Panchayats as Self-Governing Institutions

General Studies Paper-2

Context: There is a growing recognition of the crucial link between local governance, development, and gender equality.

About local self-governance

• In December 1992, Parliament passed the 73rd and 74th constitutional amendments, which instituted panchayats and municipalities,
• These amendments mandated that State governments constitute panchayats (at the village, block and district levels) and municipalities (in the form of municipal corporations, municipal councils and nagar panchayats) in every region.
• They sought to institute a third-tier of governance in the federal framework through the devolution of functions, funds, and functionaries to local governments.
• The amendments to the Constitution ensured the reservation of one third of the total seats for women in all elected offices of local bodies in both the rural and urban areas.
• Emanating from the Central Act, various States Panchayati Raj Acts have made provisions for taxation and collection. 

Sources of Revenue

• Property tax, cess on land revenue, surcharge on additional stamp duty, tolls, tax on profession, advertisement, user charges for water and sanitation and lighting are the major own source of revenues(OSRs)where panchayats can earn maximum income.
• The huge potential for non-tax revenue includes fees, rent, and income from investment sales and hires charges and receipts.
• There are also innovative projects that can generate OSR.
  • This covers income from rural business hubs, innovative commercial ventures, renewable energy projects, carbon credits. Corporate Social Responsibility (CSR) funds and donations.

Importance

• It provides for efficient provision of public goods since governments with smaller jurisdictions can provide services as per the preferences of their residents.
• It promotes deeper democracy since governments that are closer to the people allow citizens to engage with public affairs more easily.
• Gram sabhas have a significant role in fostering self-sufficiency and sustainable development at the grass-roots level by leveraging local resources for revenue generation.
• They can be engaged in planning, decision-making, and implementation of revenue-generating initiatives that range from agriculture and tourism to small-scale industries.
• They have the authority to impose taxes, fees, and levies, directing the funds towards local development projects, public services, and social welfare programmes.
• Through transparent financial management and inclusive participation, gram sabhas ensure accountability and foster community trust, ultimately empowering villages to become economically independent and resilient.

Concerns and Challenges

• Despite the constitutional promise of local self-governance, local governments operate with limited autonomy and authority.
• Revenue raised by panchayats is meagre : “Panchayats earn only 1% of the revenue through taxes”, with the rest being raised as grants from the State and Centre 
  • It specifically points out that80% of the revenue is from the Centre and 15 % from the States. 
• Several impediments: Despite every enabling factor to raise revenue, panchayats confront several impediments in resource mobilisation:
  • The ‘freebie culture’ rampant in society is the cause for the antipathy in paying taxes.
  • Elected representatives feel that imposing taxes would alter their popularity adversely.
  • In several States, gram panchayats lack the authority to collect taxes, while in numerous others, intermediate and district panchayats are not delegated the responsibility of tax collection.

Suggestions and Way Ahead

• There is a need to educate elected representatives and the public on the significance of raising revenue to develop panchayats as self-governing institutions.
• Ultimately, the dependency syndrome for grants has to be minimised and in due course, panchayats will be able to survive on their own resources.
• Panchayats can only achieve such a state of affairs when there are dedicated efforts in all tiers of governance, which includes even the State and central level.
• Thus, gram sabhas need to promote entrepreneurship, and foster partnerships with external stakeholders to enhance the effectiveness of revenue generation efforts.