized from 14th April to 24th April, 2016 to promote social harmony,

awareness among rural population about various schemes being implemented for

them, and to provide coverage and benefits of various rural development

programmes to the people. 24th April, 2016 was celebrated as “National

Panchayati Raj Day” and the efficient utilization of funds under 14th CFC award

and MNREGA and other schemes were discussed in the Gram Sabhas. The

Commission also deputed its officials at some places to observe the proceedings

of these Gram Sabhas to have first hand knowledge of the functioning of

Panchayats.

10. The Rajasthan Panchayati Raj Act has assigned various functions to

the Gram Panchayats. The key functions have been listed in Box-3. It would be

seen that almost all functions relating to the development of villages and the rural

areas have been given to the Gram Panchayats, making them institutions of rural

turn around and social transformation. The functions assigned to the Gram

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Panchayats are to be

prioritized and executed

with active participation of

the people through Gram

Sabhas.

11. Section 8A of

the Rajasthan Panchayati

Raj Act provides for

holding at least two

meetings of Gram Sabhas

every year, one in the first

quarter and second in the last quarter of the financial year. Apart from this, the

Panchayati Raj Department has issued instructions to organise Gram Sabhas on or

around 26 January, 1 May, 15 August and 2 October every year. The quorum of

Gram Sabha is 10% of the members and the presence of Scheduled Caste,

Scheduled Tribe, Backward Class and Women should be in proportion of their

population. While these provisions exists in the Act and Circular, but the fact

remains that either the Gram Sabhas are not held in time and even if held the

required quorum is not there. In practice the Gram Sabhas ar not found

representatives of the residents or their priorities. These Sabhas, their functioning

and their decision making process is to be vitalized and systemised if the will of

Box 3

Key functions of Gram Panchayats

Preparation of Annual Development Plan of the area.

Development of Agriculture, Horticulture, Live stock &

Fisheries.

Afforestation alongside village and district roads.

Maintenance of small irrigation tanks and their regulation.

Development of rural and cottage industries.

Rural Housing.

Construction and maintenance of drinking water wells,

ponds and tanks.

Construction and maintenance of village roads, drains and

culverts.

Street lighting and its maintenance.

Poverty alleviation and creation of productive assets.

Ensuring admission and attendance of boys and girls in

elementary education.

Regulation of fairs including Cattle fairs.

Sanitation, Public Health and Family Welfare.

Welfare of Weaker sections specially SC/ST.

Maintenance of community assets.

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the people is to be translated into priorities. Active and effective Gram Sabha is

the first pre-condition for empowered people and accountable Gram Panchayats

through social audit. Therefore, we strongly feel that for Panchayati Raj System to

become effective institutions of social change, meetings of Gram Sabhas as

required by the Act and direction of the Department should be held and

participation of members ensured. The Panchayati Raj Department is suggested

to issue a “Status paper” on the actual functioning of Gram Sabhas in the State so

that a road map to make them effective can be designed.

12. Under the Terms of Reference, the Commission is required to

identify the services rendered by the Panchayats and the requirement and

availability of funds for rendering these services. While this Commission is in the

process of identifying these services and estimated requirements of funds for

them, for our interim report we had to rely upon the findings of an earlier study

assigned by the 4th State Finance Commission to SPRI. According to the report

presented by the SPRI, the per capita estimated cost of core functions of PRIs was

Rs. 153.69 for capital works and Rs. 135.36 for operation and maintenance (O &

M) of these services. These requirements were estimated at the year 2013 prices.

After adding cost escalation, the per capita current year's requirement for capital

and operation and maintenance would work out to approximately Rs. 166.60 and

Rs. 146.73 respectively. This being the case, the total requirement for the entire

rural population of 2011 census for core services in respect of capital works and

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operation and maintenance works out to Rs. 858 crore and Rs. 755.66 crore

respectively, totalling to Rs. 1613.66 crore. Against these requirements, the

availability of funds with Gram Panchayats during the year 2015-16 from CFC and

SFC grants was to the tune of Rs. 3438 crore. It is, thus, more than evident that

funds are not a problem for the Panchayats to deliver basic civic services, as

generally quoted. On the contrary, there is case now for delegation of additional

functions as the funds are already there.

13. The Rural Development Department in their letter to the Commission

has mentioned that the Government of India has laid down the target of housing

for all by the year 2022 and one crore houses will be constructed in rural areas in

three years under this scheme. To achieve this objective, “Prime Minister Awaas

Yojna” has been launched in rural areas and the scheme envisages assistance of

Rs. 1.20 lac to the houseless households or living in kutcha and dilapidated house

to build a house for living. It has further been mentioned by the Department that

rural housing is included in the Eleventh Schedule after the 73rd amendment of

the Constitution, therefore, the State Finance Commission should give priority to

rural housing and provide at least 50% of the requirement out of devolution

recommended for PRIS. In view of the spirit of 73rd amendment of the

Constitution of India and also considering the acute need to provide houses to the

rural poor, we propose to provide this requirement out of 40% funds which are

being earmarked by us for National/State priority schemes. However, the

10

procedure of utilisation of this fund may be decided by the Rural Development

and Panchayati Raj Department in consultation with the Finance Department.

14. Benchmarking of basic civic services and their publication particularly

in respect of Urban Local Bodies is one of the conditions for Urban Local Bodies to

claim performance grant of 14th CFC. As mentioned in earlier paras our ToR also

includes the identification of standards of services to be performed by the local

bodies. We understand that the Urban Local Bodies are working on benchmarks

in respect of certain civic services. In our view it is desirable that the Gram

Panchayats also take some measures in this direction. We intend dealing these

and some other issues in detail in our final report.

15. Timely preparation of accounts and its audit has been an area of

major concern. The successive Central and State Finance Commissions have been

emphasizing on the need to assign priority to these issues. The 14th Central

Finance Commission has linked release of Performance grant amounting to Rs.

1363.36 crore for Gram Panchayats and Rs. 902.62 crore for Urban Local Bodies

with timely completion of this task. To ensure that the local bodies, both rural and

urban, give due attention to this issue, this Commission, in its earlier Interim

Report, framed an "Incentive Scheme" which envisages release of 5% grant

among others for maintenance of accounts of income and expenditure. Looking

to the nature and importance of the matter, the Commission requested the

Departments of Finance, Panchayati Raj, Local Self Government and Director,

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Local Fund Audit to ensure that all the PRIs and ULBs timely complete their annual

accounts and the same are audited in time so as to enable these institutions to

claim performance grants under the recommendations of 14th Central Finance

Commission. The Finance Department accordingly has issued instructions vide

circular dated 16.05.2016 for certification of accounts of Local Bodies to enable

them claim performance grant under the 14th Central Finance Commission

Award.

16. Poor database on local bodies is the most serious constraint that

we faced for designing the allocation parameters. For distribution of the State's

net own tax revenue between the State and the Local Bodies at all levels,

collection of data pertaining to income and expenditure at different levels of local

bodies, with the utmost accuracy has been a major issue. Keeping this in mind the

Commission has designed detail questionnaires to obtain information related to

status of basic civic services, receipts and expenditures in last five years,

requirements of funds etc. Other important figures, practices, indicators and

suggestions were also invited. But the experience so far has not been satisfactory.

The Commission made concerted efforts to get information and data from the

PRIs and ULBs. In this process letters were written to the concerned local bodies,

followed by reminders and several telephonic calls to respective officers to send

the required information. With this colossal effort, the Commission has been able

12

to collect data and information from most of the PRIs and ULBs as are available

with these bodies. Yet reliability and quality of this data is a bigger issue.

17. Shortage of manpower in the PRIs particularly in Gram Panchayats

is a serious impediment in functioning of these bodies. The Secretary to

Government of India, Ministry of Panchayati Raj in his letter to Pr. Secretary,

Panchayati Raj Department, has requested the State Government to enhance

human resource support to the Gram Panchayats so that the "Gram Panchayat

Development Plan" which has the potential of vitalizing Panchayati Raj, specially

at the cutting edge level could be successfully implemented. To meet this

situation, the Panchayati Raj Department has proposed engagement of Multi Task

Staff to perform various job at the Gram Panchayats, Panchayat Samities and Zila

Parishads. The Panchayati Raj Department has requested the Commission to

allow the incurring of expenditure towards the engagement of these Multi Task

Staff out of devolution to be recommended by the Commission for the Panchayati

Raj Institutions. The approximate requirement indicated by them is Rs. 200 crore

per annum. The Commission considered this request for effective, efficient

functioning of these local bodies and utilization of resources.

State Initiatives to strengthen local bodies

18. The State Government has taken up various schemes and measures

to ensure all round planned development of rural areas by convergence of funds

available with the Panchayats for development under different programmes. This

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convergence of funds is likely to

result in better delivery of civic

services including cleaning, solid

waste management, improvement in

the conditions of community assets

like cremation and burial grounds

and pasture development for

animals. This convergence would also

improve training and skill development of youth for employment opportunities.

19. The decision to lay down minimum qualification for elected

representatives in respect of PRIs and ULBs and ensuring 50% representation of

women in these bodies is also one initiative which will go a long way in successful

implementation of provisions contained in the 73rd and 74th amendments of the

Constitution of India and the Panchayati Raj and Municipalities Acts. These

initiatives have started showing results leading to participation of people as also

improvements in the functioning of these institutions.

20. Rajasthan is the largest State of the country with an area of 3.42 lac

square kilometer which is 10.41% of the total area, but the available water in the

State is only 1.07% of the country. Water level in most of the Panchayat Samities

has gone down leading to acute shortage of drinking water particularly during

summer. Most of the area in the State faces recurrent drought conditions and to

Box 4

State Initiatives

Convergence of funds under different

schemes.

Minimum qualification and representation of

women.

Jal Swavalamban Abhiyan

Bhamashah Yojna

Mukhya Mantri Rajshree Yojna

E - panchayat

Revenue courts management system

14

overcome these problems on a long term basis and to make State self reliant in

water, the "Mukhyamantri Jal Swavlamban Abhiyan" (MJSA) has been launched.

This Abhiyan envisages taking up water conservation measures in 21 thousand

villages in four year for a lasting solution of the problem. The programme was

launched in January, 2016 and 93659 works with an expenditure of Rs. 1241 crore

have been completed by 25 August, 2016. The programme includes works relating

to conservation & preservation of water, renovation and maintenance of

traditional water sources, preparing "Water Budget" by every Gram Panchayat

and tree plantation etc. The programme received appreciation at the national

level.

21. "Bhamashah Yojna" has been launched with the objective of

empowering women, their financial inclusion and effective distribution of fund

under welfare schemes. This is a unique scheme in the country for direct benefit

transfer in the bank account of the beneficiary and distribution of other benefits

in kind. The object is to transfer the funds directly to the destitute and the

deprived people of the society in their bank account. For implementation of the

scheme, the citizens are required to register all their family members at the

nearest e-mitra centre free of cost and link their bank account, Aadhar number

and other relevant details. The Government provides assistance of Rs. 2000/- to

families selected under BPL, State BPL, Antyodaya and Annpurna schemes. Social

security pensions, ration distribution, MNREGA payments, health insurance, safe

15

delivery & maternity and scholarship payments are being made directly to the

beneficiary through Bhamashah platform. Bhamashah registration and

distribution of benefits is a continuous process and as on 29.08.2016 more than

450 lac persons of 127 lac families have been registered and assistance of more

than Rs. 3726 crore has been credited in their bank accounts.

22. "Mukhya Mantri Rajshree Yojna" has been launched to address

gender issues and empowerment of girl child. The scheme aims to create positive

thinking about the girl child, improvement in their health and educational

standards, encourage institutional deliveries to reduce maternal and infant

mortality rate, ensuring registration and retention of girls in schools. The scheme

covers girl child born on or after 1st June, 2016. The scheme envisages payments

of financial benefits at various stages in increasing order right from the birth of

girl child upto the completion of school education.

23. With a view to make the functioning of Gram Panchayats

transparent, the State Government has proposed introduction of e-panchayat

system so that all information relating to functioning of Gram Panchayat remains

available in public domain. The e-governance system in Panchayati Raj at all the

levels should enable web and mobile based linkages of release and booking of

funds at the state headquarters, monitoring and utilization of funds as also

implementation of schemes and programmes. We are earmarking funds for

National/State priority schemes including use of Information Technology,

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e-governance and data bases. We, therefore, recommend that these funds could

be utilized for these activities by the Department to transform the PRIs into

modern institutions by use of these technological advancements.

24. Litigation of revenue cases is another important issue which

consumes time, energy and resources of the people involved in them. It is one of

the important reasons for social conflicts also. Therefore, the State Government

has launched "Revenue Court Management System" by organizing Revenue Lok

Adalats of various Revenue Courts. During the campaign organized this year from

16th May, 2016 to 1st July, 2016 more than 48 lac cases were settled.

25. We appreciate all these initiatives. The Commission has made

specific provisions for litigation free villages, e-governance, water availability,

gender sensitization and sanitation in its earlier as also this Interim Report.

Approach and Methodology

26. In its effort to make detailed studies of the task given to the

Commission in the Terms of Reference, the Commission has adopted multilayered

approach. To assess the requirement, availability and gaps in resources with the

PRIs and ULBs, basic data of their receipts and expenditures are being collected.

They have also been asked to give suggestions for improvement in their

functioning through web. The Panchayati Raj Department and the Local Self

17

Government Department were requested to send the data, information and

suggestions on the Terms of Reference.

27. Efforts have also been made to seek views of Public representatives,

Senior officers, academics, experts, Stakeholders and public at large. In this

regard, D.O. letters were addressed by the Chairperson to the Ministers of the

State Government, all Members of Parliament from the State, all Members of

State Legislative Assembly, senior Secretaries to the Government, Divisional

Commissioners and District Collectors. Suggestions from public were also invited

through press releases in the news papers and website. The Commission had a

series of interactions, field visits and meetings. In this process useful discussions

were held with Dr. Johanna Boestal, Principal Economist, Asian Development

Bank, Dr. Bibek Debroy, Member NITI Aayog, Prof. Sudipto Mundle and Prof. Mita

Choudhary of National Institute of Public Finance & Policy, Mayor of East Delhi

Municipal Corporation and Mrs. Snehal Ambekar, Mayor of Greater Mumbai

Municipal Corporation. The Commission organized a round table conference of

Mayor of Municipal Corporations of the State in October, 2015, wherein,

measures to raise revenues, improvement in civic services and their

benchmarking were discussed. The Commission has also been meeting regularly

to review the progress of work assigned and decide on future course of action.

28. During the field visits, the Chairperson visited Bikaner, Jodhpur, Sikar

and held a series of meetings with public representatives and officials of Zila

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Parishad, Nagar Parishad, Panchayat Samiti Laxmangarh. She also visited Gram

Panchayats and discussed the issues with the Sarpanch. The Chairperson and

Member Secretary attended two day workshop on role of State Finance

Commissions organized by the Ministry of Panchayati Raj, Government of India at

New Delhi. The Chairperson and Member Secretary visited Bharatpur and held

meetings with Mayor and officers of Nagar Nigam, Bharatpur, Chief Executive

Officer, Zila Parishad and Block Development officers of the district. During the

visit to Kota, discussions with representatives and officers of Panchayati Raj

Institutions and Urban Local Bodies of the division were held. The Chairperson

and Member Secretary also participated in the workshops organized by the Indira

Gandhi Panchayati Raj Sansthan on "Gram Panchayat Development Plan" and

interacted with the participants who were public representatives, officers of PRIs

and NGOs working in these institutions. With a view to make effective

participation of all stakeholders and the public at large a "Facebook" page titled

"Nikaymitra" has also been created by the Commission wherein success stories

and suggestions can be shared.

29. As mentioned in earlier paras, the Commission had sent

questionnaires seeking relevant information from the PRIs and ULBs. The

information from most of the institutions has come and this data is being

compiled for analysis. However in the meantime, we have tried to analyse the

data pertaining to receipt and expenditure of 180 Gram Panchayats spread over

19

24 districts on sample basis. This analysis brings out the following outcomes. Yet

these outcomes are only impressionistic and subject to change as we proceed

with fuller analysis.

A. Receipts of Gram Panchayats

(i) Average receipt of a Gram Panchayat has been Rs. 52.43 lac during the

period 2010-15 as mentioned in the table 1 and graph 2.

(ii) Amount of SFC and CFC grants have significantly increased.

(iii) Own income consists merely 1.07% of total receipts.

Box 6

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

2010-11 2011-12 2012-13 2013-14 2014-15

SFC Grant CFC Grant Own Income Other Receipt

Graph-2 : Receipts of Gram Panchayats

Box 5 TABLE 1: Receipts of Gram Panchayats (Rs. in lac)

Source 2010-11 2011-12 2012-13 2013-14 2014-15 Total % Annual Avg/GP

SFC Grants 636.57 1011.66 1533.94 1637.51 3056.12 7875.80 16.69 8.75

CFC Grants 814.97 1178.57 1645.88 1677.51 1783.58 7100.51 15.05 7.89

Own Income 116.79 75.85 107.25 93.95 113.15 506.99 1.07 0.56

Other Receipts 5075.52 6718.20 6777.63 6250.48 6881.94 31703.77 67.19 35.23

Total 6643.85 8984.28 10064.70 9659.45 11834.79 47187.07 100.00 52.43

Rec

eip

ts (

Rs.

in c

rore

)

20

(iv) Other receipts consist of funds from various developmental schemes i.e.

MNREGA, Untied funds, MP-LAD, MLA-LAD, IAY etc.

(v) Sources of own revenue are tax and non-tax receipts as indicated in

table 2.

B. Expenditure of Gram Panchayats

(i) Average expenditure of a Gram Panchayat has been Rs. 44.71 lac per

year during the period 2010-15 as reflected in table 3 and graph 3.

Box 7 Table 2 : Sources and Amount of Own Income over 5 year period (2010-15) (Rs. in Lac)

Sources Amount %

(a) Tax Income House Tax 10.77 2.12

Goods Tax 13.21 2.61

Vehicle Tax 1.48 0.29

Passenger Tax 0.26 0.05

Water Distribution Tax 10.52 2.08

Commercial Crop Tax 5.21 1.03

Special Tax on Community Services 12.83 2.53

Total (a)

54.28 10.71

(b) Non Tax Income License and Other Fees 158.66 31.29

Income from Fairs 27.82 5.49

Rent from Assets 97.44 19.22

User Charges 15.84 3.12

Royalty on minor minerals 29.34 5.79

Other Own Income (Including income from issuing pattas)

123.61 24.38

Total (b)

452.71 89.29

Total (a + b)

506.99 100.00

Box 8

Table 3 : Expenditure of Gram Panchayats (Rs. in Lac)

Component 2010-11 2011-12 2012-13 2013-14 2014-15 Total % Annual

Avg./GP

Expenditure on salary & Allowances

208.91 186.03 225.16 311.20 307.90 1239.20 3.08 1.38

Expenditure on maintenance activities

194.17 219.22 263.20 326.92 505.16 1508.67 3.75 1.68

Expenditure on developmental activities

5114.54 6144.25 7686.85 8459.82 10082.64 37488.10 93.17 41.65

TOTAL 5517.62 6549.50 8175.21 9097.94 10895.70 40235.97 100.00 44.71

21

(ii) Expenditure on basic civic services

and maintenance is very low.

(iii) Major expenditure on development

activities such as MNREGA, IAY, 13th

Central Finance Commission, State

Finance Commission, Untied funds,

MP-LAD, MLA-LAD etc.

30. As per the information gathered from the questionnaires regarding

the availability of computers and internet facilities at Gram Panchayat level, 83%

Atal Seva Kendra have computers and 72.5% had functional internet facilities, but

at many places computers are not available despite all the efforts to equip Gram

0.0

20.0

40.0

60.0

80.0

100.0

120.0

2010-11 2011-12 2012-13 2013-14 2014-15

Salary & Allowances Maintenance Activities Development Activities

Box 9Graph - 3 : Expenditure of Gram Panchayats

Exp

end

itu

re (

Rs.

in c

rore

)

Box 10

Sample Analysis 180 Gram Panchayats

Low own revenue

Average receipts > 50 lacs per

Panchayat/annum

Average expenditure < 45 lacs per

Panchayat/annum

Expenditure on civic services < 4%

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Panchayats with computers and internet facilities. Keeping in view the need for

successful implementation of the Bhamashah Yojna of the state, the Panchayati

Raj Department may look into the matter and provide these facilities.

31. The Commission has been concerned with the lack of timely

utilization of funds, with the result that large amounts remain unutilized with

most of the Gram Panchayats. To verify the position, the Commission has also

collected information regarding utilization of CFC/SFC grants and the unspent

balances lying with them as on 11th July, 2016 from selected 111 Gram Panchayats

spread over 27 districts. It has been found that the funds ranging upto 1 lac to 25

lac of CFC/SFC grants were lying unspent with these 111 Gram Panchayats and

with the addition of the unspent amount of other schemes, the total unspent

amount of a particular Gram Panchayat was as high as Rs. 2.52 crore. This is a

matter of serious concern and needs to be addressed. The Panchayati Raj

Department should monitor releases and utilization of funds to these bodies. In

case the Panchayat fails to utilize 60% amount of the earlier installment the

subsequent installment may not be released and deferred for the next financial

year.

32. An analysis of information received through questionnaires from the

7 Municipal Corporations in the State has also been compiled which reveals the

following:-

23

A. Receipts of the Municipal Corporations

(i) The total receipts of all the municipal corporations during 2010-15 was to the

tune of Rs. 6068.64 crore, as per details given in table-4.

(ii) Under obligatory taxes which account for 8.58% of the total receipts of the

Municipal Corporations during 2010-15, the major part of this consist of

Urban Development Tax (U.D.Tax ). It has been levied by all Corporations and

these receipts are increasing year to year.

(iii) The share of Discretionary Taxes is only 1.68 % in the total receipts of the

Corporations.

(iv) The internal receipts of the municipal corporations mainly consist of sale of

land, receipts under bye-laws, Act, assets, interest, user charges, penalties

etc, which contributed 27.72% of the total receipts of the Corporations

during this period.

Box 11

Table 4 : Year wise receipt of Municipal Corporations (Rs. In crore)

2010-11 2011-12 2012-13 2013-14 2014-15 Total %

Tax Revenue (A)

Obligatory Tax (A1) 81.52 90.96 96.49 112.54 139.12 520.63 8.58

Discretionary Tax(A2) 3.71 4.17 24.92 34.07 34.89 101.76 1.68

Total (A1+A2) 85.23 95.13 121.41 146.61 174.01 622.39 10.26

Non Tax Revenue (B)

Internal Receipts (B1) 264.63 274.82 400.15 420.28 322.29 1682.17 27.72

External Receipts (B2) 475.71 586.25 779.31 986.90 935.91 3764.08 62.03

(i) SFC Grants 15.89 59.92 78.96 57.24 188.26 400.27 6.60

(ii) TFC Grants 17.87 40.64 102.97 103.27 34.25 299.00 4.93

(iii) Other receipts 441.95 485.69 597.38 826.39 713.40 3064.81 50.50

Total (B1+B2) 740.34 861.07 1179.46 1407.18 1258.20 5446.25 89.74

Grand Total (A+B) 825.57 956.20 1300.87 1553.79 1432.21 6068.64 100.00

24

(v) SFC and TFC grants constitute 6.60% and 4.93% respectively in the total

receipts.

(vi) Other receipts consist of fund transfers from the Government, other

institutions and agencies.

B. Expenditure of the Municipal Corporations

(i) All the Municipal Corporations incurred expenditure of Rs. 5592.68 crore

during 2010-15 as per following details as given in table-5.

(ii) Expenditure on Health, Sanitation and Civic Services which are core functions

of the Municipal Corporations constitute 35.32% and 13.22% respectively of

total expenditure.

(iii) Expenditure on development and asset creation was 39.42% of the total

expenditure.

Box 12

Table 5 : Year wise expenditure of Municipal Corporations (Rs. in crore)

2010-11 2011-12 2012-13 2013-14 2014-15 Total %

Establishment 104.51 118.67 133.44 154.45 162.22 673.29 12.04

Health & Sanitation 294.28 344.94 400.06 444.57 491.75 1975.60 35.32

Civic Services 91.99 119.92 141.93 209.31 175.96 739.11 13.22

Development & Assets Creation

226.52 307.93 405.56 804.28 460.39 2204.68 39.42

Total 717.30 891.46 1080.99 1612.61 1290.32 5592.68 100.00

25

33. However the quality of data and information received through the

questionnaires are poor and it is very difficult to reach to any conclusion on the

basis of information and data furnished by these institutions.

State Finances

34. The medium term Fiscal Policy statement presented alongwith the

Budget Documents under the provisions of Fiscal Responsibility and Budget

Management Act,2005 (FRBM) indicates higher level of revenue and fiscal deficits

for the financial year 2015-16 (Revised Estimates) and 2016-17 (Budget

Estimates). The FRBM Act stipulates zero revenue deficit and restricting fiscal

deficit to 3% of the Gross State Domestic Product. The reasons indicated for

higher levels of revenue and fiscal deficits are lower royalty receipts due to low

prices of crude oil in the International Market, low VAT receipts from petroleum

products, financial assistance/grants to Power Distribution Companies (DISCOMs),

interest payments on taking over of DISCOM’s loan liabilities under UDAY scheme

and lower receipts in share from Central Taxes. The document states that the

State Government contemplates raising of revenue receipts by wider tax reforms

without adversely affecting the development, better tax compliance by use of

information technology, and reduction in expenditure by economy in

unproductive expenditure. The policy statement also stresses that the debt level

will be kept within the limit and investment will be increased by Public Private

Partnership. Efforts will also be made to revise the user charges of public utility

26

services. This background suggests that the goal of self reliance in local bodies

should be one of the policy objectives.

35. The country is heading towards Goods & Services Tax (GST) regime,

wherein various state taxes will be subsumed in the GST. The implementation of

GST is likely to bring about the best economic management of the country as it

will empower the state and increase revenue of the States and the Central

Government. It will also give boost to the economy. However, the actual

implication of GST on state tax revenues will have to be analysed in the

perspective of devolutions.

Devolution and Recommendations

36. In our earlier interim report, we had recommended devolution of

7.182% of net State Own Tax Revenue (SOTR) for transfer to local bodies. Since

the assessment of requirement and

availability of funds with the Panchayati

Raj Institutions and the Urban Local Bodies

is in the process of evaluation, for our

interim report we have decided to retain

the same ratio of 7.182% of state own net tax revenue for devolution to the local

bodies. As per the current year's budget estimates, the net own tax revenue of

the State works out to Rs. 51373.74 crore and 7.182% of it would work out to Rs.

3689.66 crore. This amount needs to be transferred to Local Bodies both rural

Box 13

Devolution

Net SOTR Rs. 51373.74 crore

Devolution 7.182% Amount Rs. 3689.66 crore

PRIs share 75.1% Amount Rs. 2770.93 crore

ULBs share 24.9% Amount Rs. 918.73 crore

27

and urban. In our earlier Interim Report total transfer of Rs. 3271.81 crore was

recommended. Thus, there is an increase of Rs. 417.85 crore or 12.77% in the

funds being recommended for transfer to the local bodies as compared to the

funds recommended in the earlier Interim Report.

37. As regards distribution of this amount among PRIs and ULBs, we have

adopted the population ratio of 75.1% and 24.9% for the rural and urban local

bodies respectively of 2011 Census. Accordingly, the share of PRIs and ULBs

would work out to Rs. 2770.93 crore and Rs. 918.73 crore respectively.

38. In our earlier Interim Report, we earmarked 85% funds for Basic and

Development functions, 10% for National/State priority schemes and 5% for

Incentives. In respect of Panchayati Raj Institutions, we propose to revise this

percentage to 55% for Basic

and Development functions

including maintenance of rural

water tanks, 40% for

National/State priority

schemes and 5% for

Incentives. This increase in earmarked funds for National/State priority schemes

to 40% is on account of the need for funding the schemes launched by the State

and the Central Governments for conservation of water, rural housing namely

Box 14

Distribution/Purposes

PRIs ULBs

Basic and development 55% 75%

functions

National/State priority schemes 40% 20%

to support the quality of civic

services

Incentives 5% 5%

28

Pradhan Mantri Awaas Yojna, Mukhyamantri Jal Swavlamban Abhiyan, and other

priority schemes listed in table 6.

39. In respect of Urban Local Bodies the earmarking of funds

recommended is 75% for Basic and Development functions, 20% for

National/State priority schemes and 5% for Incentives. The revision from earlier

report has been necessitated on account of the need to provide required funds

for National/State priority schemes including "Jal Swavlamban Abhiyan" and

other as listed in table 6.

40. We are also revising the list of National/State priority schemes

mentioned in our earlier Interim Report by integrating the schemes having

common objectives, and keeping in view the present day requirements. The

amount for National/State priority schemes can be utilized on any of these

activities with first priority to "Jal Swavlamban Abhiyan". The revised list is as

under:-

Table 6 : National & State priority schemes

(a) Mukhyamantri Jal Swavlamban Abhiyan/Tree Plantation

(b) Rural Housing Scheme – Prandhan Mantri Awaas Yojna – Gramin

(c) Use of information technology/e-governance/data bases

(d) Drinking water/Janta Jal Yojna/R.O. system

(e) Fire services

(f) Swachh Bharat Abhiyan/Efforts for open defecation free village/town/ city.

(g) Solar/LED lights

(h) Gender sensitization – Beti Bachao Beti Padhao

(i) Litigation free village/town/crime free villages

29

41. As regards 5% Incentive Grants, we retain the incentive scheme for

rural as well as urban local bodies as detailed in our earlier Interim Report with

minor modification. The incentive amount at 5% would work out to Rs. 138.54

crore and Rs. 45.94 crore for PRIs and ULBs respectively and will be payable to

these institutions on performance of any of the following functions:-

(i) Timely maintenance of accounts of income and expenditure.

(ii) Maintenance of records including "Assets Register".

(iii) Increase in own revenue over previous year.

Panchayati Raj Institutions

42. The Panchayti Raj Department in its Memorandum and subsequent

letter to the Commission has requested distribution ratio of 5 : 20 : 75 among Zila

Parishads, Panchayat Samities and Gram Panchayats respectively, allowing

payment of remuneration to manpower to be engaged in the PRIs, recurring

charges towards maintenance of Model Accounting System, utilization of one lac,

two lac and three lac per year by Gram Panchayat, Panchayat Samiti and Zila

Parishad respectively for various official camps organized by them from time to

time and making expenditure on Mukhyamantri Jal Swavlamban Abhiyan a "First

Charge" on SFC funds.

43. We agree to the proposals of the Department regarding distribution

ratio of 5 : 20 : 75 among the three tiers of PRIs, recurring expenses on Model

Accounting System and expenses on camps to be incurred out of the funds being

30

recommended by us. As regards Jal Swavlamban Abhiyan we reiterate that we

have listed this in the National/State priority schemes and its requirement needs

to be met for long term solution of water scarcity related problems, if need be by

"first charge" on Basic and Development portion of funds. As regards manpower

we have considered this in earlier paras.

Parameters of distribution among PRIs

44. We propose to retain the inter se distribution parameters adopted in

our earlier interim report for districtwise distribution of funds for Panchayati Raj

Institutions, which is given below:-

Box 15

45. Based on the parameters and weights recommended by us, the

districtwise share and amount for the year 2016-17 would work out as per

table-8.

Table 7 : Parameters and weights for districtwise distribution

Parameters Weights

Population 40 %

Geographical Area 15 %

Child Sex Ratio 10 %

S.C. Population 5 %

S.T. Population 5 %

Infant Mortality Rate 5 %

Girls Education 5 %

Decline in Decadal Population Growth 5 %

Deprivation on 7 Criteria as per SECC-2011 10 %

Total 100%

31

Table 8 : Districtwise distribution of Funds for the year 2016-17 for PRIs

(Rs. In crore) Sr.No District District wise comp.

weight (%) Districtwise allocation

Funds for Basic and Development

functions

Grants for National/State

Priority Schemes

Incentive grant for performance

(5%)

(55%) (40%) 1 Ajmer 2.763 76.563 42.110 30.625 3.828

2 Alwar 4.393 121.725 66.949 48.690 6.086

3 Banswara 3.604 99.876 54.932 39.950 4.994

4 Baran 2.196 60.856 33.471 24.342 3.043

5 Barmer 4.883 135.312 74.422 54.125 6.766

6 Bharatpur 3.061 84.818 46.650 33.927 4.241

7 Bhilwara 3.538 98.033 53.918 39.213 4.902

8 Bikaner 3.914 108.446 59.645 43.378 5.422

9 Bundi 2.163 59.939 32.966 23.976 2.997

10 Chittorgarh 2.518 69.775 38.376 27.910 3.489

11 Churu 2.805 77.723 42.748 31.089 3.886

12 Dausa 2.679 74.225 40.824 29.690 3.711

13 Dholpur 1.946 53.92 29.656 21.568 2.696

14 Dungarpur 2.873 79.616 43.789 31.846 3.981

15 Ganganagar 3.128 86.682 47.675 34.673 4.334

16 Hanumangarh 2.657 73.613 40.487 29.445 3.681

17 Jaipur 4.759 131.88 72.534 52.752 6.594

18 Jaisalmer 3.181 88.139 48.476 35.256 4.407

19 Jalore 3.033 84.034 46.219 33.614 4.202

20 Jhalawar 2.359 65.375 35.956 26.150 3.269

21 Jhunjhunu 2.567 71.119 39.115 28.448 3.556

22 Jodhpur 4.404 122.028 67.115 48.811 6.101

23 Karauli 2.624 72.722 39.997 29.089 3.636

24 Kota 1.733 48.022 26.412 19.209 2.401

25 Nagaur 4.46 123.59 67.975 49.436 6.180

26 Pali 3.19 88.398 48.619 35.359 4.420

27 Pratapgarh 2.095 58.056 31.931 23.222 2.903

28 Rajsamand 1.921 53.226 29.274 21.290 2.661

29 S. Madhopur 2.268 62.855 34.570 25.142 3.143

30 Sikar 3.045 84.367 46.402 33.747 4.218

31 Sirohi 2.024 56.073 30.840 22.429 2.804

32 Tonk 2.359 65.364 35.950 26.146 3.268

33 Udaipur 4.856 134.559 74.007 53.824 6.728

Total 100.000 2770.93 1524.011 1108.372 138.546

32

Distribution among PRIs

46. The Fourteenth Central Finance Commission has not given any grant

to the Zila Parishads and Panchayat Samities and has left it to the State

Government to take care of

the needs of these bodies.

In our attempt to do so, we

raised the share of Zila

Parishads from 3% to 5%

and that of Panchayat

Samities from 12% to 15%

in our earlier interim

report. Panchayati Raj

Department has requested

for raising of Pachayat

Samities share to 20%. We,

therefore, recommend raising Panchayat Samities share to 20% and leaving 75%

for Gram Panchayats. Distribution among these institutions is to be made based

on 2011 population.

47. Accordingly, the allocation of funds at 55% for Basic and

Development functions, 40% for National/State priority schemes and 5% for

Box 16

Formula for Devolution to PRIs

1. Devolved fund to all the LBs D

2. Share of PRIs 0.751 x D

3. Share of a district

DD = Ʃ{2/5 (Dp/Tp)+3/20(Da/Ta)+1/10(Dcsr/Tcsr)

+1/20(Dscp/Tscp)+1/20(Dstp/Tstp)+1/20(Dimr/Timr)+

1/20(Dge/Tge) + 1/20(Ddpg/Tdpg)+1/10(Ddep/Tdep)} X 0.751 D

4. Share of GP : PS : ZP (75 : 20 : 5)

(i) Share of all GPs in a District (GPd) = 0.75 x DD

(ii) Share of all PSs in a district(PSd) = 0.20 x DD

(iii) Share of ZP in a district(ZPd) = 0.05 x DD

5. In a district

(i) Share of each GP = (GPp/ZPp) x GPd

(ii) Share of each PS = (PSp/ZPp) x PSd

(iii) Share of ZP = ZPd

Where DD = Distt. Devolution, T = Total, D = Distt., p =

population, a = area, csr = child sex ratio, scp = scheduled caste

population, stp = scheduled tribe population, imr = infant

mortality rate, ge = girls education, dpg = decline in population

growth, dep = deprivation on 7 criteria ,GPd = devolution to all

GPs, PSd = devolution to all PSs, ZPd = devolution to ZP

33

Incentives and the share of the three tiers of Panchayati Raj Institutions works out

as under:-

Table 9 : Inter-se distribution among PRIs (Rs. in crore)

Out of Total Devolution of funds during 2016-17 (7.182% of net own tax revenue of the state) share of Panchayati Raj Institutions 75.1% of population

2770.93

55% funds for Basic & Development functions 1524.01

40% grants for National/State priority schemes 1108.38

5% Incentive grant for Performance 138.54

Particulars Funds for Basic &

Development functions (55%)

Grants for National/State

priority schemes (40%)

Incentive grant for Performance

(5%) Total

Zila Parishads (5%) 76.20 55.42 6.92 138.54

Panchayat Samitis(20%) 304.80 221.68 27.71 554.19

Gram Panchayats (75%) 1143.01 831.28 103.91 2078.20

Total 1524.01 1108.38 138.54 2770.93

Urban Local Bodies

48. The Local Bodies Department in its Memorandum to the Commission,

has requested to provide funds for fire services, as out of 190 Urban Local Bodies,

57 have neither the fire tenders nor fire stations and 33 have fire tenders, but do

not have fire stations. The total requirement of funds for Fire Services at these

local bodies have been estimated at Rs. 67.80 crore. The Department has also

requested for viability gap funding in central schemes where contribution of the

respective local bodies are required.

34

49. The Government of India has launched Smart Cities project wherein

Jaipur, Udaipur, Kota and Ajmer have been selected from our State. The project

envisages long term transformation

of the urban landscape. Its purpose

is to make citizenry services, from

physical to software infrastructure,

more efficient, affordable and

suitable by injecting high-end

technologies and advanced market

instruments into various

institutional structures. The smart

city project include financial participation of Central Government, State

Government and the concerned urban local body and the parastatal agency

spread over a period of five years. Apart from this, the ambitious AMRUT project

will be launched in 29 cities of the State. The Urban Local Bodies are also required

to contribute towards these schemes from their resources. The Commission

agrees with the request of the Local Bodies Department to allow need based

utilization of SFC funds towards gap funding of Smart Cities, AMRUT and other

Central Schemes etc where local bodies are required to contribute their share.

Box 17

Smart Cities

Four cities of Rajasthan selected

Name Total project cost

Jaipur Rs. 2401 crore

Udaipur Rs. 1221 crore

Kota Rs. 1947 crore

Ajmer Rs. 1456 crore

Long term transformation of the urban

landscape

Citizenry services from physical

infrastructure to software to become

more efficient, affordable and

sustainable

35

Funds for Urban Local Bodies

50. The share of devolution to Urban Local Bodies works out to Rs.

918.73 crore. We propose to retain the ratio of transfer to three levels of

Municipalities i.e. the Nagar Nigams, Nagar Parishads and the Municipalities as

was recommended in earlier Interim

Report. It is 55% on the basis of

population, 15% on the basis of area

to all the Urban Local Bodies and

remaining 30% funds only to the

municipalities on the basis of

population, as they have a weak

revenue base. These municipalities

were hitherto called municipalities of

category II, III, and IV. While assigning weights, we have adopted population

figures of 2011 Census. We are recommending 75% funds for Basic and

Development functions, 20% for National/State priority schemes and 5%

Incentives for timely maintenance of accounts of income and expenditure,

maintenance of records including "Asset Register" and increase in own revenue

over previous year for urban local bodies.

51. Based on above discussions and parameters, the share of urban local

bodies would work out as follows:

Box 18

Formula for devolution to ULBs

1. Devolved fund to all the LBs D

2. Share of ULBs 0.249 x D

3. Criteria

(i) Devolution on population basis(Dp)

= 0.55 x 0.249 x D

(ii) Devolution on area basis(Da)

= 0.15 x 0.249 x D

4. Share of each ULB

= {(ULBp/Tulbp x Dp)+(ULBa/Tulba x Da)}

5. Share of municipality in remaining 30%

devolution

= Mp/Tmp x 0.30 x 0.249 x D

Where p = population, a = area, T = total,

M = municipality, ULB = Urban Local Bodies

36

52. Fire service is a basic municipal function and fire fighting facilities

should be available at all municipal bodies. We included it in National/State

priority schemes in our earlier Interim Report. Now, as requested by the

Department, we are earmarking funds for providing fire services in municipal

bodies, where these services are not available at present. However, the

procedure of utilization of this fund may be decided in consultation with the

Finance Department.

53. It has been brought to our notice that some municipalities are facing

problems in rendering sanitation services due to scarcity of resources. As these are

basic civic services, the municipalities may meet financial requirements of these

services including wage component from our grants as an interim arrangement.

Table 10 : Devolution of Funds For Urban Local Bodies (Rs. in crore)

Categories (as per Municipalities Act, 2009)

55% on Population

15% on Area

Balance 30% for Municipalities

Total funds

Out of which

Funds for Basic & Development functions (75%)

Grants for National/State

priority schemes (20%)

Incentive grants for

Performance (5%)

Municipal Corporation - 7

222.08 38.87 - 260.95 195.71 52.19

13.05

Municipal Councils - 34

136.63 30.68 - 167.31 125.48 33.46 8.37

Municipalities – 149

146.59 68.26 275.62 490.47 367.86 30.29 24.52

To be kept as lump sum at Directorate level for fire services

- - - - - 67.80

-

Total – 190 505.30 137.81 275.62 918.73 689.05 183.74 45.94

37

54. The 14th Central Finance Commission has recommended funds for

Gram Panchayats and Urban Local Bodies for the year 2016-17 as basic grant and

performance grant as follows:-

Box 19

Table 11 : 14th Central Finance Commission grants (Rs. in crore)

Institutions Basic Grant Performance Grant Total

Gram Panchayats 2038.17 267.35 2305.52

Urban Local Bodies 599.73 177.00 776.73

Total 2637.90 444.35 3082.25

55. We are required to recommend formula for distribution of 14th CFC

grants. As 14th CFC grants in respect of rural local bodies are for Gram Panchayats

only, the amount may be disbursed only to Gram Panchayats as per districtwise

weights and thereafter based on population. As regards urban local bodies, the

amount may be disbursed as per formula recommended by us without

earmarking funds for fire services.

56. The total amount of devolution to PRIs and ULBs being recommended

in this report and 14th Central Finance Commission award including Performance

Grants for the year 2016-17 is given in the following table-12.

Box 20

Table 12 : Total amount of Devolution (Rs. in crore)

Institutions 5th SFC 14th CFC Total

(i) Panchayati Raj 2770.93 2305.52 5076.45

(ii) Urban Local Bodies 918.73 776.73 1695.46

Total 3689.66 3082.25 6771.91

38

57. With these devolutions the Gram Panchayats will have enough funds

to carry out its functions. The average fund with a Panchayat during 2016-17

would work out to more than Rs. 44 lac or Rs. 851 per head. This should be

enough to enable a panchayat to perform its basic civic duties towards the

residents. The efficient utilization of these funds would require technical and

other manpower with these institutions. It is the responsibility of the State

Government to provide the panchayats with the required systemic support.

58. In respect of urban areas the delivery of basic civic services is the

duty of municipal bodies. The average fund flows to these institutions during

2016-17 would work out to about Rs. 9 crore per institution or Rs. 994 per head.

This amount should be sufficient for providing basic civic services. These

institutions by and large have the manpower and other infrastructure to carry out

their functions. The available funds are more than the estimated requirements

assessed by the 4th State Finance Commission including cost escalation. The need

is to utilize these funds efficiently and to ensure this, the State Government is

required to do effective supervision and monitoring.

59. The tenure of the Commission is upto 30 May, 2017 and our

endeavour would be to give the final report by the stipulated date. However, due

to unforeseen reasons beyond our control, if our final report gets delayed, we

would not like the local bodies to face problems of funds. Therefore, to obviate

39

this situation, we recommend that till our final report is implemented, the ratio of

state net own tax revenue, the share, the formula of distribution and all other

parameters as recommended by us in this report may remain in force for transfer

of funds to these local bodies, excluding the funds for fire services for urban local

bodies as it is a one time recommendation.

Summary of Recommendations

60. (i) 7.182% of state's net own tax revenue which works out to Rs.

3689.66 crore may be given to PRIs and ULBs during the year 2016-

17. (Para 36)

(ii) The amount of Rs. 3689.66 may be divided between PRIs and ULBs in

the rural-urban population ratio of 75.1 : 24.9. Accordingly, the

amount would work out to Rs. 2770.93 crore and Rs. 918.73 crore for

PRIs and ULBs respectively. (Para 37)

(iii) 55% of recommended amount may be released as funds for Basic

and Development functions, 40% for supporting National/State

priority initiatives including Water Conservation and Rural Housing

keeping in view the spirit of the 73rd amendment of the Constitution.

And 5% as Incentive grant for performance of specified tasks to PRIs.

(Para 13 & 38)

(iv) 75% of recommended amount may be released as funds for Basic

and Development functions, 20% for National/State priority

40

initiatives including Water Conservation and 5% as Incentive grant for

performance of specified tasks to ULBs. (Para 39)

(v) The functioning of Panchayati Raj Institutions may be strengthened,

made transparent by use of e-governance and information

technology. The funds earmarked for National/State initiatives could

be used by Panchayati Raj Department for these purposes. (Para 23)

(vi) Meetings of Gram Sabhas as required by the Act and direction of the

Department should be held and participation of members ensured.

(Para 11)

(vii) The districtwise distribution of PRIs share may be made on various

parameters and weights recommended. (Para 44 & 45)

(viii) The tierwise distribution of funds among PRIs should be 5% for Zila

Parishads, 20% for Panchayat Samities and 75% for Gram Panchayats.

(Para 46)

(ix) The Panchayati Raj Department should monitor releases and

utilization of funds to these bodies. In case the Panchayat fails to

utilize 60% amount of the earlier installment the subsequent

installment may not be released and deferred for the next financial

year. (Para 31)

41

(x) Funds may be utilized for provision of systemic support including

manpower for socio-economic infrastructure for strengthening and

delivery of services. (Para 17 & 53)

(xi) Need based utilization of funds for viability gap funding and fire

services may be made. (Para 49 & 52)

(xii) The amounts of 14th CFC grants may be distributed to Gram

Panchayats and Urban Local Bodies as per parameters and weights

recommended by us. (Para 55)

(xiii) The recommendation made in this report may remain in force till our

final report comes in to effect. (Para 59)

(xiv) Conclusion subject to revision or change in view of the work in

progress on questionnaires and estimates. (Para 29 & 33)

(Dr. Jyoti Kiran) Chairperson

(Pradhyumn Singh) Member

(S.C. Derashri) Member Secretary

Jaipur,

August , 2016