The Hindu Business Line : Widening of panchayats’ revenues recommended

Thiruvananthapuram, Jan. 21 There is need for broadening and deepening of the revenue base of local governments, which now largely depend on government grants, according to the Second Administrative Reforms Commission.

The commission, in its sixth report, has recommended that the exercise will have to look into four major aspects of resources mobilisation, namely, potential for taxation; fixation of realistic tax rates; widening of tax base; and improved collection.

As of now, the panchayat raj institutions receive funds as grants from the Union Government on the recommendations of the Central Finance Commission; devolution from the state government based on the recommendations of the state finance commission; loans or grants from the state governments; programme-specific allocation from centrally sponsored schemes; and from internal resource generation.

But, the commission feels that the States have not given adequate attention to the fiscal empowerment of panchayats and even in states like Kerala, Karnataka and Tamil Nadu, which are considered to be progressive in the empowerment of panchayats, the local bodies are heavily dependent on grants.

It being so, the commission has recommended that all common property resources vested with the village panchayts be identified, listed and made productive for revenue generation.

The State Governments, on their part, should expand the tax domain of panchayats by suitable legislation and make it obligatory for panchayats to levy the taxes in this domain.

The expanded tax domain could include levies on registration of cattle, restaurants, large shops, cybercafés and tourist buses. The role of the state governments should be limited to prescribing a band of rates for these taxes and levies.

At the higher level, the local bodies should be encouraged to run or manage utilities such as transport, water supply and power distribution on a sound financial basis.

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