+ All Categories
Home > Documents > Srikanth Viswanathan ANNUAL SURVEY OF Anil Nair INDIA...

Srikanth Viswanathan ANNUAL SURVEY OF Anil Nair INDIA...

Date post: 07-Aug-2020
Category:
Upload: others
View: 3 times
Download: 0 times
Share this document with a friend
4
Srikanth Viswanathan [email protected] Anil Nair [email protected] Mathangi Chandrasekhar [email protected] October 2017 ANNUAL SURVEY OF INDIA’S CITY-SYSTEMS Municipal Finance Brief The Annual Survey of India’s City-Systems (ASICS) evaluates the quality of city systems in India across 18 states. ASICS serves as a diagnostic to identify the systemic issues preventing cities from providing good quality of life to their citizens. Urban planning & design, urban capacities & resources, empowered political leadership and transparency, accountability & public participation are the four city-system components covered under ASICS. The ability of Urban Local Bodies (ULBs) to invest adequately in providing infrastructure and services to its citizens is one of the key diagnostic parameters assessed by ASICS. This brief – a precursor to ASICS 2017 – analyses the financial management of ULBs and presents key insights on the state of Municipal Finances based on the audit reports of the CAG on their audits of ULBs in 21 states. Pursuant to recommendations of the 13th Finance Commission (FC), state governments have transferred technical guidance and supervision of the audit of local bodies to the CAG. The CAG undertakes annual audits of local bodies, both ULBs and PRIs, on a sample basis. These reports are presently the only comprehensive and regular source of information on the financial position and financial performance of ULBs in India. This brief provides 5 insights and recommendations on analysis of the data sets from CAG audit reports. Insights have been drawn from analysis of the following three critical data sets from the CAG audit reports: Own revenues on average contribute to less than 37% of the total receipts of ULBs, ranging from a low of 5% in Manipur to a high of 74% in Punjab; only 3 states record > 50% share of own revenues Impact: Own revenues Total receipts Proportion of own revenues to total receipts (%) ULBs depend on State and Central grants to a significant extent, constraining their ability to make capital investments to improve infrastructure services and other investments to improve their functioning. Recommendation: ULBs need to improve collection efficiencies of own revenues, mainly, property tax, advertising tax and parking fees. Buoyant sources of revenues such as stamp duties and entertainment taxes should be devolved to ULBs. States needs to embark on systematic fiscal decentralisation. Source: CAG reports Out of 21 states, data on proportion of own revenues and per capita total receipts of ULBs was available only for 12 states Per capita own revenue and per capita total receipts of urban local bodies across states 1,991 4,119 897 2,712 785 4,800 2,189 2,956 1,818 5,464 663 2,055 648 1,209 432 957 728 1,312 728 22 438 4,692 48% 33% 74% 33% 32% 16% 54% 25% 45% 55% 16% 5% Gujarat 2013 Tamil Nadu 2013 Andhra Pradesh 2015 212 850 Chandrigarh 2015 Punjab 2014 Karnataka 2013 Rajasthan 2015 Uttar Pradesh 2011 Assam 2013 Goa 2012 Himachal Pradesh 2014 Manipur 2014 Rs in Cr. 1. Own Revenue of ULBs 2. Status of Accounts of ULBs 3. Status of Audits of ULBs INSIGHT #1:
Transcript
Page 1: Srikanth Viswanathan ANNUAL SURVEY OF Anil Nair INDIA ...janaagraha.org/files/Municipal-Finance-Brief-Key...Srikanth Viswanathan srikanth@janaagraha.org Anil Nair anil.nair@janaagraha.org

Srikanth [email protected]

Anil [email protected]

Mathangi [email protected]

October 2017

ANNUAL SURVEY OFINDIA’S CITY-SYSTEMSMunicipal Finance Brief The Annual Survey of India’s City-Systems (ASICS) evaluates the quality of city systems in India across 18 states. ASICS serves as a diagnostic to identify the systemic issues preventing cities from providing good quality of life to their citizens. Urban planning & design, urban capacities & resources, empowered political leadership and transparency, accountability & public participation are the four city-system components covered under ASICS. The ability of Urban Local Bodies (ULBs) to invest adequately in providing infrastructure and services to its citizens is one of the key diagnostic parameters assessed by ASICS. This brief – a precursor to ASICS 2017 – analyses the financial management of ULBs and presents key insights on the state of Municipal Finances based on the audit reports of the CAG on their audits of ULBs in 21 states. Pursuant to recommendations of the 13th Finance Commission (FC), state governments have transferred technical guidance and supervision of the audit of local bodies to the CAG. The CAG undertakes annual audits of local bodies, both ULBs and PRIs, on a sample basis. These reports are presently the only comprehensive and regular source of information on the financial position and financial performance of ULBs in India.

This brief provides 5 insights and recommendations on analysis of the data sets from CAG audit reports. Insights have been drawn from analysis of the following three critical data sets from the CAG audit reports:

Own revenues on average contribute to less than 37% of the total receipts of ULBs, ranging from a low of 5% in Manipur to a high of 74% in Punjab; only 3 states record > 50%share of own revenues

Impact:

Own revenues

Total receipts

Proportion of own revenuesto total receipts (%)

ULBs depend on State and Central grants to a significant extent, constraining their ability to make capital investments to improve infrastructure services and other investments to improve their functioning.

Recommendation: • ULBs need to improve collection efficiencies of own revenues, mainly, property tax, advertising tax and parking fees. • Buoyant sources of revenues such as stamp duties and entertainment taxes should be devolved to ULBs.• States needs to embark on systematic fiscal decentralisation.

Source: CAG reportsOut of 21 states, data on proportion of own revenues and per capita total receipts of ULBs was available only for 12 states

Per capita own revenue and per capita total receipts of urban local bodies across states

1,991

4,119

897

2,712

785

4,800

2,189

2,956

1,818

5,464

663

2,055

648 1,209

432 957 728

1,312 728

22 438

4,692 48%

33%

74%

33% 32%

16%

54%

25%

45%

55%

16%

5%

Gujarat2013

Tamil Nadu2013

Andhra Pradesh2015

212

850

Chandrigarh2015

Punjab2014

Karnataka2013

Rajasthan2015

Uttar Pradesh2011

Assam2013

Goa2012

Himachal Pradesh2014

Manipur2014

Rs in

Cr.

1. Own Revenue of ULBs 2. Status of Accounts of ULBs3. Status of Audits of ULBs

INSIGHT #1:

Page 2: Srikanth Viswanathan ANNUAL SURVEY OF Anil Nair INDIA ...janaagraha.org/files/Municipal-Finance-Brief-Key...Srikanth Viswanathan srikanth@janaagraha.org Anil Nair anil.nair@janaagraha.org

Impact: This indicates lower per capita spend across smaller cities, resulting in poorer quality of life in such cities.

Recommendation: The focus, currently concentrated only to large cities, must also shift to the smaller cities and towns in order to bridge the gap in per

capita spend, by -

• improving collections of own revenues of the ULBs in smaller cities and towns

• devolving buoyant sources of revenue such as stamp duties and entertainment taxes should be devolved to ULBs, and

• increasing grants devolved to smaller cities and towns to meet the infrastructure needs.

Per capita expenditure of ULBs of capital cities versus average per capitaexpenditure of all ULBs in the corresponding states

�915

�2,244

�3,043

�1,070

�8,113

�2,648

�3,023

�2,540

�2,848

�2,036

�4,241

Source : CAG ReportsNote : Per capita data pertains to different years ranging from 2012-15. However, data of a state and its capital city belong to the same financial year

� Per capita expenditure

0-100

100-200

200-300

300-500

>500

NA

State

Andhra Pradesh

Goa Gujarat

Harayana

Himachal Pradesh

915 4,207

Average per capitaexpenditure of the state (A)

Per capita expenditure of ULBs of the capital (B)

B as a % of A

3,023

2,540

4,241

1,070 5,544

7,503

5,387

3,517

Karnataka 2,648 4,474

Maharashtra

Punjab Rajasthan

Tamil Nadu

Telangana

8,113

2,848

2,036

3,043

2,244

26,657

5,387

1,835

8,948

4,207

518.3

248.2

212.1

82.9

169.0

189.2

90.1

294.1

187.5

459.7

328.6

Per capita expenditure of ULBs of capital cities as a % of averageper capita expenditure of ULBs in the corresponding states

INSIGHT #2

On average (across 12 states), ULBs of capital cities spend 253% higher per capita, on infrastructure and services, as compared to average per capita spend by all ULBs in the corresponding states

Page 3: Srikanth Viswanathan ANNUAL SURVEY OF Anil Nair INDIA ...janaagraha.org/files/Municipal-Finance-Brief-Key...Srikanth Viswanathan srikanth@janaagraha.org Anil Nair anil.nair@janaagraha.org

Recommendation: Time-bound, transparent responses to CAG audit observations to be mandated in Municipal Corporation Acts, central and state grants to be tied to performance in audits and responses to audit observations.

State

Andhra Pradesh

Gujarat

Karnataka

Maharashtra

Tamil Nadu

110 NA

Total No ofULBs

Pendency in audit* Pendency by year Pendency in preparationof Accounts

275

265

664

187 339

173

139

122

Pendency by year

Telangana 68 41

Uttar Pradesh 630 NA

West Bengal 130 NA

NA

2010-11 (5),2011-12 (167),2012-13 (167)

2012-13 (23),2013-14 (116)

2013-14 (122)

2008-09 (38),2009-10 (67),2010-11 (82)

NA

25

159

132

NA

707

NANA

NA

187

658

From 2016

From 2015-16

2012-13 (3),2013-14 (52),

2014-15 (652)

NA

NA

NA

NA

From 2012-13 (as on 31.03.2014)

Over 33,198 unanswered audit observations from CAG Audits across 16 states, relating to several thousand crores in financial terms; no implications for open audit observations

Impact: Constraining the ability of state governments to hold ULBs accountable and of ULBs themselves to take informed decisions or raise funds from the capital markets.

Recommendation: To clear the pendency in accounts and audit, States should actively consider empanelling Chartered Accountants. Karnataka, Bihar, Chhattisgarh, Gujarat, Odisha and Rajasthan are among the states that have empanelled Chartered Accountants to clear the backlog in audit and accounts.

Impact: Open audit observations are a sign of weak internal controls and poor financial hygiene in ULBs, exposing them frauds and losses.

Source –CAG ReportsNote: 1. Data on pendency in audit/account preparation is available only for states mentioned above. 2. *Audit by the state audit department.

The NITI Aayog’s three year Action Agenda recommends that the introduction of standardized, time-bound, audited balance sheets across 4,041 ULBs would help improve financial management as well as spur further reforms in the area of Municipal Finance. Publishing of Audited Financial Statements is one of the mandatory conditions for availing performance grants as per recom-mendations of 14th Finance Commission as well as a mandatory reform under AMRUT.

INSIGHT #3

INSIGHT #4

Significant delay in preparation of Accounts and Audit of ULBs across states, inability to ascertain accurate financial position and performance of ULBs

Page 4: Srikanth Viswanathan ANNUAL SURVEY OF Anil Nair INDIA ...janaagraha.org/files/Municipal-Finance-Brief-Key...Srikanth Viswanathan srikanth@janaagraha.org Anil Nair anil.nair@janaagraha.org

Janaagraha Centre for Citizenship and Democracy is a Bengaluru based not-for-profit having the mission of transforming quality of life in India’s cities and towns. It defines quality of life as comprising quality of citizenship and quality of infrastructure and services. It works with citizens to catalyse active citizenship in neighbourhoods and works with governments to institute city-system reforms to city governance in India. Janaagraha’s City-Systems framework comprises four components: Urban Planning and Design, Urban Capacities and Resources, Empowered and Legitimate Political Representation and Transparency, Accountability and Participation. Municipal Finance is an integral part of the Urban Capacities and Resources city-system component.

Acknowledgement : We would like to acknowledge the contributions made by Bharathy Jayprakash and Kartika Nair in the preparation of this brief.

Year for which latestCAG report is available

2016 4 Andhra Pradesh, Assam, Karnataka, Telangana

No of States States

2015 9 Chhattisgarh, Himachal Pradesh, Maharashtra, Punjab, Rajasthan, Tamil Nadu, Madhya Pradesh, Bihar, Kerala

2014 2 Manipur, West Bengal

2013 2 Gujarat, Haryana

2012 1 Goa

2011 2 Uttar Pradesh, Jharkhand

2010 1 Odisha

Recommendation:

Impact: CAG audits are the last line of defence around internal controls in ULBs. Delays in CAG audit reflects lackadaisical approach to the audit process.

Fix accountability for submission of financial records of ULBs on time to CAG; make transparent time table of CAG audits and reasons for delays in CAG audits.

Source: CAG reports

Significant backlog in CAG audits of local bodies undermining quality of TG&S by CAG INSIGHT #5:

Source: CAG reports

2,618 unanswered audit paragraphs,amounting to Rs. 2,190 Crores

1,755 unanswered audit paragraphs,amounting to Rs. 557 Crores

3,700 unanswered audit paragraphsamounting to Rs.5,854 crores; includingobservations pending from 2003-04

2,123

1,244

4,1963,807

429 361 324

2,507

1,755

2,767

825

3,700

2,984

813

2,6182,745

Andh

raPr

ades

h

Assa

m

Goa

Guja

rat

Him

acha

lPr

ades

h

Jhar

khan

d

Mah

aras

htra

No o

f par

agra

phs

Mad

hya

Prad

esh

Oris

sa

Raja

stha

n

Tam

il Na

du

Tela

ngan

a

Chat

tisga

rh

Punj

ab

Utta

r Pr

ades

h

Wes

t Ben

gal

Unanswered audit paragraphs by state


Recommended