The Tamil Nadu government should continue to devolve 10 per cent of the State’s own tax revenue (SOTR) to the local bodies, according to the recommendations of the Sixth State Finance Commission, headed by retired bureaucrat Mohan Pyare.

Of the total devolution amount, 49 per cent should be devolved to rural local bodies (RLBs), and 51 per cent should be devolved to urban local bodies (ULBs).

Special grants

The Commission recommended ₹1,573 crore as special grants per annum, with an annual increase of ₹146.8 crore during the award period. It also recommended a special grant fund at the state level, namely the Capital Grant Fund, with an allocation of ₹861 crore for the first year and a fixed annual increase of ₹86 crore per annum over the previous year allocation; and the Operations Maintenance and Deficit Grant Fund, with an annual allocation of ₹712 crore and an increase of ₹60.8 crore per annum over the previous year’s allocation.

The State government should take up the issue of necessary amendments to Article 285 of the Constitution to make the Union Government buildings liable for property tax. In the interim, the Ministry of Urban Development must be impressed upon to make statutory provisions enabling the levy of service charges to replace the current executive instructions, which have proven ineffective, the Commission said in its report.

Public-private partnerships have been least explored in the urban sector. The Tamil Nadu Infrastructure Development Board should take up a special drive to map revenue-generating existing assets and identify new shelves of potential assets.

A concerted effort should be taken to leverage various State government schemes, local body funds, and special grants recommended by this commission to create infrastructure projects under various PPP models in a mission mode during the five-year award period of this commission.

In case of high-cost infrastructure, the government should bear the cost of the infrastructure only if it is found to be uneconomical for implementation under the PPP model. Even then, possibilities for doing O&M in the PPP model should be explored, the Commission said.

Metropolitan City

A new category of urban local body named “Metropolitan City” should be introduced for the purpose of devolution grants to accommodate the special nature of the Greater Chennai Corporation.

The total devolution grants for ULBs should be divided into two broad categories, i.e., the only metropolitan city. Of the total devolution amount for urban local bodies, 16 per cent should be devolved to Chennai Metropolitan City.

Among the key reforms to be undertaken in the ULBs, the Commission recommended that the quinquennial general revision of property tax should reflect at least the cumulative CPI change since the previous revision. In case local bodies fail to notify proactively any revision of property taxes, the property tax rates should automatically be revised to a minimum of the cumulative CPI change during the previous five years. The government should amend the relevant portion of the District Municipalities Act, 1920, to give effect to this recommendation.

Water consumption charges should be revised by at least 100 per cent, and the minimum charge should be ₹100 per month, the Commission said.

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