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Chapter 4
SOURCES OF FUNDS IN SAMPLE GRAMA
PAIVCHAYATS
In the previous chapter wc: discussed the status of panchayat finance in
Kerala since decentralization anti panchayati raj and also highlighted various
issues. A more indepth analysis is difficult with the macro level data. Hence
for a detailed examination of the sources of funds and expenditure 30 sample
panchayats were drawn and their trends, status and composition are discussed
in the next two chapters. The culrent chapter discuss the sources of funds and
the succeeding chapter examines the expenditure pattern.
The classification of panchayats in to special grade, first grade, second
grade & third grade was done in 1983 based on their income. As per this
classification there are 340 special grade panchayats, 435 first grade
panchayats, 206 second grade panchayats and 10 third grade panchayats
making a total of 99 1 grama panchayats. When income and expenditure of the
panchayats were analysed it was observed that there was no significant
difference between the first grade, second grade and third grade panchayats.
But there was so111e observable difference between that of special grade and
other category of panchayats. Therefore for the purpose of our study these
panchayats were classified as srecial grade and lower grade including all the
others. As we know, out of the 991 grama panchayats 113'~ are special grade
and 213 are lower grade. And hmce to have a proportional representation 10
special grade and 20 lower grade panchayats were taken as representative
samples for the study. The samples covered almost all the regions, viz,
midland, coastal, hilly, high ranges, etc.
The samples include Poomangalam grama panchayat of Thrissur
district with a population of 11!)05 and Munnar grama panchayat of Idukki
district with a population of (18205. considering the geographical zones
covered by the sample panchaya1.s; it may be seen that 8 panchayats are from
hilly regions, 13 panchayats are ikom midland four are from coastal areas and
5 are from the high ranges. Agriculture is the main activity of the sample
panchayats. Marine fishing and nland fishing are seen in coastal panchayats
and in panchayats near backwaters. In the high ranges people are employed in
tea, coffee, spices, etc. plantatisns. In the hilly and midland regions rice,
coconut, arecanut, pepper, rubber banana, etc. are cultivated. Generally in
panchayats majority of the people are engaged in agriculture and allied
activities.
It may be noted that 8 panchayats are located more than 50 kms from
the district headquarters, 15 panchayats are located between 25 and 50 kms,
and 7 panchayats are located within 25 kms.
In the preceding paragraphs an attempt is made to examine the
generation of funds in the samplt: panchayats consisting of 20 lower grade and
10 special grade panchayats.
Table 4.1
Profile of 2C' lower grade panchayats
SI. 1 No. Name of
panchayat Code I No. I Block District
features Land I activities Main I 1 Arpookar: PI Ettunanur Kottayam
Ayyampuzha P 2 Ang;rmaly Ernakulam
1 3 Balal 1 P 3 I Kanhangad / Kasargod / Hilly / Agriculture /
Hilly Agriculture
Alappuzha Coastal Agriculture
Kannur Midland Agriculture
Kasaragod Hilly Agriculture Karnithalam 1 9 1 K O ~ ~ ~ ~ O O P 9 Peravoor 1
10 Mogralputhur P I0 Kasgvagod Kasaragod
1 1 Paralam P I1 Cherpu
Hilly
Coastal
Midland
Agriculture
Agriculture
1 12 / Kuzhur I P 12 I Malt1 / Thrissur / Midland / Agriculture 1
Nedumkandam ldukki
Thrissur
Alappuzha
High Tea, coffee, ranges 1 spices 1
16 Senapathy I P 16 Idukki I I
Midland
Midland
ldukki
Agriculture
Agriculture
High Tea, coffee, ranges / spices I
Thiruvaniyoor
Thondernad
Thripprangatoor
Vadavukode
Mar anthavadi
Kocthuparambu t
Ernakulam
Waynad
Kannur
Midland
High ranges
Hilly
Agriculture
Tea, coffee, spices
Agriculture
1 20 1 Vengad 1 P20 lrini ( Kannur Midland Agriculture I
Table 4.2
Profile of 10 special grade panchayats
Rl,)ck 1 District Land 1 Main features activities
P 2 1 Edapp;~lly Ernakulam Midland Agriculture
P 22 Thalasiiery Kannur Midland Agriculture. -
P 23 Vypin Ernakulam Coastal Agriculture. fishing
P 24 Chalakudy Thrissur Hilly Agriculture.
P 25 Mallappally Pathanamthitta Hilly Agriculture.
7 1 2 7 "vikulam Idu!&i i ~ i ~ h p:c;lture. ranges Tea, coffee,
Sources of Funds
Table 4.3 gives the details of source of funds for own tax revenue for
20 lower grade panchayats. As we know source of funds include Property
Tax, Profession Tax, Entertainment Tax, Advertisement Tax etc. From the
table it is seen that the most significant taxes are property tax and profession
Table 4.3 Source of Funds: Tax Revenues : Own Taxes of 20 lower grade panchayats and 10 special grade panchayats (Rs. in Lakhs)
1. I
2.
3
4.
5.
6.
Propertp Tax Per Panchayat Percent to total Profession Tax Per Panchayat Percent to total Entertainment Tax & Show tax " "~ . ~,.~.~.. re* L a ~ ~ r r o y a r
Percent to total Advertisement Tax Per Panchayat Percent to total Service Tax & Surcharge Per Panchayat Percent to total Others Per Panchayat Percent to total Total own tax revenue Per Panchayat Percent
I
1998-99 49.81 2.49 46.54 43.30 2.16 40.45 5.26
n i c Y.LV
4.91 0.017 0.008 0.02 1.96
0.098 1.83 6.70 0.33 6.26
107.04 5.35 100
1998-99 53.64 5.36
55.13 27.06 2.71 27.81 6.04
kc2 6.2
0.038 0.0038 0.04 2.23 0.22 2.29 8.30 0.83 8.53
97.30 9.73 100
panchayat 2000-0 1
63.83 3.19
44.58 57.35 2.87 40.06 4.79
"24 3.35
2.82 0.14 1.97
14.38 0.72 10.05
143.17 7.16 100
Lower grade 1999-00 57.83 2.89
43.42 57.65 2.89 43.3 5.04
2.25 3.78
2.06 0.10 1.55 10.60 0.53 7.96
133.17 6.65 100
Spl. grade 1999-00 66.72 6.67 52.05 45.49 4.55 35.48 5.71
0.57 4.45 0.027
0.0027 0.02 2.70 0.27 2.12 7.55 0.76 5.89
128.20 12.82 I00
panchayats. 2000-01
54.61 5.46
48.45 40.77 4.08 36.16 4.90
O.*P 4.34
0.02964 0.003 0.03 2.68 0.27 2.38 9.74 0.97 8.64
112.73 11.27 100
200 1-02 73.89 3.69
43.95 70.56 3.53
4 1.97 3.46
1 9,!7 2.06
3.22 0.16 1.92 17.00 0.85 10.1 1
168.13 8.4 1 100
200 1-02 78.46 7.85 54.77 56.71 5.67
39.59 3.20
1 n.32 2.24
N LL
2.28 0.23 1.59 2.60 0.26 1.82
143.26 14.33 100
Diagram 4.1 - --
Property tax
oc 1998-99 1099-00 2000-01 2001-02
Year
L-~ower grade Panchayats t Spl Grade ~ a n c h a y d --- -- - - -- - - - - - -
Diagram 4.2
Profession tax
04- I
1998-99 19E9-00 2000-01 2001 -02
Year ' I t Lower graae Panchayats t S p Grade Pancnayats
Diagram 4.3 - - - -- - -
Total Own Tax Revenue
1998-99 1!199-00 2000-01 2001-02 I Year I
t Lower grad,? Panchayats t Spl. Grade ~anchayatsl ~
-~ -
tax which together constituted 86.99 per cent of the total own tax revenue in
1998-99. This share remained tht: same in subsequent years. At the same time
in absolute terms these taxes recorded substantial progress. For instance, per
panchayat property tax which stood at Rs.2.49 lakhs in 1998-99 increased to
Rs.3.69 lakhs. the percentage increase being 48.19. It may be specially noted
that Pookode panchayat of Thrissur district collected Rs.6.82 lakh as property
tax in 1998-99 which increased to Rs.8.00 lakhs in 2001-02 which is much
greater than the per panchayat value of property tax. Vengad and
Mogralputhur also showed high amounts of property tax collection. Similarly,
profession tax increased from Rs.2.16 lakhs to Rs.3.53 lakhs the rate of
increase being 63.43. These trends are due to the increase in the number of
buildings assessed for property tax and steady increase in the number of
payers of profession tax. Entertinment tax showed a steady decrease. It is
also interesting to observe that advertisement tax was recorded only in 1998-
99, that too a very small amount In toto, it is also to be seen that the own tax
revenue of the panchayat increaiied from Rs. 10.70 crores to Rs. 16.8 1 crores,
the percentage of increase being 57.10. Consequently, per panchayat taxes
also increased from Rs.5.35 lakhs to Rs.8.41 lakhs. In short, we may conclude
that own tax revenue recorded a reasonable increase over a period of four
years. Property tax and Profession tax showed an increasing trend. In the
sample of 20 lower grade panchayats only 9 had cinemas and collected
entertainment tax. Only two pa~ichayats collected advertisement tax. This is
due to laxity on the part of the panchayats.
From table 4.3 it is a150 seen that in the case of special grade
panchayats the most important taxes are property tax and profession tax which
together constituted 82.94 per cc:nt of the total own tax revenue in 1998-99.
This share remained almost the same in subsequent years except in the
terminal year which showed a peak of 94.36 per cent. In absolute terms these
taxes recorded a substantial increase except for a slight dip in 2000-01. For
example, per panchayat property tax which was Rs.5.36 lakhs in 1998-99
increased to Rs.7.85 lakhs in 20C 1-02, the percentage increase being 46.46. In
the same way, profession tax increased from, Rs.2.71 lakhs to Rs.5.67 lakhs,
the rate of increase being 109.22:. These trends are due to the increase in the
number of buildings assessed and steady increase in the number of payers of
profession tax. However, it was observed that for majority of the panchayats
both the numbers fluctuated during 2000-01. Considering the property tax
among the special grade panchayats, Munnar collected Rs.16.52 lakhs in
1998-99 which increased to Rs 24.88 lakhs in 2001-02. it showed a dip in
2000-01 and this is due to the bifurcation of the panchayat as Munnar and
Mankulam in 2000 and subsequent fall in the number of buildings assessed
and delay in collection of tax. Profession tax also reveals a similar trend
which increased from Rs.9.79 lskh in 1998-99 to Rs.23.64 lakhs in 2001-02.
These amounts of property tax and profession tax are found to be much
greater than the corresponding, per panchayat figures. Entertainment tax
showed a decreasing trend for the period. This is because number of people
who go for cinemas are declining. It is peculiar to see that the panchayats are
least bothered to collect advertisement tax. Panchayats are flushed with plan
funds and therefore their interest in exploiting new avenues of taxes have
declined. In sum, per panchayat taxes increased from Rs.9.73 lakhs to
Rs.14.33 lakhs. From this obsercation we may conclude that non tax revenue
showed a reasonable progress during the period of study.
Out of 10 special grade panchayats, 8 had cinemas. It is seen that, only
two panchayats collected advertisement tax, that too only for two years.
Both property tax and profession tax are buoyant and would have
fetched more amounts had the method of assessment been scientific. The
present system of annual rent based valuation of buildings causes great
leakages of taxes. The assessment must be based on 1) type of construction of
building 2) location 3) type of use and 4) plinth area of the building. For
multi-storeyed buildings area ol' each floor has to be calculated separately.
Self assessment of the property owner may be taken as a base. Depreciation
for wear and tear has to be considered. The method should be of minimum
discretion, transparent and simple. It may be noted that a large number of
buildings like buildings of air.ports, tourist resorts, theme parks, lodging
houses, hospitals, etc. are to be tsrought in to the tax net. It is interesting to see
that unnecessary and untimc:ly interventions from state government
occasionally cause problems for the panchayats. To give an example, the
quinquennial revision of building tax has been stopped as per a government
circular, presumably, to switch over to plinth area based taxation, rules
pertaining to which have not yet been framed. This has caused a loss of 20 to
25 per cent of increase in builcing tax which amounted to crores of rupees.
Tax has to be revised during alterations and additions to the existing
buildings. This is possible onl:~ in those few panchayats where the Kerala
Building Rules are applicable. Penal provisions may be incorporated in to the
rules so as to make it statutory to report the modifications of buildings to the
panchayats.
Coming to Profession tax, many omissions are to be noticed. Many
professionals like doctors, advoi;ates, consultants and businessmen who are
mainly private practitioners are not assessed for taxation. Similar is the case
with business concerns and i~stitutions which are run without proper
panchayat license.
It is pertinent to notice that nowadays there is no actual demand
maintained for profession tax in many of the panchayats. Demand has to be
prepared by 3oth April every year. Now the practice followed is to treat actual
collection as on 3 1'' March as dzmand for the year. Constitutional ceiling of
profession tax to be levied is Rs.1250 half-yearly and Rs.2500 yearly. A
minimum half yearly turn over of Rs.2 lakhs is required for institutions for
assessing profession tax of Rs.120 half yearly. Big business houses have
crores as turn over, but they also have to remit only Rs.2500 yearly.
Institutions in the economic zones are exempted from paying profession tax.
This, in turn, causes great loss of tax to the fund starved panchayats.
For entertainment tax, its buoyancy is being lost. As the other
entertainment media are well developed, the relevance of Cinema halls have
declined. To compensate, a tax may be imposed on cable television, internet
cafes etc.
The only thing a panchayat has to do to collect advertisement tax is to
have an approved bye-law. It is observed that only four panchayats out of a
sample of 30 have shown some interest in collecting advertisement tax. This
tax may conveniently be collecteti by giving on auction.
Assigned Taxes
Table 4.4 gives the composition of funds for Assigned taxes revenue
which include duty on transfer of property, Basic tax and Vehicle tax
compensation. From the table it is observed that the most important taxes are
duty on transfer of property and vehicle tax compensation which together
constituted 86.81 per cent of the total assigned taxes revenue in 1998-99. The
same pattern continued throughout the period. However, in absolute terms the
receipts from these taxes showc:d fluctuations. For example, per panchayat
duty on transfer of property which was Rs.3.34 lakhs in 1998-99 increased to
Rs.4.5 lakhs in 2000-01 which again decreased to Rs.2.63 lakhs in 2001-02.
Similarly, the receipts on vehicle tax compensation which stood at Rs.3.55
lakhs steadily decreased to Rs.C.15 lakhs, the rate of decrease being 95.77.
This shows the irregular and urpredictable pattern of release of funds from
the state govt. Some arrears of duty on transfer of property was released in
2000-01 and the due share was n3t released in 2001-02.
In sum, it is also to be noted that the assigned taxes revenue of the
panchayats decreased from Rs.158.70 lakhs in 1998-99 to Rs.67.30 lakhs in
2001-02 the percentage of decrease being 57.15. As a result, per panchayat
taxes also decreased from Rs.7.93 lakhs to Rs.3.36 lakhs. In short, we may
conclude that revenue from assigned taxes recorded a reasonable decrease
over a period of four years. From this it is clear that the state govt. with holds
Table 4.4
Source of Funds: Assigned Taxes of selected 20 lower grade and 10 special grade panchayats (Rs. in Lakhs)
1.
2.
3
4.
Note: Upper fig. gives total for 20 lower grade panchayats (part I) and total for 10 special grade panchayats (Part 11)
Middle fig. gives value per panchayat
Lower fig gives percentage contribution to total assigned taxes
Duty on transfer of property Per Panchayat Percent Basic Tax Per Panchayat Percent Vehicle tax compensation Per Panchayat Percent Total Assigned Taxes Per Panchayat Percent
Lower grade panchayats
I
1998-99 66.76 3.34
42.06 20.93 i n 4 13.19 7 1 .O1 3.55 44.75 158.70 7.93 100
Spl. grade panchayats. 2000-01
90.05 4.5
79.56 8.02 0 an 7.08 15.12 0.75 13.36 113.19 5.66 100
1999-00 72.32 3.62
47.28 6.68
1 n ? ? 4.37 73.97 3.70
48.35 152.97 7.65 100
1998-99 53.81 5.38
36.85 14.75 1 47
10.10 77.48 7.75 53.1
146.04 14.6 100
2001-02 52.56 2.63 78.09 11.78 n 5 9
17.51 2.96 0.15 4.4
67.30 3.36 100
1999-00 45.43 4.54 45.51 16.86 ! 6? 16.89 28.73 2.87 28.78 91.00
9.1 100
2000-01 47.80 4.78 86.4 6.65 n.66 12.03 0.87 0.09 1.57
55.32 5.53 100
2001-02 34.51 3.45 8 1.75 4.63 9.46 10.96 3.07 0.3 1 7.28 42.22 4.22 100
Diagram 4.4
Duty or1 Transfer of Property
1939-00 2000-01
Year
!+~wer grade F'anchayats t Spl Grade Panchayats 1 - - . . - -
Diagram 4.5
--- --
Basic Tax
1998-99 ' 999-00 2000-01 2001-02
Year
-t Lower grade Pancnayats t Spl Grade Pancnayals -
Diagram 4.6 -
Vehicle Tax Compensation
1998-99 1993-00 2000-01 2001-02
Year I ~~ -
[ x s o r grade Ptlnchayats t Spl. Grade ~anchayats i ~~ .. -- - - 1 -
the amounts due to the panchayats and releases the same at unpredictable
intervals.
Coming to the case of special grade panchayats it is seen that the same
pattern followed. It is observed from the table I1 that per panchayat receipts of
taxes which stood at Rs.14.6 lakhs in 1998-99 decreased to Rs.4.22 lakhs the
percentage of' decrease being 71 10. Out of 30 panchayats 2 did not have any
receipts under duty on transfer of property in the last two years. 10 panchayats
did not have any receipts under basic tax in the last 2 years and 24 panchayats
did not have any receipts under vehicle tax compensation in the last two
years. There are fluctuations ~ I I the amounts disbursed also. This kind of
unsteady flow of funds creates ~roblems for panchayats in preparing budget
estimates properly.
Table 4.5 presents the details regarding the sources of funds for non tax
revenue for panchayats. The soupces comprise gate fees, license fees & permit
fees, income from property (buildings & others), river sand, usufructs from
trees, beneficiary contribution, user charges and toll etc. From the table it is
observed that the most significailt items are income from property, river sand
and beneficiary contribution. Tz~gether the three items constitute 72.87 per
cent of the total non-tax revenul: in 1998-99. This share remained almost the
same in the following three years. At the same time, in absolute terms both
income from property and riker sand recorded substantial progress. For
instance, per panchayat income 'rom property which stood at Rs. 1.05 lakhs in
1998-99 increased to Rs. 1.53 l;~khs, the percentage increase being 45.7 1. It
may be noted that Poomangal;lm panchayat of Thrissur district collected
Table 4.5
1.
2.
3
4.
5.
6.
7.
8.
grade and 2001-02
1.23 0.06 0.76 6.60
0.33 4.04 30.54
1.53 18.71 77.34 3.87 47.39 1.56 0.08 0.96 11.21 0.56 6.87 0.08 0.004 0.05 34.64 1.73
21.22 163.21 8.16 100
Source of Funds:
Gate fees Per Panchayat Pzrcznt License fees & Permit fees Per Panchayat Percent Income from property (Buildings and others) Per Panchayat Percent River sand Per Panchayat Percent Usufructs from trees Per Panchayat Percent Contribution (Beneficiary) Per Panchayat Percent User charges & toll
pp
Others Per Panchayat Percent Total Per Panchayat Percent
10
-
Non Tax 1998-99
0.42 0.02 0.39 6.07
0.30 5.6
21.02
1.05 19.39 3.86 0.19 3.56 0.81 0.04 0.75 54.14 2.71 49.92 0.13 0.01 0.12
22.00 1.10
20.28 108.46 5.42 100
special grade 1998-99
2.29 0.23 3.12 4.87
0.49 6.61 7.40
0.74 10.05
2.15 29.21 0.14 0.014 0.19
24.60 2.46 33.44 1.33 0.13 1.81 11.46 1.15
15.57 73.59 7.36 100
Revenue of 1999-00
0.34 0.02 0.28 5.95
0.30 4.87 29.55
1.48
-p-.pppp- 24.21 7.26 0.36 5.95 0.89 0.04 0.73
60.57 3.03
49.59 0.08 0.004 0.07 17.48 0.87 14.32 122.13 6.11 100
selected 20 lower 2000-01
0.92 0.05 0.62 7.09
0.35 4.77 40.93
2.05 27.54 9.68 0.48 6.51 0.27 0.01 0.18 45.93 2.30 30.91 0.08 0.004 0.05
43.72 2.19 29.42 148.62 7.43 100
panchayatsRs. 1999-00
1.93 0.19 2.62 6.19
0.62 8.32
1 3.36
0.34 4.55 18.20 1.82
24.68 0.086 0.01 0.12 2.68 0.27 36.28 2.68 0.26 3.63 14.54 1.45 19.72 73.74 7.37 100
in Lakhs 2000-01
3.08 0.31 4 69 9.86
0.99 15.03 11.1 1
1.11 16.94 17.59 I. Ib
26.82 0.83 0.08 1.27 7.39 0.74 11.27 1.10 0.11 1.61 -
14.66 1.47
22.36 65.58 6.56 100
2001-02 2.96 0.30 4.63 7.01
0.70 10.96 10.68
1.07 16.7 16.81 -
1.66
26.28 0.24 0.02 0.38 3.25 0.33 5.09 0.64 0.06 1.07
22.37 2.24 34.96 63.98 6.40 100
Diagram 4.7
Contribution
19 39-00 2000-01
Year
--- ~ - , t Lower grade F'anchayats +Spl. Grade Panchayats ~~ ~ ~ L I -. - - ~ ~~~
Diagram 4.8 ~ ~ ~
~ ~~
River Sand
19!39-00 2000-01
Year
~ ~~~- -
[ ? p i e r !grade F,anchayats -m-Spl. Grade ~ a n c h a y a d . - - -- -- - ~ , ~ i
----.---p-.. ~p~ -p-- ~~ I
Diagram 4.9 . -
Others
' - - , ! 0
1998-99 1399-00 2000-01 2001-02
Year I ---~~ ! --t Lower grade Panchayats t Spl. Grade L~~ ~~
p~ ~, -- ~
~
Rs.2.87 lakh in 1998-99 and Rs.3.25 lakh in 2001-02 as income from
property. This is found to be much higher than the per panchayat values. This
highlights the capacity of certain individual panchayats in creating income
generating assets. Similar is the case of Cheruthazham with a collection of
Rs.4.95 lakhs in 2001-02 and Arppookara with a collection of Rs.16.10 lakhs
in 2001-02. The highest value recorded was Rs.2.05 lakhs in 2000-01.
Similarly, income from river sand increased from Rs.0.19 lakhs to Rs.3.87
lakhs, the rate of increase being 409. 16 out of 20 lower grade panchayats of
the sample recorded collection of income from property. More and more
panchayats have showed interest in construction of buildings like shopping
complexes and community halls by making use of plan funds. This caused to
generate more income under this item. But, the panchayats can invest still
more in this regard. Here it is pertinent to note that only 5 out of 20
panchayats have collection on account of income from river sand. It is
interesting to notice that one panchayat has shown a high income especially in
2001-02 showing a peak increase. Changaroth panchayath of Kozhikode
district collected Rs.1.98 lakhs n 1998-99 which increased to Rs.75.43 lakh
in 2001-02 fkom river sand. It is also important that the government has
imposed a lot of restrictions on the mining of sand from the rivers, as it causes
a lot of environmental problen~s. Moreover, lifting of ban of sand mining
results in a sudden rise in incomt: from this item.
Coming to the item of beneficiary contribution panchayats recorded a
steady decrease except for the year 1999-00 when it showed a rise. For
instance, per panchayat beneficiary contribution which stood at Rs.2.71 lakhs
in 1998-99 decreased to Rs.0.5f1 lakhs in 2001-02, percentage decrease being
79.34. However it constituted 49.92 per cent in 1998-99 and decreased to
30.91 and dipped to 6.87 per cc:nt in 2001-02. These trends are due to the
inability and lack of interest of the panchayats in resource mobilization.
Moreover, people's interest in contribution also declined because of the
feeling that panchayats have enough funds to spend. Panchayats, in turn, were
finding it difficult to spend the l'unds allotted to them in time. Only 9 out of
20 panchayats of the sample wt:re able to mobilize beneficiary contribution
during the period of study that too the amount recorded a decreasing trend. 7
out of 20 panchayats mobilized partly, that is, for one or two years. There is
no consistency seen in the rrobilization of beneficiary contribution. In
general, panchayats were struggling to incur expenditure of their plan funds
allotted in time thereby causing lapse of funds. Instalments of plan funds have
been cut by govt. In such a situation the capacity of panchayats in the
mobilization of beneficiary contribution declined. At the same time, the
beneficiaries have the general feeling that panchayats have enough funds and
consequently, there were few takers for individual based projects where the
beneficiary contribution is a must.
Collection with regard tc' the conventional sources of funds like gate
fees, license Fees & permit fees, user charges and toll etc together constituted
around 5 per cent of the total ncntax revenue and recorded a stagnant picture.
Panchayats do not mobilize thme sources of revenues due to a variety of
reasons among them were lack of interest, scarcity of staff and their
unwillingness for field duty and the virtual absence of division of duties,
monitoring and supervision by competent senior officers of the department. It
is to be noticed that the compt:tency of the senior officers are doubtful (as
most them are promotees from lower division clerks and some of them are
even from part-time sweepers1 for efficient and effective control and
supervision of administration ol' the officers under the new panchayati raj
system. Panchayats should be able to collect the conventional items not only
as a source of revenue but also to exert control over the various activities
going on in the area of jurisdict on of panchayats. In toto, it is seen that the
non tax revenue of the panchayat increased from Rs.108.46 lakhs to
Rs.163.21 lakhs the percentage of increase being 50.48. Consequently, per
panchayat tax also increased from Rs.5.42 lakhs to Rs.8.16 lakhs.
In short, we my conclude: that non tax revenue recorded a reasonable
increase over a period of four years. However considering its potential this
increase is not adequate.
Coming to the case of spzcial grade panchayats the three items of non
tax revenue together constitute '72.7 per cent in 1998-99. However, the share
sharply declined to 48.07 pel cent in 2001-02. In absolute terms, per
panchayat revenue from property increased from Rs.0.74 lakhs to Rs.1.07
lakhs, showing a percentage increase of 44.59. Mallappally panchayat of
Pathanamthitta district collected Rs.2.84 lakhs in 1998-99 and Rs.2.61 lakhs
in 2001-02 as income from property. This is much greater than the
corresponding per panchayat values. However, revenue from river sand
decreased from Rs.2.15 lakhs to Rs. 1.68 lakhs the percentage decrease being
21.86. Beneficiary contribution also decreased from Rs.2.46 lakhs to Rs.0.33
lakhs, percentage decrease being 86.58. 9 of the 10 spl. grade panchayats have
recorded income from property. It is interesting to observe that per panchayat
revenue recorded is much lower than that recorded for lower grade
panchayats. This should have been the other way round. This is because in
the case of special grade panchayats, the shopping complex buildings and
community halls are comparativc:ly older and the rents were fixed earlier and
hence less when compared to t ~ a t of lower grade panchayats. 6 of the 10
sample special grade panchayats have recorded income from river sand. But
during certain periods they did not show any income at all. It may be noted
that Ranniangali panchayat collected Rs.1.76 lakhs in 1998-99 which
increased to Rs.8.76 lakhs in 20(11-02 on account of river sand. This is due to
the ban imposed by the state goternment on sand collection from the rivers.
Also, it is seen that the laxity on the part of panchayats to prevent
unauthorized sand mining resulting in heavy loss of income and
environmental degradation. Panchayats need to show more attention to
prevent leakage of income from liver sand.
Another observation is thlt collection from gate fees, license fees and
permit fees is much better for rpecial grade panchayats than that for lower
grade panchayats. This is because special grade panchayats have markets and
some have implemented Kerala Building Rules which fetch them fees for
building plan approval based on the plinth area of the building.
On the whole, it is to be seen that for special grade panchayats non tax
revenue per panchayat slightly 'ecreased from Rs.7.36 lakhs to Rs.6.4 lakhs
the percentage of decrease being 13.04. In short, we may conclude that non
tax revenue recorded a marginal decrease over a period of four years. This is
mainly because the special grade panchayats could not mobilize beneficiary
contribution to any reasonably good level. Ranniangadi panchayat mobilized
beneficiary contribution to the time of Rs.9.17 lakhs in 1998-99 which
sharply declined to Rs.0.85 lakhs in 2001-02. During the initial years people's
participation was higher and hence their interest to contribute to the
development projects was also greater. Over the years, the participation rate
as well as contribution declined t~ a very low level.
From the items gate fees, usufructs, user charges & tolls the
contributions were only insignifcant which together contributed about 5 per
cent of the total revenue. Revenue from beneficiary contribution and river
sand together comprises about 50 per cent under the non tax revenue both for
lower grade and special grade panchayats. However, it may be noticed that
these are not regular and dependable sources of income. But the revenue from
other permanent sources like gate fees, license fees, permit fees etc. are very
small. These sources have to bc: augumented. Income from own property of
the panchayats like buildings, shopping complexes and community halls may
also be increased by starting new markets; parking places, cart stands etc, and
constructing new buildings for shopping complexes, community halls etc. At
the same time the income structure of these items have to be thoroughly
revised.
Grants-in-aid
Table 4.6 gives the composition of grants-in-aid which comprises plan
devolution (people's planning). state plans schemes (sponsored), funds for
management of transferred institutions (non plan), other grants (rural pool
Table 4.6
Source of Funds: Grants-in-aid of selected 20 lower grade and 10 special grade panchayats (Rs. in Lakhs)
1 1 Per ~anchavat ' 5.35 6.04 1 10.04 1 8.08 1 6.00 1 5.72 9.03 1 8.58 1
2001-02 352.53 35.25 60.91 40.40
4.04 6.98
66.68
6.67 11.52 9.06
0.91 1.57
110.08 1
6 .
1998-99 765.93 76.59 73.15 61.19
6.12 5.84
71.34
schemes '
Per Panchayat Percent Pensions(SocialWe1fare) - ~- ~ ~~~~~~~~
Percent Total Grants-in-aid Per Panchayat Percent
2000-01 687.20 34.36 61.64 33.31
1.67 2.99
105.57
I.
2.
3
1999-00 481.87 48.19 66.19 34.19
3.42 4.74
62.79
2001-02 576.41 28.82 60.97 13.60
0.68 1.44
106.17
1998-99 848.27 42.41 69.65 44.24
2.21 3.62
124.33
Plan (People's Planning) Per Panchayat Percent State Plan Schemes (Sponsored) Per Panchayat Percent Management of transferred institutions
4.02 6.59
107.05
8.76 1221.42 61.07
100
2000-01 421.64 42.16 30.50 68.68
6.87 49.68 61.45
6.28 8.7
32.52
3.25 4.5
52.88
1999-00 774.57 38.73 65.52 22.17
1.1 1 1.87
88.73
6.15 4.44 3.42
0.34 0.25
118.74
4.
5.
5.2 8.80
120.70
10.21 1182.25 59.1 1
100
7.13 6.81
29.28
2.93 2.79 59.31
6.22 10.18 17.02
0.85 1.39
80.50
(Non Plan) Per Panchayat Percent Other grants (mral pool, VRM etc) Per Panchayat Percent Centrally Sponsored
I
5.28 1 5.31 9.47 1 1.23
4.44 7.50 72.08
3.6 6.10
104.00
3.25
0.16 0.29 84.63
4.23 7.59
200.89
18.02 11 14.85 55.74
100
3.07
0.15 0.33 84.58
4.23 8.95
161.63
17.10 945.47 47.27
100
5.93 5.66
60.06
5.74 1047.10 104.70
100
5.28 7.33
57.15
7.92 721.41 72.14
100
11.87 8.59
90.33
6.53 1382.42 138.24
100
11.00 19.02 85.76
14.82 578.75 57.87
100
Iliagram 4.10 - -
Plan
1!399-00 2000-01
Year
State Plan Schemes
15199-00 2000-01
Year
-- -. - ~-
S p i Grade ~ a n c h a y a r s 1 ~~~ - ,
Iliagram 4.12 --
Centrally Sponsored Schemes
4 I
2 i 0
1998-99 1999-00 2000-01 2001-02 ~ Year
--
t Spl. . Grade ~ Panchayaq J
~- . ~~ ~~~ ~~ ~
Pensions (Social Welfare)
12 .. .. -- - - .. . . -. . --- . - - ~.
Year
[*Cower grade Panchayats t Spl. Grade Panchayats 1 ~- - - -- ~- ~~ . . ~
Diagram 4.14
(Grants-in-aid
1 20- - 1998-99 1!l99-00 2000-01 2001-02
Year
Grade Panchayats / 1 .- -- ~
~~~.
,- ~ ~ ~~ . -
1 Establishment Cost
0 --
1998-99 1599-00 2000-01 2001-02
Year ~- ~
/ t & w e r grade Panchayats ~ t S p l . .- Grade ~ a n c d ~ .~~ -~ --
grant, village road maintenance grant etc.). Table 4.6 presents the picture of
receipts under various grants-in-aid from state and central governments.
From table 4.6 it is seen that the most significant grants-in-aid is the
plan fund devolved under peoplz's plan which constituted 69.65 per cent of
the total grants in 1998-99 and 61.97 per cent at the end of 2001-02 recording
a small but steady decrease over the years. In absolute terms also plan funds
recorded a steady decline. For example, per panchayat plan funds which stood
at Rs.42.41 lakhs in 1998-99 decreased to Rs.28.82 lakhs in 2001-02, the
percentage decrease being 32.04.
These decreasing trends itre due to the inability of the panchayats in
utilizing plan funds in time and the corresponding cut in actual allocation
from the state government over the period. Panchayats find it very difficult to
obey the detailed guide lines issued by the government for sectional
allocation, plan formulation, beneficiary selection, projects approval,
implementation and monitoring .within prescribed time frame. In some cases,
by the time the projects are approved by the District Planning Committee the
season might be over, especially in the case of agricultural and related
projects. Considering the capacity of elected representatives and staff at the
local government level the cumbersome procedure to be followed for projects
approval and implementation is too much for them. This is partly the result of
the 'big-bang' blunder of devolution of huge quantum of funds at one go,
without waiting for capacity building of local government functionaries. With
a view to improve the quality o ' execution by participation and to avoid the
leakage due to the presence of contractors in the system beneficiary
committees were entrusted pith civil construction works. In reality,
beneficiary committees were a lcose association of beneficiaries which do not
have any technical and practical competency in undertaking civil construction
works. Naturally, this led to the coming of contractors as benamis into the
scene. The pity is that presently these binamis had a good time as they had no
responsibility for the execution of the work. Again, they did not have to make
any advance investment as they got advance from panchayats through
beneficiary committees. This re:;ulted in deplorably poor quality of projects
executed and an enormous waste of funds and corruption at the local level.
Now it is well known that what the beneficiaries could do at the most
was to monitor the quality of mplementation of projects. In the name of
people's participation many voluntary expert groups with too much criticism
of the activities of the panchayat and less positive help entered the liable local
government structure which in turn disturbed the apple cart of administration
at the local level. These issues greatly affected the good performance of local
governments. All these and other factors contributed to the poor performance
of panchayats and the consequc:nt decrease in allotment and utilization of
funds. Grants from state plan schemes and management of transferred
institutions together constituted J 3.8 per cent in 1998-99. This share remained
almost the same in subsequent years. At the same time, in absolute terms
these grants showed substantial decrease. For instance, per panchayat state
plan schemes which stood at R: .2.21 lakhs in 1998-99 decreased to Rs.0.68
lakhs, the percentage decrease being 69.23. Similarly, grants pertaining to
management of transferred inztitutions decreased from Rs.6.22 lakhs to
Rs.5.31 lakhs, the rate of decrease being 14.63. The trends show that there is
no clear cut policy of devolutioi~ of grants to panchayats. It is interesting to
notice that the grants from ruriil pool & village road maintenance are not
significant which vary from 1.39 per cent to 0.33 per cent and the devolution
is found to be irregular.
Coming to the centrally sponsored schemes, per panchayat contribution
was Rs.4.02 lakhs in 1998-99 which slightly increased to Rs.4.23 lakhs. It
shows a stagnant picture. Regarding welfare pensions, per panchayat
contribution stood at Rs.5.35 lekhs increased to Rs.8.08 lakhs, the rate of
increase being 51. Formerly, welfare pensions have been disbursed from
various government departments. Presently, they have been transferred to
panchayats for convenience of distribution. The pity is that funds have been
transferred, but not the functionaries in the corresponding proportion. The
procedure regarding the beneficiary selection for pensions is rather time
consuming as it required personal verification by visiting the place of
residence of the beneficiary. It is significant to note that panchayats are
understaffed with the pattern fixed two decades ago when the panchayats had
a different face altogether. In toto, it is also to be seen that the receipts of
grants per panchayat decreased from Rs.61.07 lakhs to Rs.47.27 lakhs the
percentage of decrease being 22.50. We may conclude that the grants received
during the four year period showt:d a decline.
In the case of special grade panchayats also, the same pattern is seen.
Coming to item wise contribution, revenue from plan funds recorded the
highest percentage contribution for having shown 73.15 per cent in 1998-99
which steadily decreased to 60.9 1 per cent in the terminal year. For instance,
per panchayat receipt of plan funds which stood at Rs.76.59 lakhs decreased
to Rs.35.25 lakhs the percentage of decrease being 53.98. In toto, the receipts
under grants showed high fluctuations. For example, per panchayat receipt
was Rs.104.70 is 1998-99 which sharply decreased to Rs.72.14 lakhs in the
next year. Again it, showed a mdden peak to Rs.138.24 lakhs in 2000-01
which sharply fell to Rs.57.87 in the last year. This trend is attributed to the
irregular flow of funds from slate government to panchayats. However, a
microscopic view of the grants-in-aid structure reveals a declining trend both
in the case of lower grade panc.hayats and special grade panchayats over a
period of four years. llence the hypothesis that the flow funds for state
government to panchayats by .Nay of grants-in-aid and assigned taxes is
decreasing over the years is reaswed.
Debt Heads
Receipts under the deb heads (Table 4.7) are collected by the
panchayat and deposited to its account and remitted later on to various
departments. That is, the amount collected shall not be used for the
developmental activities of the 1)anchayats. Here, the panchayats act only as
an agent for collection under dc:bt head account. Therefore, normally there
will not be any great impact on the panchayat revenue by this account. For
lower grade panchayats, it is ob:;erved from the table that, in absolute terms,
per panchayat debt head which stood at Rs.3.91 lakhs showed fluctuations
and decreased to Rs.2.54 lakh in 2001-2002.
The main components of debt head are library less, sales tax, income
tax, Kerala Work man's Welfare compensation fund earnest money deposit
Table 4.7
Debt Heads of selected 20 lowx grade and 10 special grade panchayats ( i s . in Lakhs)
etc. In certain panchayats provident fund, repayment of loans and other govt.
78.37
49.20
60.40
50.84
24.44
16.74
27.43
12.27
dues remained as back log to be remitted. It is seen that majority of the lower
Per panchayat
3.91
2.46
3.02
2.54
2.4
1.67
2.74
1.23
grade panchayats divert the fund under this item for meeting establishment
expenditure which are expected to be met from own fund of the panchayat.
There are arrears for remittance. There are also cases in which provident fund
deducted from salaries are not remitted in time. Similarly, loans from Rural
Development Board, arrears of water charges etc. are not paid in regular
instalments.
In the case of special srade panchayats, per panchayat debt head
fluctuated between Rs.2.4 lakhs and Rs.1.23 lakhs in 2001-02. It is obsewed
that special grade panchayats have better own funds position so as to meet
establishment expenditure and hence there is less diversion of funds from debt
head.
Loans
From table 4.8 it is seen that only one panchayat out of the total sample
has availed of loans from financial institutions (Rural Development Board)
All the other panchayats have not shown any effort to avail loans. This
actually makes a potential loss tcl the panchayats. They can avail of loans for
the creation of income-yielding assets. Most of the panchayats own vacant
plots of lands with them which c m be utilized for this purpose. On the whole,
we may conclude that this is a fully unavailed source of fund.
Table 4.8 Loans of selected 20 lower grade and 10 special grade panchayats
(Rs. in Lakhs)
I Year I Loans I I
1999-00
2000-01
2001-02 -- Nil
Source of Funds
Table 4.9 presents the colnposition of source of funds. It is composed
of own taxes, assigned taxes, non tax revenue, grants-in-aid, debt heads and
loans. From table 4.9 it is seen that the most significant sources are grants-in-
aid and assigned taxes which together constituted 82.13 per cent in 1998-99
which decreased to 72.76 per cent. At the same time, in absolute terms these
sources recorded substantial decrease. For instance, per panchayat assigned
taxes which stood at Rs.7.93 lakhs decreased to Rs.3.37 lakhs in 2001-02, the
percentage decrease being 57.50. Similarly, grants-in-aid decreased from
Table 4.9
Total Source of Funds: of selected 20 lower grade and 10 special grade panchayats (Rs. in Lakhs)
/ 1998-99 1 1999-00 1 2000-01 1 2001-02 1 ( 1998-99 1 1999-00 / 2000-01 1 2001-02 1. i Own taxes i 107.04 i 133.17 i 143.17 i 168.13 i i 97.30 i 128.20 i 112.73 i 143.26 I
Per Panchayat Percent 6.37
Per Panchavat Percent 1 9.44 1 9.33 / 7.16 1 4.83 1 Non-tax revenue 1 108.46 / 122.13 i 148.62 1 163.20 1
I
Percent / 6.45 1 7.45 1 9.40 1 11.70 1 Grants-in-aid 1 1221.42 1 1182.25 1 1114.85 1 945.47 i Per Panchayat 61.07 59.1 1 55.74 47.27 Percent 72.69 72.1 70.55 67.78
5. Debt heads 78.37 49.20 60.40 50.84 Per Panchayat 3.92 2.46 3.02 2.54
I Percent 1 4.66 1 3 1 3.82 / 3.64 1 1 1.76 / 1.62 1 1.67 / 1.46 6. 1 Loans 1 6.30 1
Per Panchayat Percent Total
1 I 1 0.3 1 0.37
1680.28 84.01 100
-
1639.71 81.99 100
-
1580.23 79.01 100
1394.95 69.75 100
1388.47 138.85
100
-
103 1 .I0 103.1 1
100
1643.49 164.35
100
840.48 84.05 100
Total source of funds 1998-99 (Lower Grade Panchayats)
-- -- -p - -- - - --
own taxes El Assigned taxes Non-tax revenue1
OGrants-~n-a~d R l Debt heads Loans I L . - - - : -~ ~ ---- -~ - -
Diagram 4.17
'Total soilrce of funds 200 1-02 (Lower Grade Panchayats)
-~ - -- -. - p~ ~- - I HAssigned taxes ONon-tax revenue)
Loans i
H Debt heads - - -~ -- - - - -~ - -- ~ -- - ~ I
Iliagram 4.18 Total soirce of funds 1998-99
(Special Grade Panchayats)
I ll ~ssigned taxes on-tax revGn4
grants-in-aid I 1 Debt heads Loans I - -- - - -- -
p- ~ - - -
Diagram 4.19 Total source of funds 2001-02
(Special Grade Panchayats)
I - - . --
Own taxes ll Assigned taxes Non-tax revenue ( L n t s - i n - a i d 11 Debt heads !
O Loans --
~p~ ~~~ ~ ~- ~
--- - 1
Rs.61.07 lakhs to Rs.47.27 lakhs, the rate of decrease being 22.60. These
trends are due to the decrease in the devolution of assigned taxes to the
panchayats by the state government. In the case of grants-in-aid the allotments
to panchayats decreased becausc: of the non utilization of plan funds. Plan
funds have been devolved in four instants depending on the utilization of the
previously allotted installments. -i[owever, most of the panchayats did not get
the fourth instalment. This was ihe main reason for the declining trend. It is
seen that own taxes and non tax revenues show almost equal importance.
Both together constituted 12.82 per cent in 1998-99 and increased to 23.75
per cent in 2001-02. At the same time, in absolute terms, both these taxes
showed a substantial progress. For example, per panchayat own taxes which
stood at Rs.5.35 lakhs in 1998-90 increased to Rs.8.4 lakhs, the percentage of
increase being 57.00. Similarly, non tax revenue increased from Rs.5.42 lakhs
to Rs.8.16 lakhs the percentage of increase being 50.55. 'These trends are due
to the increase in the number of lax payers for property tax and increase in the
number of payers of profession lax over the years. It is interesting to observe
that only one panchayat has ava led of loans from Rural Development Board
which was used for the construc ion of a shopping complex during the period
of study.
Rural Development Boartl or similar types of Financial Institutions are
a good source of funds to be utilized by the panchayats, especially, for
constructing income-generating assets which will be a long term asset for the
panchayat. Panchayats have the powers of raising loans and deposits which
have been exercised with the purpose of building income-yielding assets.
Large sums of rental incomes ought to have been earned by this way.
In toto, it is to be seen that the source of funds decreased from
Rs.1680.28 lakhs to Rs.1394.95 lakhs the percentage of decrease being 16.98.
Consequently, per panchayat sollrce of funds also decreased from Rs.84.01
lakhs to Rs.69.75 lakhs. In short, we may conclude that source of funds
recorded a decrease over a period of four years. The highest contribution to
the source of funds was from grants-in-aid. In sum, the analysis of sources of
funds reveals a declining trend, which has its adverse impact on the problems
of resource mobilization and ~tltimately the development scenario of the
panchayats. From table 4.9 it is observed that grants-in- aid showed a steadily
declining trend from a per panthayat value of Rs.61.07 lakhs in 1998-99 to
Rs.47.27 lakhs 2001-02. It is se,:n that the panchayats find it very difficult to
prepare projects and get the approval of the district planning committee with
in the prescribed time limit after the cumbersome procedure of grama sabhas
development seminars. Once the approval is given and the project is ready the
season for implementation would have passed most of the time especially in
the case of projects in the a;<riculture sector. Many projects under the
infrastructure sector are held up because of delay in getting land. In certain
cases the individual beneficiaries would not turn up to take the projects. There
used to be frequent treasury ban:; also. Due to all these factors panchayats will
not be able to avail of all the instalments of plan funds allotted. This is the
major reason for the decline in the source of funds over the years.
Coming to special grade panchayats, it is also seen that the most
important sources are assignc,d taxes and grants-in-aid which together
constituted 85.93 per cent of thc total sources of funds in 1998-99. This share
remained almost the same with marginal fluctuations in subsequent years.
However, in absolute terms these sources recorded tremendous
decrease over the four years. For instance, per panchayat assigned taxes which
stood at Rs.14.6 la!& in 1998-99 decreased to Rs.4.22 lakhs, the rate of
decrease being 71.10. These trelds are due to the non availability of funds
from the state government to panchayats. Assigned taxes are collected by
state governments but given to panchayats. Finances of the state government
during the period was very weak and they held back the amounts to tide over
the fiscal problems of the state government. To make matters worse, there
were treasury bans also. Similarly, per panchayat grants-in-aid which was
Rs.104.71 lakhs in 1998-99 decreased to Rs.57.87 lakhs, the percentage of
decrease being 44.73.
These trends are also due to delayed flow of funds to local bodies. It is
interesting to notice that there were budgetary allocation, but in actual
practice, the panchayats did nct get the amounts due to them, either the
panchayats were not able to uti ize the prescribed minimum to get the next
allotment or the government had no money to disburse to panchayats. It is
pertinent to notice that the state ;:overnment published a white paper showing
its financial position. Treasury bans were every day occurrences during these
days. In the case of both the assigned taxes and grants, the government have
the direct control.
Considering the cases of own tax and non tax revenues, it is significant
to notice that both these source:, show almost the same quantum and rate of
growth. Taken together these two sources constituted 12.31 per cent of the
total sources in 1998-99. This slare showed great fluctuations in subsequent
years having values of 19.58 per cent in 1999-00 and 10.85 per cent in 2000-
01.
In absolute terms own tax revenue sources showed substantial
progress where as non tax revenues showed a slight decrease. For example,
own taxes revenue which stootl at Rs.9.73 lakhs in 1998-99 increased to
Rs.14.33 lakhs, the percentage increase being 47.28. The non tax revenue
showed a decrease. For example, per panchayat non tax revenue which stood
at Rs.7.36 lakhs in 1998-99 decreased to Rs.6.40 lakhs in 2001-02, the
percentage of decrease being 13.04. In the case of own taxes, the upward
trend is due to the fact that there is gradual increase in number of buildings
assessed for tax and increase in the number of payers of profession tax. There
have been good realization of these taxes also. On the other hand, the
panchayats have shown little i~terest in collecting various items of fees.
Hence, it showed a declining trend.
On the whole, the sources of funds of the panchayats decreased from
Rs.13.88 crores to Rs.8.40 crores, the percentage of decrease being 39.48.
Consequently, per panchayat soivces of funds also decreased from Rs. 138.85
l a b s to Rs.84.05 lakhs. In shc~rt, we may conclude that sources of funds
recorded a decrease over a period of four years. Both the lower and special
grade panchayats showed a similu declining pattern.
Sources of funds (People's Planning)
Table 4.10 gives the deta~ls of sources of funds earmarked exclusively
for peoples' planning. As it involved 35 to 40 per cent of the state plan funds,
for expenditure of plan assistanc:e, specific guide lines are issued by the state
government for sectoral allocation, projects preparation, beneficiary selection,
implementation and monitoring. Therefore, these funds are treated separately
for our study. As we know sourc1:s of funds include plan assistance from state
government, own fund of the panchayat transferred, beneficiary contribution,
loans from financial institutions, voluntary contribution and share from other
local bodies. From the table it it; seen that the most significant source is the
plan assistance from state goverrment which constituted 76.69 per cent of the
total funds. This share showed a gradual increase over the years. At the same
time, in absolute terms this source recorded a substantial decrease, For
example per panchayat plan assistance which stood at Rs.42.41 lakhs in 1998-
99 decreased to Rs.28.82 lakhs in 2001-02, the percentage decrease being
32.04. This trend is due to the dccrease in allotment of plan assistance. Due to
a variety of reasons the pancllayats found it very difficult to make the
expenditure in time by stipulati~ig to the guidelines for spending plan funds.
Most of the projects of the panchayats were imitations of the model projects
prepared at the state level rc:sulting in problems at the stage of real
implementation at the local 1evc:l. The true reflection of needs and wants of
the grama sabha in the projecls of the panchayats are very limited which
caused the declining interest in participation and beneficiary contribution for
the projects in later years. Frvquent treasury bans for long periods every
month also prevented the smootl~ expenditure of funds. It is interesting to note
that every year there is increase: in the allocation of funds as per the budget
document of the state government. But in actual practice panchayats could get
only less and less amounts during the period.
Table 4.10
Source of Funds: People's Planning of selected 20 lower grade and 10 special grade panchayats (Rs. in Lakhs)
.. I .
2.
3
4.
5.
6.
55.31 100
~ ~ ~ ~
Plan assistance from state government Per Panchayat Percent Own fund transferred Per Panchayat Percent Beneficiary Contribution Per Panchayat Percent Loans from Banks & Other institutions
Voluntary Contribution Per Panchayat Percent Share from other local bodies Per Panchayat Percent
1999-00 774.57 38.73 79.07 69.22 3.46 7.07
91.33 4.57 9.32 4.86
0.24 0.50
35.41 1.77 3.61 4.21
0.21 0.43
979.60 48.98
100
1998-99 848.27 42.41 76.69 99.22 4.96 8.97
87.82 4.39 7.94
70.71 3.54 6.39 0.13
0.006 0.0 1
1106.15
2000-01 687.19 34.36 79.67 100.87 5.04 11.69 37.59 1.88 4.36 2.04
0.10 0.24 9.23 0.46 1.07
25.67
1.28 2.98
pppp
862.59 43.13
100
2001-02 576.41 28.82 86.65 36.77 1.84 5.53
20.78 1.04 3.12
4.73 0.23 0.71
26.54
1.33 3.99
665.23 33.26
100
1998-99 765.91 76.59 89.16 45.00
4.5 5.24
33.18 3.32 3.86
10.00 1 .OO 1.16 4.94
1 0.49 0.58
859.04 85.9 100
1999-00 473.07 47.31 81.64 52.06
5.2 8.98
35.59 3.56 6.14
17.13 1.71 2.96 1.62
0.16 0.28
ppp
579.47 57.95 100
2000-01 421.54 42.15 83.37 59.24 5.92 11.72 16.40 1.64 3.24
3.80 0.38 0.75 4.65
0.47 0.92
505.63 50.56
100
2001-02 352.43 35.24 78.2
78.15 7.8
17.34 10.46 1.05 2.32
3.60 0.36 0.80 6.02
0.60 1.34
450.65 45.07
100
Iliagram 4.20
Source of funds: People's Planning 1998-99
(Lower Grade Panchayats)
( 1 0 Beneficiary contribution Loans from banks & other institutions(/ ~ 1. Vo1untary~;ontribution Share from other local bod~es --- -
- - - - - . - -~ ~ ~ - - -
Source of funds People's Planning 2001 -02
(Lower Grade Panchayats)
- - - - - -- -- 1 Plan assistance from State G O ~ 0 i n fund transferred
Beneficiary contribution Loans from banks & other institutions . Voluntary contribution Share from other local bodies ~ - ~ ~ -
-~ - -~ - - -
Diagram 4.22
Source of funds: People's Planning 1998-99
(Special Grade Panchayats)
- - ~ . ~ ~ --
Govt. M o w n fund transferred OLoans from banks & other institutions
Share from other local bodies . ~
- - --
Iliagram 4.23
Source of funds People's Planning 2001-02
(Special Grade Panchayats)
~- - ~~ ~
I Plan assistance from State God. Own fund transferred
Beneficiary contribution Loans from banks & other institutions
.Voluntary contribution Share from other local bodies - -. -
~ - - ~ -- - . - - I \ --
Coming to beneficiary contribution, per panchayat the amount stood at
Rs.4.39 lakhs in 1998-99 which decreased to Rs.1.04 lakhs, the percentage
decrease being 76.30. During tht: initial years of the people's plan campaign
the beneficiaries showed good interest to contribute their share. But over the
years people's interest declined and the panchayats were forced to reduce the
number of projects with beneficiary contribution.
Similarly, per panchayat loluntary contribution which stood at Rs.3.54
lakhs decreased sharply to Rs.0.33 lakhs, the percentage of decrease being
93.50. The reason for this downward trend is that people's interest to
contribute has become less as they feel that panchayats are flooded with funds
and they get lapsed due to laxi@ on the part of the panchayat administration.
It is to be noticed that the share from other tiers of panchayats is negligibly
small and this indicates that ccmmon integrated projects with contribution
from all tiers are few. The main reason for this is that though the guide lines
stipulates that recommendations for common projects may be given to higher
tiers, in actual practice, this is nct considered at that level. There used to be no
time for integration of projects ;it the district and state levels by the time the
projects reach at the District Planning Committee. It is interesting to notice
that every year there used to be ast hour rush. In many cases, projects are not
assessed properly for its feasil)ility which causes hurdles at the stage of
execution.
The fate of the dream projects were also the same. Delays in
availability of land and hurdles in land acquisition were some of the other
impediments. Coming to loans from banks and other institutions the picture
was very poor. Majority of the panchayats were not able to mobilise funds
from this source. The main reason was non feasibility of the project.
Exactly the same pattern is followed by special grade panchayats also.
For special grade panchayats per panchayat plan assistance which was at
Rs.76.59 lakhs in 1998-99 dec:reased to Rs.35.24 lakhs in 2001-02, the
percentage decrease being 54. It may be noted that Munnar panchayat
received an amount of Rs.301.1.4 lakhs in 1998-99 as plan assistance which
declined to Rs.60.96 lakhs in 2001-02. These amounts are much greater than
the per panchayat values.
In this chapter we dis;ussed the sources of funds for sample
panchayats classified into lower grade and special grade. This classification
was based on the guidelines is:;ued in 1983. It is felt that the division of
panchayats into various categori,:~ based on different criteria is not scientific
and relevant because irrespectite of the status of the panchayats pattern of
sources of funds is almost similar. To ascertain this and also assure
correlations and t-test (two sample means) were estimated and the results are
available from table 4.1 1.
From table 4.1 1 it is seen that in the case of basic tax, contribution,
others, people's planning, centr;illy sponsored schemes and grants-in-aid the
correlations are not siginificant. This may be due to the attitude of the
government towards various category of panchayats. In the case of river sand,
people's planning and centrallj sponsored schemes even the correlation is
negative. The t-test (two sample mean) values are found to be statistically
insignificant in all cases.
Table 4.1 1
Computed correlation and t-values of sample panchayats
Incoma
Property Tax
Profession Tax
Total own tax revenue
Duty on transfer of property
Basic Tax
Vehicle tax compensation
Contribution
River sand
Others
Plan (People's Planning)
fate Plan Schemes
Centrally Sponsoreil Sche
Pensions (Social Welfare)
Grants-in-aid
These trends indicate that the gr'mping of panchayats into different categories
is not relevant. All panchayats are of almost equal status in terms of financial
performance with respect to source of funds. Hence the hypothesis that there
is no significant difference in tke pattern of income and expenditure for both
lower grade and special grade psnchayats is validated.
To sum up, based on th; sample panchayat analysis it is established
that the decentralization and panchayati raj have not made any substantial
changes in the structure of sources of funds. The gains of new Panchayat Raj
Act is not directly associated to the own resources of the panchayats. The pre
panchayati rirj sources of funds and post panchayati raj sources of funds are
not significantly different. The relative advantage was with respect to the flow
of funds for activities listed under people's planning. Eventhough there were
attempts to link panchayati raj astivities directly with people's planning, and
similar activities moved in an isoloated way limiting to planning exercise.
These discussions, arguments and logic validate the hypothesis that resource
mobilisation efforts of panchayats are declining over the years.