Panchayats in crisis

Published : Mar 16, 2002 00:00 IST

Development works are affected in Tamil Nadu as a cash-strapped State government fails to provide necessary funds to the local bodies.

TAMIL NADU Chief Minister Jayalalithaa has announced that the first and foremost task before her is to pull the State government out of "the financial mess that it presently finds itself in". The announcement would have come as a relief to over 12,000 panchayats in the State, which have been facing a financial crisis.

Manifestations of the cash crunch came three months ago when the government, then led by O. Panneerselvam, denied its employees and teachers several customary benefits, including festival advance, bonus and ex gratia payments. Over 1.2 lakh employees of government-owned transport corporations went on strike for a fortnight, but the government refused to concede their demand for a bonus amount not smaller than that of the previous year. The government had also announced a number of austerity measures and cuts in employee benefits. It followed up these measures with steep increases in bus fares, power tariffs and the price of milk and placed restrictions on the supply and raised the prices of essentials sold through the public distribution system.

The trickle-down effect of the crisis began to be felt soon by the panchayati raj institutions, which had been entrusted with the task of implementing development schemes. Representatives of the newly elected heads (the elections were held in October 2001) of panchayats complained that local bodies had not received funds from the State government for more than a year now. They said that as a result, development works had practically come to a halt. It was stated that only about 25 per cent of the Rs.517.32-crore State Finance Commission (SFC) grant allocated in the State Budget had been devolved to the local bodies. (Even this amount, which is lower than the previous year's allocation of Rs.577.80 crores, had not actually been disbursed.)

Owing to a paucity of funds, many panchayats have not paid their electricity bills and consequently face the threat of disconnection of power. Some even find it difficult to pay their employees. They are not able to repair faulty pumpsets or replace bulbs.

President of the Tamil Nadu Federation of Women Panchayat Presidents Ponni Kailasam, who heads the Anaikkuppam village panchayat in Thiruvarur district, said that some of the presidents had managed to get the most essential works done by raising personal loans. She said that many panchayat presidents were reluctant to do this because there had been occasions when they were pulled up by bureaucrats or threatened with corruption charges by adversaries.

The State government sets apart a certain percentage of its tax revenue to be devolved to local bodies. In addition, it provides matching grants to panchayats for the money collected by way of land revenue, house tax, stamp duty and so on. The Central government also funds panchayats through regular, periodic payments to implement public health, employment generation and poverty alleviation schemes. The fund distribution procedure of the State government is such that panchayats have to spend money on approved development schemes and the amount is reimbursed through the district administrations on a quarterly basis.

Payments for five successive quarters have not reached the panchayats. Two of these quarters are in the last phase of the earlier Dravida Munnetra Kazhagam (DMK) government led by M. Karunanidhi (1996-2001). According to Ponni Kailasam, the Centre is in arrears of two instalments of funds.

The present crisis has thrown up questions about the vulnerability of the statutory organs of self-government at the grassroots. Unless they are shielded against financial instability of this kind, panchayat institutions will not be able to serve the people the way they are expected to.

G. Ramakrishnan, State secretariat member of the Communist Party of India (Marxist), said: "The State governments, whenever they are faced with financial crisis, can at least avail themselves of overdraft facilities of the Reserve Bank of India or go in for Central assistance or loans. But to whom can panchayats turn for help, under similar situations?" Ramakrishnan, who was a member of the high-level committee appointed by the Karunanidhi government to suggest steps to empower panchayats, said the DMK government had allotted only 8 per cent of the tax revenue to local bodies. The government had originally announced that the allocation would annually increase by 1 per cent to reach 12 per cent in the fifth and last year of the panchayat bodies' term. But that was not done and it remained at 8 per cent. In contrast, while Karnataka allots 34 per cent of the State revenue to local bodies, Kerala shares 40 per cent of its plan funds with panchayats. In West Bengal, about 50 per cent of the State's allocation for development expenditure is devolved to panchayats.

The second State Finance Commission, headed by Sukavaneshvar, presented its report on devolution of funds to local bodies to the All India Anna Dravida Munnetra Kazhagam (AIADMK) government in May 2001. The report is yet to be presented to the State Assembly. "This only shows that the State government has scant regard for panchayati raj institutions," said Ramakrishnan. He said that the rural people would lose confidence in the panchayat system if the real reason for the crisis was hidden from them.

G. Palanithurai, who holds the Rajiv Gandhi Chair for Panchayati Raj Studies at the Gandhigram Rural Institute-Deemed University, said that the powers and finances devolved to panchayati raj institutions should be commensurate with their responsibilities. The Eleventh Schedule of the Constitution lists 29 items, which include agriculture and agricultural extension, implementation of land reforms and land improvement schemes, minor irrigation, social forestry, fisheries, education at primary and middle levels, and women's and children's uplift, as subjects to be dealt with by panchayati raj institutions. (Although these items are yet to be transferred to the local bodies by the State governments, schemes relating to many of them are already handled by panchayats.) In Palanithurai's view the State government should set apart a minimum of 30 per cent of its tax revenue to the local bodies. That was necessary because the developmental and welfare expenditure in rural areas had to be demand-driven rather than supply-driven, particularly because in many villages even basic amenities had not been provided yet, he said. "Unless adequate funds to match these responsibilities and without a semblance of financial autonomy, how can democracy function at the grassroots level?" Ramakrishnan asked.

The current crisis has brought to the fore the need to evolve a system for panchayats to sustain themselves, until such time as they are able to depend on their own resources to a great extent. Now the State and Central governments cover more than 80 per cent of the panchayats' expenditure. While the panchayats close to cities and towns can enhance their revenue by means of higher rates of house, professional, industrial and entertainment taxes, most of the village panchayats have little chance of doing anything similar. There is also popular opposition to raising rural taxes, which is partly a consequence of the historical association between agricultural taxation and colonial oppression. The panchayats are reluctant to risk losing popular support.

There are also constraints on tapping resources such as common property in the villages. In most places these "common properties" are virtually in private hands, having been encroached upon by politically influential persons. Ponni Kailasam said that "most of the so-called community property in villages" was really in private hands. In her village, with a population of 6,000 and comprising nine hamlets, 15 to 20 tanks were in the possession of private individuals. She said that common property roughly valued at Rs.1 crore was enjoyed by such people. Palanithurai suggests that wherever possible the common properties can be improved and enriched to yield substantial income to panchayat bodies.

The current financial crisis also points to the need for a more effective system of prioritisation of development works and devices to plug fund leaks. Planning from below with greater people's participation and continuous monitoring of project works can help the State come out of its predicament, if one goes by the Kerala experience of 1996.

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